Management Accounting Research and Trends

The provided assignment details a comprehensive analysis of 25 years of management accounting research, covering various topics such as top trends in management accounting, popularizing ideas like the balanced scorecard, domain theory, method theory, validation approaches, outsourcing case studies, PLS-SEM in management accounting, and public sector management accounting in emerging economies. The assignment also includes references to relevant articles, books, and online resources on management accounting reporting, budgetary control, and more.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
ACTIVITY 1....................................................................................................................................1
PART A.......................................................................................................................................1
PART B........................................................................................................................................5
ACTIVITY 2....................................................................................................................................8
PART A.......................................................................................................................................8
PART B......................................................................................................................................12
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Management accounting is the analysis of business activities and functions which further
helps the management to take effective decision in order to achieve their organisational goals &
objectives. It is also called managerial accounting where manager use the various provisions to
control their functions (Arroyo, 2012). Basically it is used for the internal analysis where
manager of the company take important decision on the basis of their available financial
information. AP Diving company choose for the better understanding of this concept. AP Diving
is scuba equipment manufacturing company established in 1969 and it's headquarter in Cornwall,
England.
This report include the various topics such as understanding of management accounting
systems, it's essential requirement, management accounting reporting and use different methods
to calculate cost and prepare income statement. In addition, it also include the manage
accounting techniques for the planning and control the internal functions. Along with this, how
organisation used these techniques to solve their financial problems.
ACTIVITY 1
PART A
Management accounting: It is also called managerial or cost accounting which analyse
the cost of business and prepare the financial report on the basis of internal operations. It include
the recording and reporting which further helps the manager to take important decision on the
basis of financial reports. Management accounting help the manager to build strategic plans and
it's implementation will help to achieve their business goals & objectives. With the help of this
accounting, AP Diving Ltd manage their operations which helps in decision making process.
Management accounting system and it's essential requirement:
It include the various system which help the business to organize, measure or evaluate the
process. With the help of financial accounting information, manager take effective decision in
respect of the organisation to achieve their business goals & objectives. Their are some of
management accounting system which is followed by the AP Diving company for the effective
or efficient performance (Ball, 2013).
Inventory Management System: It is software of system which help the organisation to
management their inventory level for the purpose of sale, order raw material and for the delivery.
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Basically it is used for the manufacturing company where business need to maintain their stock
level for the manufacturing purpose. In AP Diving Ltd, this system help the organisation to
manage their inventory level because if manager to take care of it then they have to face
challenges in the future. Shortage of stock will affect the production which automatically impact
the profit margin of the company. Over inventory in the warehouses will increase the carrying
cost which increase the production cost and it also affect the profitability of the company. It is
required by the manager which help the business to regular track their inventory and then take
decision according to the requirement.
Cost Accounting System: It is called product costing system where this framework help
the business to estimate their each unit cost. It will further help the organisation to identify their
expected profit, inventory valuation and for the control of cost. AP Diving Ltd use this system
for the estimation of each unit cost that will further provide the overview of the profit margin. It
is required by the manager to take effective decision in respect of the organisation to achieve
their business goals & objectives (Bromwich and Scapens, 2016). By using this system, manager
identify the cost, try to reduce each unit cost which increase the profitability and build various
strategies for the further functioning.
Price Optimisation System: It is a mathematical analysis which help the organisation to
identify their customer's reaction on different price range of product. It also determined that
product price will meet with company's objectives or not. It is required for the determination of
price which suits the customer's expectation. In AP Diving Ltd, manager use this system for the
analysis of price where consumer happy to pay for the equipment. So manager of the company
build various strategies to accomplished their organisational goals & objectives. Develop
strategies on the basis of market situation, perception of their clients and current demand which
attract the targeted costumers. Essentially required to fix the price of their manufactured products
which increase the profitability of the company.
Different methods of management accounting reporting:
It is also called accounting reports which help the organisation to identify their
performance as well as their employees performance (Management accounting reporting, 2017).
