Management Accounting Research and Practice

This assignment delves into the world of management accounting, exploring its importance, role in supporting organisational change, and potential for environmental management accounting development. It also touches on Islamic accounting and the controversial relationship between management accounting research and practice.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essential requirement of different types of accounting
systems...................................................................................................................................1
P2 Different methods used for management accounting reporting........................................2
M1 Benefits of management accounting system and its application in organisation.............3
D1 Management accounting system and its reporting integration with organisational process. 4
TASK 2............................................................................................................................................4
P3 Calculate costs using appropriate techniques of cost analysis..........................................4
M2 Different types of accounting techniques to produce financial reporting documents.....8
D2 Financial report that accurately apply and interpret data for a range of business activities..8
TASK 3............................................................................................................................................9
P4 Advantage and disadvantages of different types of planning tools used for budgetary
control.....................................................................................................................................9
M3 Applications of planning tools for preparing and forecasting budgets with its uses.....10
TASK 4..........................................................................................................................................11
P5 Adapting management accounting systems to respond to financial problems................11
M4 Management accounting lead organisation for sustainable success and financial problems
..............................................................................................................................................12
D3 Planning tools for accounting respond appropriately to resolve financial problems.....13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is a procedure of preparing the accounts as well as reports which
give the timely and accurate statistical or financial information needed through managers to
make the short term and day- to- day decisions. It helps in analyse operations and business costs
in order to make internal financial report, account and records to assess process of decision
making of manager for attaining the business objectives. It is presentation of the accounting
information to prepare the effective policies and adopted through management and also help its
daily activities. Management accounting helps management of an organisation to perform all
functions consisting planning, staffing, organization, directing and also controlling. (Arroyo,
2012). This present report is based on Williams Performance Tenders. It is a boat manufacturer
business firm in Berinsfield. Under this given report will be discussed about management
accounting and its various kinds of management accounting systems. Benefits and limitations of
different kind of planning tool for the budgetary control will be discussed in mention assignment.
Planning tools which company used to solve the financial issues and lead business to sustainable
success will be given this report.
TASK 1
P1 Management accounting and essential requirement of different types of accounting systems
Management accounting refers to analysis, presentation, analysis, interpretation and
determination of accounting information that has been obtained through cost accounting and also
financial accounting. It helps the manager of company to prepare policies, conduct daily basis
operations and process of decision making of company. It is profession that consists the
partnering in devising planning, providing expertise, better decision making and also
performance management system in financial reporting and also control to help management in
develop and execution of strategy of company (Bodie, 2013). With the help of use management
accounting, Williams Performance Tenders can enhance its productivity along with
effectiveness. Thus, these are different management accounting system which are described
below:
Inventory management system: This system is related with management and
supervision of non-capitalized assets and stock of organisation. Williams Performance Tenders
provide boat to people, for which manager require to have sufficient material. For this, they
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maintain relations with suppliers which help top personnel to have flow of inventory in effective
manner. Along this, market forecast is conducted by management to have information about
future demands to arrange material in respect to order. Thus, firm's capital is utilised properly
and reduction of cost of storage and transportation.
Job costing system: It is a system which define that management monitor cost by
assigning manufacturing expenses to each item. For this, products require to be similar in nature
than only proper accounting of them are possible. In Williams Performance Tenders, manager
first find communicate with customers to have information about quality of material. Along this,
rates are also fixed so that production process are conducted accordingly. Thus, now superior
responsibility is to asses cost which are involved in preparation of product to reduce unnecessary
expenses and utilise money properly (Hillier, Grinblatt and Titman, 2011).
Cost accounting system: This is another system which define that management analyse
profitability of firm and inventory by computing expenses of product. Manager of Williams
Performance Tenders coordinate all departments to have accurate information about cost which
are involved in production of boat. This help them to implement appropriate equipment and tools
in system for providing quality product to customers. Along this, management is even able to
reduce unnecessary cost in manufacturing process.
