Management Accounting: Definition, Importance, and Systems

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2............................................................................................................................................8
TASK 3..........................................................................................................................................13
TASK 4..........................................................................................................................................15
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Management accounting is considered as the procedures of facilitating financial data as
well as resources to managers. It is also called the managerial accounting. Moreover, it is the
practices to find, measure, evaluate, interpretation and communicate financial data for pursuing
the objectives of company (Liff and Wahlstrom, 2018). This practices is essential as it acts as a
bridge among function of finance as well as another aspects of business. Management accounting
is related with methods of obtaining qualitative as well as quantitative data for producing internal
reports. It plays crucial role in respect of managing firm's inside activities and functions. As per
the given scenario, the chosen company for this report is ABC Ltd., which is a medium size
manufacturing firm. This report covers the explanation of management accounting, kinds of
management accounting system and reports, computation of income statement using costing
techniques, benefits as well as drawbacks of several forms of planning tools that is utilised for
budgetary control. Apart from this, identification of financial problems and how management
accounting system responds to that issues are also discussed in this report.
MAIN BODY
TASK 1
Management accounting- It is an accounting system that is aligned in the process of gathering
monetary and non monetary data with an aim of producing internal reports of various aspects
(Fleischman and Parker, 2017). On the basis of these reports, managers of companies take
corrective action for success of business entities.
Definition of MA-
According to CIMA (charted institute of management accountants), “The term MA is a
systematic process of finding, evaluating, accrediting, analysing, preparing and interpreting of
information needed by management to plan and control in a business entity.”
Management accounting system (MAS)- The term MAS can be defined as a kind of system that
a business entity uses in order to measure and assess process for management. These systems are
linked with various aspects of companies in order to better management.

Importance to integrate accounting systems within a business entity:
There are vital range of accounting systems that are aligned with various activities of
business. Basically, this is crucial for business entities to apply a suitable accounting system with
different kind of departments. Such as in the aspect of chosen business entity, ABC limited their
manufacturing department is linked with inventory management system in order to better
utilisation of available raw material.
Origin, role and principle of MA:
Origin- The origin of MA can be traced since last 300 years when it was firstly used during time
of industrial revolution (Kerr, Rouse and de Villiers, 2015). This accounting was evolved after
the evaluation of financial accounting. Though, in current time period this accounting is not
compulsory for business entities to apply.
Role of MA- This accounting is very useful for companies in the aspect of vital range of
department. It has below mentioned roles that are as follows:
 Beneficial in planning- It is essential for all types of businesses to make effective plan for
futuristic activities. In this aspect, MA plays a key role by providing key information
regards to business transactions which are acquired by managers. In the above ABC
limited company, their managers make effective planning by help of this accounting.
 Beneficial in controlling- Along with the above mentioned benefit, another role of this
accounting is to control various kind of activities in an effective manner. Such as in ABC
limited company, they control their different operations of manufacturing by help of this
accounting.
 Beneficial for decision making- As well as the MA is useful for companies' managers in
order to take corrective decisions. It becomes possible by providing detailed information
regards to different elements of business (Cooper, 2017). The managers of ABC limited
take accurate decision by help of this accounting.
Principles of MA: