Management Accounting: Types, Methods, and Cost Computation

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Define management accounting and their crucial requirements of their types.................1
P2 Elaborate methods of management accounting reporting.................................................3
P3 Computation of costs for preparation of income statement through marginal and absorption
costs........................................................................................................................................4
P4 Assets and detriment of various kinds of planning tools................................................10
P5 Analogy among firms for adoption of management accounting system for responding to
financial................................................................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

INTRODUCTION
Management or managerial accounting refers to process of furnishing financial resources
as well as information to the managers for formulation of decisions. Management accounting
aims at usage of statistical data for building up accurate and efficacious decision, management of
enterprise, development and business activities. Basically, this denotes application of knowledge
and professional skills for preparation of information related with accounting and finance
(Harrison and Lock, 2017). In addition to this, it aids firm within development of planning,
control of operations and planning for them accordingly. To understand the concept of
management accounting, Berkeley Partnership was brought in 1990. They render diverse to their
client firms in the form of independent management consultants. Essentra packaging is one of
their client who is a manufacturing organisation and deals within tear tapes. This deals with
management accounting their types and methods for their reporting. In addition to this, different
costs have been calculated and merits and demerits of planning tools have been illustrated.
Furthermore, comparison has been shown among accounting systems to financial issues.
P1 Define management accounting and their crucial requirements of their types.
The process of preparation of accounts and reports which render precise, timely statistical
and financial information needed by managers for taking short term decisions with respect to day
to day decisions is referred to management accounting. This will assist Essentra packaging to
build up policies and plans according to activities they have to carry out. It will aid them for
carrying out performance analysis by creating hypothesis of strategies, budgeting, forecasting
and many others. Generally, it comprises of presenting information related with accounting.
There are wide range of assets that are being offered by management accounting and can be
utilised by Essentra packaging to attain their goals in an appropriate manner (Chiarini and
Vagnoni, 2015).
Management accounting system refers to internal systems which are used by organisation
for evaluation and measurement of performance. Essentra packaging can make use of these
systems to formulate policies for each department depending upon their performance so that
affirmative results can can be attained. This will enable management to have precise information
and decisions can build up accordingly. Thus, it is necessary for Essentra packaging to make use
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of this tool as it deals with both financial and non-financial data that will assist them within
carrying out their business operations.
Firms can make use of management accounting systems as per their requirements and
demand of the situation. For an instance Essentra packaging can make use costing accounting
system with respect to management of their inventory. Price optimisation system can be applied
by them for furnishing framework for determining prices of their commodities. Similarly
different systems serves diverse purposes and can be utilised accordingly.
Management accounting system was brought in England during industrial revolution.
This involves various operations through which issues related with financial problems can be
sorted out (Armitage, Webb and Glynn, 2016). Principle of management accounting deals with
creating an influence as well as build up trust so that operations of organisation can be oriented
and synchronised.
Difference between management and financial accounting
Management accounting Financial accounting
It is utilised by Essentra Packaging for carrying
out their internal operations. Figures and facts
are confidential and are being utilised for
formulating decisions.
Reporting is carried out for public view, all
facts, figures and amounts are are publicly
disclosed.
In this case there are not specified format or
pattern for reporting. Figures are illustrated as
per target audiences and may not comprise
information according to requirements.
With respect to this universal reporting
standards associated with accounting are being
used such as GAAP, IFRS, etc. that can be
understood by individuals easily.
Essentra packaging can have financial and
non-financial data by its usage in their reports
according to requirements.
They aims at firms financial data (Financial
accounting vs Management Accounting, 2019).
No formal audit structure is needed in such
kind of reporting.
In this case reports are initially audited and
then they are being reported or published.
Types of management accounting system
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