P2 Different methods used for management accounting reporting
Management accounting reporting is process which is conducted by top personnel to have
accurate information about statistical and financial information of company. This help them to
make appropriate decisions in respect to short-term and day-to-day business operations. Williams
Performance Tenders is small firm, so manager require to have sufficient funds for setting up
appropriate outlet in market. For this, businessperson examine different sources from which they
can get money to expand business to increase customer base, thereby enhance sales volume and
profitability. Management conduct financial reports that are profit and loss, balance sheet to have
information about availability of funds (Abugalia, 2011). Besides this, other statements that are
cash flow, sales report, item cost are prepared which help manager to have knowledge about net
worth of firm. Thus, these are various tools which are used for management accounting reporting
which are described below:
Inventory and manufacturing reporting: This is report which is formulated in firms
which are conducting production activities. This help management to have information about
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inventory and manufacturing processes to execute business operations in effective manner. It is
an appropriate report for Williams Performance Tenders, as company is manufacturing boat. For
this, labour expenses, wastage related with inventory and per unit overhead cost are various
constituents of this report. These are components which help manager to identify improvement
opportunities in system in respecty to workers and departments. For this, comparison of different
assembly line to have appropriate information about functioining of system.
Job cost reporting: It is another type of report which is related with acknowledgement
of expenses, cost and revenue in respect to each job. Management conduct examination of
earning of each project, so that they are able to choose appropriate one (Humphrey and Miller,
2012). This help executive of Williams Performance Tenders to safe their efforts and funds from
getting wasted in less valuable projects. Along this, manager is also able to have information
about cost that are conducted while progress time to make project profitable for firm.
Performance reporting: This is form of report which is formulated by management to
have information about business activities. For this, difference between budgeted performance
and actual outcomes is made. This help manager of Williams Performance Tenders to have
information about deviations and issues that have occured while production time.
M1 Benefits of management accounting system and its application in organisation
Management accounting system Advantages
Inventory management system This system help manager of Williams
Performance Tenders to save money and time
by maintaining an accurate inventory orders.
Job costing system Management of Williams Performance Tenders
use this system to save their efforts and get
appropriate results about cost that are incurred
in manufacture activity.
Cost accounting system This system help management of Williams
Performance Tenders to have measure
efficiency of business activities, thereby make
changes in system accordingly. Along this,
manager is also able to formulate plan about
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operations to reduce expenses of production of
boat.
D1 Management accounting system and its reporting integration with organisational process
Type of reporting Integration with organisational process
Inventory management system Management of Williams Performance Tenders
enhance inventory orders by using appropriate
technologies in respect to maintenance of
record of material in respect to demand of
people (Basel, 2012).
Job Costing system In Williams Performance Tenders, manager
compute expenses which will be incurred in
production of boat to reduce and eliminate
unnecessary cost.
Cost accounting system Management of Williams Performance Tenders
is to have information about orders of people to
arrange material accordingly. Along this,
expenses for production of boat is also
ascertained by manager to keep prices
appropriate in according to demands of people.
TASK 2
P3 Calculate costs using appropriate techniques of cost analysis
Cost refer to activity which is conducted by management to have information about
money value which are incurred for execution of business operations in firm. Each and every
organisation require to have sufficient funds for having adequate material and manpower for
deliver of appropriate items and services to people. In business, there are two forms of cost
which are fixed and variable which are described below:-
Fixed cost: This tactic include expenses which doesn't change for a certain output level
that are rent, depreciation and many other. It has direct connection with production process, as
both increase or decreases in respect to items manufactured.
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Variable cost: It is another aspect which define expenses which fluctuate and depend
upon business activities. For example: Employees, material and many other cost depend on level
of output which management require to provide products and services in according to fulfil
demands and needs of people.
Marginal costing: This is efficient tool which is used by management to make
appropriate decision about allocation of funds in different business activities. It is an accounting
system in which fixed costs are reduced from contribution. Besides this, variable expenses are
allocated to unit costs. This help manager of Williams Performance Tenders to have information
about net profit of firm (Ismail, Ramli and Darus, 2014).
Absorption costing : It is another method in which expenses and resources which are
related with production are considered as item cost. Fixed and variable overhead cost, direct
material and labour are various components of this tactic which give information to management
of Williams Performance Tenders about net profit. This help them to make appropriate decisions
about funds.
