Management Accounting and its Requirements

This document provides an overview of management accounting and its essential requirements. It discusses the fields in management accounting and their specific requirements. The document also explores the methods used in management reporting and the merits and demerits of budgetary tools. Additionally, it provides insights into financial problems faced by organizations and their responses to these problems.

Management
Accounting

Table of Contents
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
Identification of fields in management accounting and their requirements...........................3
P2 management accounting reporting and Method................................................................5
TASK2.......................................................................................................................................6
P3 Income statement using marginal and absorption costs....................................................6
TASK3.......................................................................................................................................8
P4 Merits and demerits of budgetary tools............................................................................8
TASK4.....................................................................................................................................10
P5 Financial problem and response of organization............................................................10
CONCLUSION........................................................................................................................12
REFERENCES.........................................................................................................................13
Books and journals...............................................................................................................13

INTRODUCTION
Management accounting is referred to a process which is related to identification of various
cost and using appropriate information in order to manage the financial resources of
organisation (Drury, 2018). There are a number of purposes which will be included under the
management accounting system which are related to communication of info to different
parties in order to achieve the objectives of organisation. In relation to the current report, it is
based on study of Capital joinery. In relation to the current report it includes discussion about
the management accounting and its essential requirements. There is also a discussion about
various methods used in management reporting. Along with this, this report is also the
discussion about calculation about the cost of organisation. In last, there is discussion about
various planning tools which are used for budgetary control with advantages and
disadvantages and differentiating how the enterprises can adopt a management accounting
system in response to the financial problems.
MAIN BODY
P1 Identification of fields in management accounting and their requirements
Management accounting can be defined as a process which involves managing
various accounts of organization in order to meet the financial requirements and identification
of different cost so that organization can perform its function in an appropriate way and
achieves the objectives in timely manner. Management accounting is useful system to the
organization as it promotes standardization within the work as well as help in meeting the
requirements of stakeholders. Capital joineryis also using management accounting in order to
strengthen its decision making process as well as identify various requirements in the
meantime (Otley, 2016).
According to the institute of management accounting "management accounting can be
defined as a term which is used by professionals in relation to meeting the decision-making
abilities of organization and planning about the financial performance. Include evaluation of
different financial accounts and identification of cost which are related to the products and
services offered by organization in the current business time".
There are a number of management accounting systems and types which has to be
managed by organization in order to achieve better system. In context of Capital joineryit is

also utilizing appropriate system which is helpful for manager to utilize the function and
perform them in an effective manner. Some of these functions are discussed below:
Profit maximization: management accounting is useful for organization in
maximizing the profitability. This is because management accounting helps in evaluation of
various financial statements of organization which help in evaluating the current position of
firm and identifying the cost involved in different products and services. This enable
organization to use appropriate system and manage financial accounts according to the
requirements (Maas, Schaltegger and Crutzen, 2016).
Efficiency booster: management accounting is appropriate systems which help in
increasing the efficiency of employees and performing the function in an appropriate way. In
context of the current business environment, management accounting help in identifying the
actual function which are performed by organization and remedies which can be used to
improve those functions. These functions are associated with current profitability of
organisation and efficiency of employees in working. By utilizing the accounts in an
appropriate manner and performing the functions of management accounting lead in better
profitability and efficiency.
Management accounting system
Inventory management system: It is a part of management accounting which helps
business entity in managing inventory in accordance with its sales. In context of Capital
joinery, manager within management accounting identify the current stock of inventory is
within storage of organization As well as at physical stores. This is helpful to Organization in
analyzing its current functions and performing them in an appropriate manner. Real manager
divide inventory in raw material finished good and semi process good. This is helpful to the
manager in evaluating the inventory within Capital joineryand using an appropriate method to
identify the aging inventory and selling it prior to the new inventory.
Cost accounting: It is also act as a part of management accounting. This is helpful to
Organization in managing the functions of costing. It can be defined as a system which was
adopted by organization under the topic of management accounting where organization has to
identify different cost which are involved under the process of selling goods and services
from beginning to end. This provides specific guidelines to organization about the process of
cost involved in various function and help in achieving business objectives. Include