With the help of reporting, manager can develop various strategies, take essential decision in
respect of the business to measure performances. Reports will be prepared for the whole
accounting period because important decision will be taken on the basis of it. Manager of AP
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Diving Ltd build various report for the analysis of their operational function and for the future
decision. Some of the accounting reports are discussed below:
Budget Report: It is a formal statement which is prepared on the basis of their previous
experience. It include the all expenses related to the production and estimation of revenue. This
budget report include the all sources of earning and expenditures. With the help of this budgeted
report, manager of AP Diving Ltd complete their task in order to achieve their business goals &
objectives. It provide the guidance regarding various incentives which is going to offer
employees on the basis of their performances in the organisation. Manager of AP Diving Ltd
prepare this report for the analysis of all the expenses or incomes which further affect the
decision. With the help of this report manager build effective strategies which increase the
productivity as well as profitability of the AP Diving Ltd (Cokins, 2013).
Account Receivable Report: This report prepared by those organisation which provide
the goods on credit. So it is required to report their creditors for the recovery of their amount in
the future. Specially for the large organisation, because they are not able to recognize their each
credit sale. So it beneficial for the company to prepare this report and it help the company at the
time of recovery. With the help of this report company identify their defaulter who not paid their
amount. AP Diving Ltd use this report to record their creditors who purchase equipments on
credit and it used at the time recovery. With the help of this report, manager develop more strict
policies to reduce their defaulters.
Performance Report: This report prepared by the organisation for the analysis of
employees performance as well as the whole business. It also include the departmental
performance which is generally used by the large organisation. Manager of the AP Diving Ltd
use this report and develop strategies for the future. With the help of this performance report,
manager award the various incentives to the best performer in the business. To offer various
incentives or reward to the employees will increase the motivation level of individual. Which
further help the organisation to achieve their business goals & objectives. Along with this, it
al;so helps in increasing their productivity or profitability. Performance report used for the
decision making process.
Benefits of management accounting system:
Management
Accounting System
Benefits
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Inventory management
system
 With the help of this system, AP Diving Ltd achieve
efficiency & effectiveness in their operations.
 Minimise the carrying cost which automatically increase the
profit margin and sale of the products.
 Manager regularly track their inventory level.
 It helps in taking future decision which affect the productivity
as well as profitability.
Cost accounting system  With the help of this, business identify the accurate cost of
each unit.
 Identify the cost and then try to reduce it to maximise their
profit margin (Cooper, Ezzamel and Qu, 2017).
 With the help of this costing system, manger take essential
decision in order to achieve their business goals & objectives.
 Control on cost and maintain for the whole production period.
Price optimisation
system
 Help the AP Diving Ltd to identify the customer behaviour
regarding their price,
 Immediate financial benefits which increase the sale as well
as profit margin.
 This system minimise the manual work which reduce the
chances of errors.
 With the help of this system, manger can take effective or
quick decision in order to achieve business objectives &
goals.
 Company analyse the buying pattern of the consumer and
their reaction regarding price.
Evaluate that how management accounting system or reporting integrated with
organisational process:
Management accounting system and management accounting reports both are interlinked
with each other and with organisational process. Above mentioned accounting system help the
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AP Diving Ltd company to build strategies which helps the business to increase their
productivity as well as profitability. Manager take effective decision in order to achieve their
business goals & objective. Such as cost accounting system, price optimization and inventory
management provide various information which further helps in decision making process.
They will provide financial or non–financial information which required in organisational
process. With the help of available data, manager build strategies and then implement in the
organisation for the successful results (Dekker, 2016). Manager of AP Diving Ltd use these
information to prepare accounting reports which include the performances of an individual.
Company prepare these report for the internal as well as external analysis which directly affect
the organisational process. Basically accounting reports and system used for the decision
making process which help the AP Diving Ltd to achieve their desire profit or increase their
product demand in the market for the effective competitive advantage. For the successful
outcomes, business need to use management accounting system or management accounting
reports. It is integrated with the organisational process. Because by using this, AP Diving Ltd
accomplished their goals & objectives.
PART B
ANNEX (A):
Absorption Costing Method: It is a method which accomplish all the manufacturing
cost associated with the production. It include the all fixed and variable overheads such as direct
materiel, labour, production overhead and fixed expenses related to production or selling &
administration.
