Functions of Management Accounting and Different Types of Management Accounting System

Management Accounting

Contents
Introduction.................................................................................................................................................3
Task 1..........................................................................................................................................................3
A) Functions of management accounting................................................................................................3
B) Different types of management accounting system.............................................................................5
Task 2..........................................................................................................................................................5
1. Marginal costing..................................................................................................................................5
2. Absorption costing...............................................................................................................................7
Task 3..........................................................................................................................................................8
A) Advantage and Disadvantage of different types of budget.................................................................8
B) Process of preparing budget................................................................................................................9
C) Pricing strategies..............................................................................................................................10
Task 4........................................................................................................................................................11
A) Balance Score Card..........................................................................................................................11
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13

Introduction
A cost accounting system is a system of accounting used by the manufacturers to account
for manufacturing activities carried by the manufacturer under perpetual inventory system. Thus
it can be said as the accounting system designed for the manufacturers to record the flow of
inventory through various stages of production (Gullifer and Payne, 2015). A typical cost
accounting system records the inflow and outflow of the materials at each stages of the
production. Whether it be in work-in-progress it should be properly accounted for. Present report
is based on Imda tech limited which produces mobile charger and other gadgets for retail outlets
in UK (Hecht, 2016). Current assignment will discuss the function of management accounting. It
will explain cost accounting system, inventory management system. It will calculate the
Absorption cost and marginal cost. In addition, report will describe the balance score card
approach.
Task 1
A) Functions of management accounting
Management accounting whole process depends on 4 basic function of Management like
1. Planning, 2. organisations, 3. Controlling and 4. Decision Making. Explaining in details
function of Management accounting they are:
1. Planning: Planning is preparation done in advance before execution to achieve some specific
goal (Horngren and et.al, 2010). It may be short term or long term. A budget planning is type of
financial planning shows how scarce resources to be maximal utilised over specific period of
time. Management accounting is interconnected in financial management and budgetary system
as whole because budgeting control depends on developing of financial reports which helps in
providing information to manager to take decision in financial controlling. Planning reports help
manager to estimate the effect of alternative options available on firms ability to achieve desirer
goal (Kaplan and Atkinson, 2015). If business enterprises target specific profit in one financial
year they they should also determine how they can achieve them.
2. Organising: It is process of establishing organisational framework and assigning
responsibility to the people working in organisation for achieving business goals and objective.

Organisational structure differs from business to business or an enterprise to enterprises. In
business different department can be assigned to by setting up divisions, departments, sections
and branches (Quattrone, 2016).
3. Controlling: It is a process of monitoring, measuring, evaluating and correcting the actual
results to ensure that a business enterprise goal and planning is achieved or going to be achieved
or not (Saladrigues and Tena, 2017). Controlling is accomplished with feedback, feedback is
process to take corrective measures been taken to evaluate or correct steps while implementing
plan.
4. Decision Making: Decision making is process of choosing best alternative among various
ones. Decision Making is inherent in all three functions of management like Planning, organising
and controlling (Weygandt, Kimmel and Kieso, 2015). A manager cannot plan without decision
making and have to choose among different alternative the best one which meet goals as early as
possible. Following are process of decision making:
• Identifying a problem requiring managerial actions.
• Specifying the objective or goals to be achieved.
• Choosing alternative coerce of action.
• gathering the information about sequence of Each alternatives (Zimmerman and Yahya-
Zadeh, 2011).
Importance of management accounting
Management accounting is very important for decision making. It assist in
determine the selling process of the goods. It examines the cost and try to ignore unnecessary
expenditure of the organization so that company can make effective control over the costs. It
determining the activities required for the production (Carlsson-Wall Kraus and Lind, 2015).
Management accounting is very important that helps in determine the production activities. With
the help of this company like Imda can make effective decision and can make profit to great
extent. It is the great tool that assists in reducing cost of the organization. Budget is the major
part of any business. With the help of management accounting Imda ltd can improve its cash
flow to great extent. That is the great technique that assists in getting effective financial returns.