Working Notes:
Formula of marginal costing:
Sales revenue – marginal cost of goods sold = Contribution – fixed cost = Net income
Particulars Amount
Sales revenue 33000
Marginal Cost of goods sold: 9600
Production 12800
Closing stock 3200
Contribution 23400
Fixed cost ( 3200+1200+1500 ) 5900
Net profit 17500
 Sales revenue = Selling price * no. of goods sold = 55 * 600
 Production = Units produced * marginal cost per unit = 800 * 16
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 Closing stock = Closing stock units * marginal cost per unit = 200 * 16
Formula of absorption costing:
Net Profit = (Sales revenue) – (Cost of goods sold)
= (Gross profit – Selling and Administrative expenses)
Particulars Amount
Sales = (selling price * no. of units sold = 55 * 600) 33000
Cost of goods sold = (total expenses per unit * actual sales = 23.375 * 600) 14025
Gross profit 18975
Selling & Administrative expenses = (variable sales overhead * actual sales +
selling and administrative cost = 1 * 600 + 2700) 3300
Net profit/ operating income 15675
Management of Williams Performance Tenders has formulated cost card which is
mentioned below:
Cost Card
Particulars £
Direct Labour 6
Direct Material 7
Variable Production Overhead 2
Fixed Production Overhead 1
Fixed Production Overhead incurred actually £6000
Variable selling & distribution expenses 30% of sales value
Selling Price 55
Sales 20000
Break-Even Analysis: This technique help management to have information about
products which they require to sell to gain amount in respect to cover business costs. For this,
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fixed cost, variable costs per unit of sales and profit per unit of sales is considered by manager of
Williams Performance Tenders. This help them to have knowledge about that level when all
expenses are ascertained. Thus, this is situation which consists no profit and no loss chance
which benefit top personnel to sustain firm's position and image in market in respect to
competitors.
Number of products which are required to be sold for break even point are calculated as
Sales per unit 40
Variable costs VC = DM +
DL 28
Contribution 12
Fixed costs 6000
BEP in units 500
Break even point in accordance with sales revenue, can be calculated as
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
Profit volume ratio PVR = Contribution /
sales * 100 30.00%
BEP in sales 20000
Calculation for obtaining desire revenue of about 10,000
Profit 10000
Fixed costs 6000
Contribution 16000
Contribution per unit 12
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Sales 1333.33
Margin of safety, if 800 products are sold in market
Actual sales in units 800
Break even sales in units 500
Margin of safety 37.5
Margin of safety: This refers to point by which sales level and output can reduce in
respect to business reach to its break-even point. For this, variance between actual sales and
break even sales is ascertained by management. Along this, market prices of stock and its
differentiation with intrinsic value of stock. Thus, manager of Williams Performance Tenders to
make appropriate decisions about investment of funds in business.
M2 Different types of accounting techniques to produce financial reporting documents
Management of Williams Performance Tenders have different methods of accounting for
having information about activities that can be conducted in business. This help them to have
knowledge about net operating income and profitability of firm. These are accounting techniques
which are used by manager which are described below:
Standard costing: This technique of accounting benefits management to have
information about difference between actual cost of items and standard. This help manager of
Williams Performance Tenders to acknowledge variances in expected and actual expenses that
are computed in production of products.
Marginal costing: It is another tool which help management to have information about
net profitability of firm. It is simple and best method which aid manager of Williams
Performance Tenders to have knowledge about fixed and variable cost (Jones, 2011).
Thus, these are two techniques of accounting which are used by manager of Williams
Performance Tenders to formulate statements that are balance sheet, profit and loss, income
statement and many other. This help management to have accurate information about financial
position and soundness of firm.
D2 Financial report that accurately apply and interpret data for a range of business activities
Data Interpretation:
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From the above data, it is interpreted that marginal costing is technique which is used by
management of Williams Performance Tenders. This is an effective accounting method which
aid manager to have information about profitability of business. Net profit of company which is
computed through marginal costing is about £17500, while absorption technique result is
£15675. These are tools which define that difference in cost are due to fluctuations in variable
costs. Besides this, BEP analysis state that company require to sold 500 units to attain break-
even point of 20,000. Management earn around £10,000 of profit, for which sales of nearly 1333
units to be made by firm. Thus, this results in obtaining margin of safety of 37.5 when this
company sold 800 units.
TASK 3
P4 Advantage and disadvantages of different types of planning tools used for budgetary control
Budget planning tools which are used by management to predict, frame plan and manage
capital properly. It is essential that funds are properly utilised by top personnel for which they
formulate a budget that is allocate money in different business activities. This help them to
execute operations to attain targeted results and objectives. With technological advancements,
manager of Williams Performance Tenders shifted from traditional budgeting tools to cloud
based software. This help executive to maintain records appropriately which aid them to have
accurate knowledge about funds.
Budgetary control: This is a financial process which is conducted by management to
manage expenditures and income of organisation. For this, financial and performance goals in
respect to budget are set by top personnel. This help management to compare actual outcomes to
make adjustments in performance of firm to execute business activities in respect to market. This
technique is used by management of Williams Performance Tenders to keep track of financial
information of company. Thus, executive have knowledge about requirement of investments for
making alteration in system in according to future market situations (Christopher, 2016).