appropriate process which has to be followed by manager of the organization so that they can
identify different cost and used the cost in accordance with organizational functioning
(Hopper and Bui, 2016)
Price optimization system: Price of optimization system is that part of organization
which is helpful in calculating the instruments cost which are implemented by the
organization in order to generate the revenue. This is important part of management
accounting which is responsible for identification of customer behavior and using the prices
according to the response of customers within market. This is helpful to the organization in
evaluating the current processes which has to be followed in order to meet the customer
requirement and using an appropriate pricing policy. In context of Capital joinery,
organizations performing its function at global level which means that it requires an
appropriate pricing policy to meet the requirements of global standards. Under this price
optimization system can be implemented which help the form in analyzing the pricing
policies according to the longer period and performing functions in an appropriate way for
identifying future growth.
Job costing system: Job costing systems include identification of different cost which
are involved in a particular job or a task which are performed under separate activity. job
costing system is useful for organization in management of various processes and using these
processes under a manufacturing industry. This involves identification of actual expenses and
using appropriate revenues in relation to the process performed by firm. there are a number of
cost which are involved in organizational process and help in identification of appropriate
profitability. Capital joineryalso involved job costing method in its management accounting
which helped the management in identification of actual cost which is implemented in a
particular process. This is also useful to the firm in utilizing its resources and managing
function according to the needs and requirements (Cooper, Ezzamel and Qu, 2017)
P2 management accounting reporting and Method
Management accounting report
Management accounting reporting is that part of management accounts which is
related to different reports which covered under the management accounting system in order
to manage different accounts. It includes different systematically procedures which are used
to formulate by the organisation in order to strengthen the decision-making process and

perform the function in an appropriate way. There are number of management accounting
reports which are used by Capital joinery, some of these are discussed below:
Budget report: Budget report is an essential part of management accounting system
which consist information about the budget allotted to different activities which are
performed in order to maintain the working condition. This is a important part of Capital
joinerybecause it consists action plans as well as budget to each and every activity in order to
manage the work of different activity. Manager it in Capital joineryalso use this function to
improve the functioning and achieve objectives (Jansen, 2018).
Cost managerial accounting report: This is that financial report which consist
information about different cost implemented by the managers in order to sell the products
and services and generate revenue. It is useful part in organisation which is prepared take
different actions against different cost which are implemented Organisation in manufacturing
a product selling it to the last consumer. In context of Capital joinery, manager in
organisation news report to identify the system and perform inventory management.
Performance report: Performance report is that report which includes description
about the performance of different individuals. What is the most essential report in
organisation as it helped us to identify the current requirement as soon as performance of
employees. This performance will be evaluated in appropriate places where different
decisions are taken accordingly (Makrygiannakis and Jack, 2016).
It can be evaluated from the above mentioned information that there are various
function which has to be analysed and will be used by organisation. This make it difficult for
the firm to choose appropriate system and finalize the accounts in an appropriate way. It
became responsibility for manager to use various reports in order to identify and perform
functions appropriately.
TASK2
P3 Income statement using marginal and absorption costs
Income statement: Income statement is function as a financial system which includes
different accounts related to the profit and loss of organisation. This is an appropriate system
which provides financial information about different estimates so that form can achieve its
objective and improve its financial position. In current business system, there are number of
functions with perform by the organisation in order to improve its profitability. It is important

for organisation to identify the performance and functioning so that it can operate in an
appropriate way and identify the current requirements of profitability. Income statement of
organisation is based on the period so that organisation can prepare appropriate balance sheet
and represent a position to its stakeholders (Abernethy and Wallis, 2019).
Absorption cost: Absorption cost can be defined as that kind of managerial cost
which is related to the fixed and variable cost implemented by the organisation on the product
and has to be identified in order to analyse the price of the product. Absorption costing is
important parts or organisation as it helps in identifying and all those caused which are
absorbed by the product and has to be maintained. Absorption cost is also defined as a cost of
manufacturing per unit so that organisation can analyse the appropriate costing system