Income statement by using Absorption costing method (1st Quarter):
Particulars Details Amount
Sales (4500*95) 427500 427500
Less: Cost of Sale -231750
Gross Profit 195750
Add: Under/ Over Absorption 6800
Actual Gross Profit 202550
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Less: Fixed expenses -45000
Net Income 157550
Working Notes:
* Total variable cost per unit = 51.5
* Cost of Goods Sold (COGS) = Production Cost – Closing Cost
= 257500 – 25750
= 231750
* Under or Over Absorption:
Income statement by using Absorption costing method (2nd Quarter):
Particulars Amount
Sales (95*3000) 285500
Less: Cost of Goods Sold -180250
Gross Profit 104750
Less: Under Absorption -5476
Actual Gross Profit 99247
Less: Fixed expenses -45000
Net income 54274
Working Notes:
* Total variable cost per unit = 51.5
* COGS = Opening cost + Production Cost – Closing cost
= 25750 + 303850 – 1493501
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= 180250
* Under absorption = Fixed production cost – actual cost
= 75000 – 80476
= -5476
Marginal Costing Method: This method also known as variable costing because it
includes those cost who change the according to the change in production. It does not include the
fixed overhead. It help the business to identify accurate cost of product (Kihn and Ihantola,
2015).
Income statement by using Marginal costing method:
Particulars Details Amount
Sales 427500 427500
Less: Variable Cost
Direct Labour (15*5000) 75000
Direct Material (18*5000) 90000
Production Overheads ( 9*5000) 45000
Variable @ 10% on sales value 42750 252750
Less: Direct labour (15*500) 7500
Direct material ( 18*500) 9000
Production Variable (9*500) 4500 -21000
CONTRIBUTION 195750 195750
Less: Fixed expenses (180000/4) -45000
Profit for the year 150750
Interpretation: From the above calculation it is concluded that total production overhead
of product X is 72000 and product Y is 192000 by using the absorption costing approach. In case
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of ABC analysis total production overhead of product X is 82749 and Y is 181255. it is also
observed that different activities which are included in the production process. In case of activity
based costing method machine hour per period of product X is 24000 and the other hand for
product Y machine hour per period is 16000.
ANNEX (B)
(a) Labour Hour:
Product X = 6000 * 1 = 6000
Product Y = 8000 * 2 = 16000
22000
Labour Hour = 264000 = 12 per hour
22000
Overhead absorption on Labour Hour:
X Y
Overhead Absorption 1*12 = 12 2*12 = 24
Total Overheads =6000*12
= 72000
= 8000*24
= 192000
(b) Using ABC:
Machine Hour per period:
Product Amount
X (6000*4) 24000
Y (8000*2) 16000
Total 40000
Cost Driven Rate:
Cost Driven Rate Amount
Production Set Up = 179000/60 = 2983 per set up
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Order handling = 30000/72 = 416.66 per order
Machine cost = 55000/40000 = 1.375 per order
Overhead using ABC approach:
Particulars Product X Product Y
Set up cost = (15*2983)= 44745 = (45*2983) = 134235
Order cost = (12*417) = 5004 = (60*417) = 25020
Machine cost = (24000*1.375) = 33000 = (16000*1.375) = 22000
Total 82794 181255
ACTIVITY 2
PART A
Budgetary Control: It is a process where manager of the company fix their goals
regarding finance or performance of the organisation. It will help the business to compare their
actual performances with the standard one. Basically, this budget help the business to control and
monitor their internal process for the effective results (Budgetary Control, 2019). Budgetary
control involve the various activities such as planning, coordinating, organizing and take
effective decision in order to achieve their business goals & objectives. It is used by the top
management of the company where they develop budget in order to control their product cost
and monitoring the other activities. Their are various planning tools which is used by the
manager of AP Diving Ltd for the effective control in their organisation. It is used for the
financial or non financial objective where it helps in achieving business goals & objectives.