Manager of Williams Performance Tenders used budgetary control as an coordination
instrument. This tool help management to formulate plan for future that is set budget for each
and every business activity. By this, technique they are able to reduce wastage of funds and
enhance profitability. Thus, these are various budgetary control planning tools which are
described below:
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Contingency tools: This is budgetary planning tool which help management to have
information about problems and difficulties that have possibilities of occurrence in business. For
this, they design system flexible and conduct operations in according to market. Organisation are
present in market which never remain static. For this, manager of Williams Performance Tenders
execute market research to have information about requirements of people. Along this,
competitor's offering are also determined which help top personnel to provide product
accordingly. Advantage: Management design system flexible to keep employees prepared for future
uncertainties. Along this, staff members are distributed roles and duties in according to
their skills and capabilities. This make them dedicated and encourage them to perform
tasks in effective manner.
 Disadvantage: Manager find this tool inappropriate, as changes in system become
expensive for them. Williams Performance Tenders is small firm which require utilisation
of funds properly. Company require to construct position and image in market, so
employees are not ready to work with modification. This impact on their performance
and outcomes (Murray Lindsay, 2012).
Forecasting tools: It is a planning tool of budgetary which aid management to control
future uncertainties and risk. For this, they conduct prediction activity to have information about
present and past market trends. This process comprises assumptions which manager of Williams
Performance Tenders made and depends on their knowledge, experience and judgements. These
are computation which are projected by them by using appropriate techniques that are regression
analysis, Delphi method and many other. Thus, management require to make adequate
assumptions to reduce errors of wrong forecasting on business. Advantage: This technique help management to forecast future to make assumptions
accordingly. By this, they are able to make appropriate decisions which aid them to
complete business goals and objectives.
 Disadvantage: Manager knowledge and experience determine assumptions that are made
in respect to organisation. Thus, accuracy of results have less guarantee that they are
accurate in according to market trends.
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M3 Applications of planning tools for preparing and forecasting budgets with its uses
Management of Williams Performance Tenders uses planning tools to have information
about requirements of public. It is necessary that system is designed by them in respect to market
conditions. For this, problems and crisis chances of occurrence in future are ascertained for
making transformation and alteration in system accordingly (Jones, 2011). Budgetary control is
technique which aid top personnel to have information about past and future trends. Manager
define limit of funds for each business activity utilisation of funds properly. This aid them to
conduct business operations effectively, by reducing uncertainties that have chance of occurrence
in future. Hence, management is able to utilise resources properly and execute activities in
respect to market conditions.
TASK 4
P5 Adapting management accounting systems to respond to financial problems
Each and every organisation require proper utilisation of funds for execution of business
operations effectively. This is a financial issue for a small firm, as they have shortage of money
which require to be uses properly. Williams Performance Tenders is small scale enterprise which
provide boat to people. Thus, these are various financial problems which are faced by executive
of Williams Performance Tenders which are described below:
Lack of proper information related to cash transaction: Finance management process
is dependent on information about cost of transaction that are maintained in firm. Top personnel
of Williams Performance Tenders conduct training programmes in firm. This help them to
enhance capabilities of manager and subordinates to make them competent to work with
financial software. Thus, proper record is maintained about business operations and expenses
that are incurred in production of boat (Laine, Paranko and Suomala, 2012).
Lack of finance management system: This is another financial issue which manager
face, if organisation didn't have appropriate system using for maintaining record. It is necessary
that management of Williams Performance Tenders implement adequate software to prepare
record of financial data about business transaction. Hence, budgetary system is impacted if
appropriate accounting tools are not used by manager.
Overload expenses: It is financial problem which occur in organisation due to its
existence in market which is dynamic and changes with time. Management of Williams
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Performance Tenders require to make expenses which are unexpected and affect on funds
availability. This impact on business activities, as there will be shortage of money with top
personnel.
Thus, these are financial issues which are faced by management of Williams Performance
Tenders. It is small firm, so top personnel require proper utilisation of resources that is funds,
material and workforce. For this, manager responsibility is to use appropriate management
accounting tools to reduce and remove financial issues from firm. Along this, they even require
to enhance company's position and goodwill in market in respect to competitors for improving
their profitability.