TASK3
P4 Merits and demerits of budgetary tools
There are a number of planning to switch can be used by an organisation in order to
achieve its objectives as well as perform the function of budgetary control. These planning
tools are helpful in making effective system which can be executed by the firm in order to

achieve better profitability and perform the function in group oriented behaviour. There are a
number of to switch can be used by Capital joinery. Some of these are discussed below:
Capital budgeting: Capital budgeting can be defined as that to which is used by the
organisation and order to investment appraisal. It is a planning process which is useful to the
organisation in determining whether the organisations long term investment in relation to
machineries replacement of machinery building a new plant new product and other research
program can be utilised or will be worthy to the organisation according to its capitalisation
structure (Taylor and Scapens, 2016). In context of Capital joinery, the system can be used by
organisation in order to educating its major capital and investment and expenditures by
identifying its management accounts and forming the function in an appropriate manner. This
is useful for organisation in identifying the capital budgeting investment and increasing the
value of forms in front of its stakeholders.
Advantages
 The major advantages of using capital budgeting as a tool of budgetary planning is
that it help the organisation in providing assistance about understanding different risk
with are involved in investment made by firm as well as return on investment for
successful business operations.
 One more benefit of this system to the organisation is related to identification of
estimate related to different investment and identifying best possible returns.
Disadvantage
 Capital budgeting is useful for organisation in identifying various decisions and
managing the decisions in an appropriate way so that it can plan for long term but
there is no relevance technique to identify the business challenges and changes in
environment for long period which act as a disadvantage.
 Capital budgeting is also an appropriate and various situations because it includes
number of assumptions where there is no shortage of fulfilment of these assumptions.
Cash budget: Cash budget is important school in budgetary control which is helpful
to the organisation in managing techniques as well as using appropriate flow of cash so that
firm can achieve its objective. In context of Capital joinery, it is using appropriate flow of
cash which is helpful to the organisation in managing the activities and achieving the
performance at battery level. This will also allow organisation to identify the current flow of

cash within the firm so that it can manage the functions and identify the requirement of funds
in order to maintain liquidity (Phornlaphatrachakorn and Khajit, 2020).
Advantages
 This system is useful for Organisation in order to identifying the current needs and
requirements of liquidity and when is the function according to the flow of cash.
 One more advantage of using cash budget as a budgetary tool and Capital joineryis
that It helped the form in being resourceful by initiating regular flow of cash and
ensuring availability of liquidity in each and every department.
Disadvantage
 Addition of using cash budget within an organisation is that there are a number of
records which has to be maintained by the organisation for using the cache which can
also lead to left of cash as well as misleading the transaction.
It is analysed from the mention information that there are various functions which are
related to budgetary control to an organisation and helpful in implementing a particular
situation the most effective tool which can be used by Capital joineryis capital budgeting.
This is Helpful to the organisation in identifying the future requirements as well as return on
investment so that form can achieve its objectives in a timely manner.
TASK4
P5 Financial problem and response of organization
Listen to the current corporate environment it is important for every organisation to
perform its functions and identify the needs and requirement to utilise the businessman dual
strategies and processes according to the social challenges and value of stakeholders. This
make it important for organisation to utilise its resources and function in an appropriate way
by managing its financial account to solve different financial problems (Pelz,, 2019). Under
this system, there are different financial problems which are faced by the organisations
working in this scenario. In context of Capital joinery, it is also facing number of financial
problems which impact on management of organisation. Some of these are Unplanned
expenses, Poor management of money, Late payments from clients and Reduces profits due
to lower productivity. The main issue which is faced by Capital joinery is related to using the
budgetary targets key performance indicators and various business activities. Financial