Their are some planning tools used by the AP Diving Ltd for the budgetary control along with
it's advantage or disadvantage and it will be discussed below:
Flexible Budget: It is more sophisticated budget in comparison to other budget because
budget will be change according to the change in the volume or in the activities. It help the
manager to analyse their actual or standard outcomes. It help the organisation to achieve their
desire profit because according to the requirement they can change their budgeted amount which
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help the manager to grab the opportunity. It increase the productivity as well as profit margin
which further helps in achieving business goals & objectives.
Advantage:
 It allow the manager to change in their budget according to the production requirement
(Lukka and Vinnari, 2014).
 It provide the accurate results due to including each transaction and fulfil the business
objectives.
Disadvantage:
 It is confusing budget method because generally every budget have single amount but in
this case it will change according to the requirement which create confusion.
 It is not straightforward budget because it required time to understand and include
complexity.
Contingency planning tool: This tool prepare for the help of organisation which
response very quickly for the future events. It is used to deal with unexpected situation at the
time of performing their task. It help the AP Diving Ltd to formulate or implement their
strategies in order to reduce risk and face the unfavourable condition in the working
environment.
Advantage:
 Minimize the damage due to quick action of any problem which save the time of
recovery.
 It is beneficial for the unfavourable situation and take corrective action in order to reduce
the risk.
Disadvantage:
 It is time taken process which also required money for the further actions and it is used
for the current situation not for the future circumstances.
 Taken action not always helpful for the business to resolve their problems and some
times it become inadequate due to lack of understanding the situation.
Incremental budget: This budget used to prepare current budget with the helps of
previous budget. In this budget method, organisation increase their budgeted amount with some
fixed rate according to the previous year budget. AP Diving Ltd can use this budget with some
modification in their last year budget (Merchant, 2012).
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Advantage:
 Incremental budget reduce the unnecessary expenses in the current year budget and it
save the time.
 No special qualification required to prepare this budget and it can be easily prepared by
the individual or easy to understand.
Disadvantage:
 It is not accurate budget because it is prepared on the basis of past estimation which is not
reliable in the current budget.
 This budget not consider the changes in the variables, this budget increase the amount
without analysing the change in the each element.
Different planning Tools and it's applications:
planning tool is very important for the organisation because it help the business to resolve
their financial issues. By using these tools manager build strategies and then implement in the
organisation which increase the productivity as well as profitability. Above mention budget help
the manager of AP Diving Ltd to analyse their previous budget and then develop new budget.
With the help of previous budget, manager identify the problems and previous performances. At
the time of preparing new budget, manager make sure to apply those things which reduce the
future problems and increase the performance in comparison to last year. Manager of AP Diving
Ltd use previous budget to build new budget which helps in taking effective decision in order to
complete their task. It increase the productivity & profitability which further helps in achieving
business goals & objectives. Further it help the organisation in term of increasing their market
share and make their financial position more stronger (Nielsen, Mitchell and Nørreklit, 2015).
ANNEX (C)
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NPV Product X Product Y
NPV = Dis Cash flow – Initial
Investment
= 5416.647 – 5000
= 416.647
= 7182.647 – 8000
= -817.353
PART B
Financial problem: Financial problem refer to the crises or shortage of fund faced by
company while running its operations. It is the hard time which company needs to overcome to
improve the situation of business (Nitzl, 2016). Further, there are various short as well as long
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term source of finance which business can raise to makes its condition stable. Thus, various tools
company uses to enhance its financial position is defined below:
Benchmarking: Benchmarking refer to the process which is used to measure the
performance of business with other similar type of business. It act as a opportunity to improve
their performance in future as compare to present performance (Sunarni, 2013). Further, with
the help of benchmarking method company can identify their internal problem and take
corrective measure to resolve it. The manager of AP Diving Ltd can make the use of
benchmarking method to identify the financial problem such as delay in making payment to
debtor and so on. Therefore, once the problem is identified through benchmarking method then
business set the standard which needs to be achieved within stipulated time period.
Key performance indicator: Key performance indicator is a kind of measuring value
that helps to determine how effectiveness as well as efficiently company is making effort to
achieve its objective (Suomala and Lyly-Yrjänäinen, 2012). Such indicator help the company to
achieve its target successfully. In context to AP Diving Ltd company uses this indicator to
demonstrate the key performer as well as problem faced to deal with the situation effectively. For
instance, if company are incurring unnecessary or excess expenditure then KPI makes measure to
reduce the overspending done by company by eliminating or minimising the cost of company.
