Management Accounting: Systems and Techniques

Management
accounting
7 / 1 1 / 2 0 1 9

Management accounting 1
Contents
LO1 Systems of Management accounting.......................................................................................3
Management accounting and vital obligation of various sorts of system of management
accounting....................................................................................................................................3
Management accounting..........................................................................................................3
Roles........................................................................................................................................3
Management Accounting System............................................................................................4
Methods adopted for management accounting reporting............................................................4
Advantages of systems of Management Accounting and their implementation in the
organization.................................................................................................................................5
LO2. Techniques of Management accounting.................................................................................7
Compute costs using proper techniques of cost study to make a profit and loss statement with
the help of absorption and marginal costs...................................................................................7
Cost..........................................................................................................................................7
Costing method........................................................................................................................7
Planning tools in management accounting......................................................................................9
Advantage and disadvantage of various types of planning tools used for budgetary control.....9
Budgetary control....................................................................................................................9
Different types of planning tools.............................................................................................9
Advantage and disadvantage of using planning tools of budgeting......................................10

Management accounting 2
Organization could use management accounting to answer to financial difficulties....................12
Adapting the system of management accounting to provide the respond to financial issues....12
Benchmarking........................................................................................................................12
Key Performance Indicator (KPI)..........................................................................................12
Management accounting skill set...........................................................................................13
Skills are used to avoid and/or deal with monetary difficulties.............................................13
M4. Analyse how, in answering to financial issues, management accounting can lead
organizations to justifiable accomplishment.............................................................................14
References......................................................................................................................................16
Appendix........................................................................................................................................18

Management accounting 3
LO1 Systems of Management accounting
Management accounting and vital obligation of various sorts of
system of management accounting
Management accounting
It is procedure of evaluating organisation costs and processes in order to form core financial
report, records as well as explanation to assistance the manager decision-making activities in
attainting gaols within the company (Kaplan and Atkinson, 2015).
Roles
Formulate financial strategies: - Management accountants can form different financial
approaches with the help of budgets, sales forecasting as well as job-costing methods among the
other tools of management accounting. The role of management accounting is to align data from
organisation financial statement in order to from the strategies that can contribute in improving
the gross income, net profit as well as earning per share.
Monitor expenses: - The management accountants of the company can form flexible, static as
well as the rolling budgets with the diverse kinds of reports that permit the elder leaders and head
of the section who control all the expenses (Cooper, Ezzamel and Qu 2017). Operating expenses
leads to the direct influence on the bottom line profit.
Maintaining profitability: - Management accountant’s uses different tools through which they
can use to possess the profitable organisations that include execution break-even analysis

Management accounting 4
(Parker, 2012). Further, the accountant can manage the direct as well as indirect manufacturing
cost that helps the company to improve the cost structure that is essential for earning profit.
Management Accounting System
In the management accounting, there are diverse systems that are used by accountants for
effective working of companies. Some of them are –
 Inventory management system: - The inventory management is majorly near specifying
shape as well as placement of products that is required by companies at different places
where they require maintaining their stock.
 Cost accounting: - This system is majorly are adopted by the companies to keep record of
the production actions with the use of effective inventory system (Wickramasinghe and
Alawattage, 2012). The tracking of inventory is done at different stage of production
through this system.
 Job costing system: - The process of job costing system comprises of assigning cost that
incurs to be particular job in which business is involved (Ward, 2012).
 Price optimization system: - The process of identifying the maximum price in against of
the customers who are willing to make the payments is possible with this system.
Methods adopted for management accounting reporting
In the dynamic environment, the companies use diverse kinds of managerial accounting reports
in bookkeeping period for maintaining the information. Some of them are -
Budget reports: - This report helps the company in evaluating the performance and that business
is big enough with this the manager evaluates the performance and control costs of departments
(DRURY, 2013). The managers of the company use the budget reports for the future projection,

Management accounting 5
also for offering the incentives and bonus to personnel and determining that monetary areas are
achieved or not.
Job Cost Reports: - The report is majorly prepared to determine the high-earning parts of
organisation so that they can emphasis on the hard work rather than wasting time as well as
currency on occupation with low profit margins. This report helps manager to match it projection
of revenue that is essential for evaluating the job’s profitability ( Weetman, 2019).
Inventory and Manufacturing: - Every company prepares the inventory and manufacturing
report to ensure that these processes are working efficiently. The major items that are included in
report comprise inventory waste, hourly labour charges, per-unit overhead costs, and (Rana,
Wickramasinghe and Bracci, 2019). The manager evaluates the performance and then allocates
the additions to finest execution departments.
Accounts Receivable Aging Report: - The report is essential for the managers as it shows the
cash flow of company that extends credit to their customer. Further, manager can use the report
for determining the issues with the client’s collection process.
Advantages of systems of Management Accounting and their
implementation in the organization
Management accounting does not frequently follow any category of nationwide bookkeeping
principles as well as the business owners of the business can design the system of management
accounting as per their organisational business operations.
Reduce expenses