governance is also faced by the organisation and impact on the functioning of organisation.
One more organisation which is facing these issues is HOUSEDEC. It also facing number of
financial problems in the current business environment where it can use different system in
order to meet the financial obligations.
Comparison of the company with other company is as follows in which both of them are
using management accounting to respond financial problems:
Management
accounting
technique
Capital joinery HOUSEDEC
Benchmarking In order to compare credit policies with
competitors and meet needs related to
management of credit period capital
joinery will use benchmarking.
In order to anticipate possibility of
lower profits, management in
Houcedec use benchmarking. This
helps in maintain position in business
firm.
Key
performance
indicators
This will help management in
identifying the reason behind the
function performed to reduces
possibility of sudden expenditures could
be reduced.
In order to identify the errors in
supply chain management,
management in firm use KPI.
Balance score
card
In order to deal with the problem
related lower profits. This is also used
in order to meet needs related to low
productivity. Here it helps in determine
the performance of all staff members
and provide them compensation
accordingly
This helps in managing performance
of employee in order to meet needs
and perform task in effective.
Activity based
costing
In order to create lack of funds for the
company as it can help to assign cost to
all the activities according to their
requirements is the technique which is
required to perform.
There are various activities that
possibility of overspending of budget
could be reduced by using this tool.
This helps in managing function and
costing in effective way.

Financial
governance
In order to meet needs related to
principles of finance. This help in
meeting needs related to improper fund
management this technique.
There are number of financial
principles are compiled by
management. This can be possible
with the help of financial governance.
It is analysed from the above mentioned information that there are various factors
which can be considered by organisation to manage its function and use this function in an
appropriate way. This will bring profitability as well as solve different financial problems in
the current business environment which is fulfilled requirements of stakeholders and help the
form in achieving its objectives (Quinn and Hiebl, 2018).
CONCLUSION
It can be concluded from the above mentioned information that there are various
management accounting system which can be used by the organisation in order to achieve its
business objectives and perform the function in an appropriate manner. These are helpful to
the firm in managing its function and utilising its resources according to the needs and
requirements. Along with this, you can also have concluded that these are helpful in
performing appropriate system which promote benefits in an organised manner to achieve
and identify the cause and manage better profitability.

REFERENCES
Books and journals
Abernethy, M.A. and Wallis, M.S., 2019. Critique on the “manager effects” research and
implications for management accounting research. Journal of Management
Accounting Research, 31(1), pp.3-40.
Bui, B. And De Villiers, C., 2017. Business strategies and management accounting in
response to climate change risk exposure and regulatory uncertainty. The British
Accounting Review, 49(1), pp.4-24.
Cooper, D.J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea:
The case of the balanced scorecard. Contemporary Accounting Research, 34(2),
pp.991-1025.
Drury, C., 2018. Cost and management accounting. Cengage Learning.
Hopper, T. and Bui, B., 2016. Has management accounting research been
critical?. Management Accounting Research, 31, pp.10-30.
Jansen, E.P., 2018. Bridging the gap between theory and practice in management
accounting. Accounting, Auditing & Accountability Journal.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability
assessment, management accounting, control, and reporting. Journal of Cleaner
Production, 136, pp.237-248.
Makrygiannakis, G. and Jack, L., 2016. Understanding management accounting change using
strong structuration frameworks. Accounting, auditing & accountability journal.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
Pavlatos, O. And Kostakis, X., 2018. The impact of top management team characteristics and
historical financial performance on strategic management accounting. Journal of
Accounting & Organizational Change.

Phornlaphatrachakorn, K. and Khajit, N.K., 2020. Strategic management accounting and firm
performance: Evidence from finance businesses in Thailand. Journal of Asian
Finance, Economics and Business, 7(8), pp.309-321.
Phornlaphatrachakorn, K. And Khajit, N.K., 2020. Strategic management accounting and
firm performance: Evidence from finance businesses in Thailand. Journal of Asian
Finance, Economics and Business, 7(8), pp.309-321.
Quinn, M. and Hiebl, M.R., 2018. Management accounting routines: a framework on their
foundations. Qualitative Research in Accounting & Management.
Schaltegger, S., 2018. Linking environmental management accounting: A reflection on
(missing) links to sustainability and planetary boundaries. Social and Environmental
Accountability Journal, 38(1), pp.19-29.
Sugahara, S., Daidj, N. And Ushio, S., 2017. Value Creation in Management Accounting and
Strategic Management: An Integrated Approach. John Wiley & Sons.
Taylor, L.C. and Scapens, R.W., 2016. The role of identity and image in shaping
management accounting change. Accounting, Auditing & Accountability Journal.