Tools that are used to overcome financial issues:
Benchmarking: This is essential tool which is used by management to have knowledge
about organisation financial position. For this, standards are formulated by them to direct staff
members to perform business activities in systematic and organised manner. In Williams
Performance Tenders, manager provide compare actual outcomes of employees with benchmarks
to have information about deviations. This help them to make alteration in system and policies to
remove financial problems. For this, management compute cost of products to select appropriate
projects and make changes in system accordingly (Leitner, 2013).
Key Performance Indicator (KPI): It is an effective method which is used by
management to have information about effectiveness of firm. Management require to accomplish
business objectives and financial outcomes. KPI vary from one sector to another which occurs
because of operational difference with financial structures. Company's net profit, gross margin,
debt to equity ratio and current ratio are various elements of this technique. This aid manager of
Williams Performance Tenders to overcome financial issues. For this, management uses business
analytics software to gather data about production process in respect to order of customers.
Performance monitor system benefit them to make changes in system in according to meet
expectations that are set by top personnel. Thus, employees are informed about modified goals to
make them execute activities accordingly.
Financial governance: This tool is used by management to manage financial
information by collecting and monitoring it for proper utilisation of funds. If organisation have
lack of financial governance, than there are possibilities about reduction in trust level of
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investors. Besides this, regulatory bodies even charge penalties, if manager of Williams
Performance Tenders didn't follow government rules and laws (Lukka and Vinnari, 2014).
M4 Management accounting lead organisation for sustainable success and financial problems
Management accounting is concept which helps top personnel of Williams Performance
Tenders to reduce financial issues. Thus, this is explanation of how manager bring sustainable
success in business by use of this tactic is described below:
 Marginal, standard, absorption and break-even analysis are various accounting techniques
which aid manager to integrate sustainable matters while decision-making process time.
 Management accounting tools help management to formulate appropriate strategies to
incorporate sustainability in business.
 Further, management accounting also benefits manager to construct reporting policies
with help of financial and non-financial terms.
D3 Planning tools for accounting respond appropriately to resolve financial problems
Benchmarking, key performance indicator and financial governance are various budget
planning tools which are used by management of Williams Performance Tenders. These
techniques aid manager to have knowledge about current financial performance of firm. Actual
results are compared with standards which benefit top personnel to ascertain financial issues to
make appropriate decisions about use of funds (Lukka and Vinnari, 2014). Apart from this,
financial data interpretation and further analysis provide information to top personnel about
external reporting. Thus, management is able to sustain growth of business in respect to rival
firms.
CONCLUSION
From the above report, it can be comprehended that management accounting is essential
for each organisation. Small firms have shortage of funds which they require to utilise in
efficient manner. In this, management consists essential role which is to use appropriate
accounting system for maintaining record of financial data. Different accounting reports that are
performance, job cost, inventory and manufacturing. Marginal and absorption costing are
techniques which aid manager to gain information about net profitability of company. Besides
this, budgetary control planning tools are used to utilise funds properly. For this, management
formulate budget to distribute money in different business activities. Thus, management
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accounting system that are benchmarking, key performance indicator and financial governance
are used by top personnel to overcome financial issues. Thus, management is able to sustain
firm's position and reputation in market in respect to rival firms.
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REFERENCES
Books and Journals
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accounting practices: evidence from Libyan companies (Doctoral dissertation,
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Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Hillier, D., Grinblatt, M. and Titman, S., 2011. Financial markets and corporate strategy (No.
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parameters and coordinates of accounting and public management reforms. Accounting,
Auditing & Accountability Journal. 25(2). pp.295-327.
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and Islamic corporate social responsibility compliance: evidence from ISO14001
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Leitner, S., 2013. Information Quality and Management Accounting: A Simulation Analysis of
Biases in Costing Systems (Vol. 664). Springer Science & Business Media.
Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting
research. Accounting, Auditing & Accountability Journal. 27(8). pp.1308-1338.
Mat, T.Z.T., Smith, M. and Djajadikerta, H., 2010. Management accounting and organisational
change: an exploratory study in Malaysian manufacturing firms. Journal of Applied
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Murray Lindsay, R., 2012. We must overcome the controversial relationship between
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24(3). pp.357-375.
Murray Lindsay, R., 2012. We must overcome the controversial relationship between
management accounting research and practice: A commentary on Ken Merchant's
“Making management accounting research more useful”. Pacific Accounting Review.
24(3). pp.357-375.
Napier, C. and Haniffa, R., 2011. Islamic accounting. Edward Elgar Publishing.
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