Financial governance: The financial problems which are identified through
benchmarking method and key performance indicator are resolved by financial governance. As
the role of financial governance is to collect the information, monitor as well as control the
essential financial information in order to mange the performance successfully. The manager of
selected company track the financial transaction of business, manage the operation and
performance as well as resolve financial problem significantly.
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Comparison between AP Diving Ltd and Bentley Motors limited:
AP Diving Ltd Bentley Motors limited
AP Diving company is a tool making as well as
manufacturing company that provide wide
range of quality scuba and surface diving
equipments.
Respective company faces financial problem
related to inventory, cost accounting as well as
price optimisation that is affecting the financial
position as well as performance of business.
To resolve the financial issue budget report,
performance report as well as account
receivable report is prepared (Tappura and
et.al., 2015).
Bentley Motors limited is an engineering
company that is specialised in manufacturing
luxury cars and selecting appropriate
promotional strategies to spread the awareness
about company.
The financial position of company is unstable
due to which company lacks in building the
trust of investor. This is the main financial
problem experienced by above mentioned
company.
Inventory management system is being
followed by company to keep the count of the
inventories being manufactured by company.
Thus, it assist the company to track the
inventory of company.
Management accounting in solving financial problems and ultimately leading to organizational
success
Management accounting is an internal process which provide both monetary as well as
non monetary information to take the business decision significantly. Proper preparation of
management report helps the manger to carry out day to day operations smoothly. Thus, it helps
in maintaining better control within the business (van Helden and Uddin, 2016). Moreover, key
performance indicator is a management tool used by company to resolve any financial or
monetary as well as non financial or non monetary problem faced by company. Along with KPI,
benchmarking method is used that provide right picture to company by measuring its
performance with other business rivalries. Therefore, such management system helps the
business to improve its performance and manage its day to day operations significantly.

Evaluation of planning tools for accounting to solve problems and support industry with
sustainable success.
Planning refer to thinking in advance and predetermining all the business strategy that
helps the business to face the adverse situation and sustain in dynamic situation. The manager of
respective company makes standard budget for all department as well as activities of business.
Thus, is the duty of firm to incur the expenditure based on the pre set budget. Further, the actual
expenses or budget is matched with the standard budget and then corrective actions are adopted
accordingly. Thus, company uses various technique as well as tool to sustain the industry for
longer duration (Vosselman, 2014).
CONCLUSION
From the above report it has been determined that management accounting plays a
significant role to take the decision related to financial or non financial report. Along with that
there are various management approaches such as KPI as well as benchmarking system that
needs to be utilised in order to resolve the financial problem faced by company. Thus, proper
utilisation of indicator helps the business to gain the advantage of sustainable development in the
competitive environment.
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REFERENCES
Books & Journals
Arroyo, P., 2012. Management accounting change and sustainability: an institutional
approach. Journal of Accounting & Organizational Change. 8(3). pp.286-309.
Ball, R., 2013. Accounting informs investors and earnings management is rife: Two questionable
beliefs. Accounting Horizons. 27(4). pp.847-853.
Bromwich, M. and Scapens, R. W., 2016. Management accounting research: 25 years
on. Management Accounting Research. 31. pp.1-9.
Cokins, G., 2013. Top 7 trends in management accounting. Strategic Finance. 95(6). pp.21-30.
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.
Dekker, H. C., 2016. On the boundaries between intrafirm and interfirm management accounting
research. Management Accounting Research. 31. pp.86-99.
Kihn, L. A. and Ihantola, E. M., 2015. Approaches to validation and evaluation in qualitative
studies of management accounting. Qualitative Research in Accounting & Management.
12(3). pp.230-255.
Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting
research. Accounting, Auditing & Accountability Journal. 27(8). pp.1308-1338.
Merchant, K. A., 2012. Making management accounting research more useful. Pacific
Accounting Review. 24(3). pp.334-356.
Nielsen, L. B., Mitchell, F. and Nørreklit, H., 2015, March. Management accounting and
decision making: Two case studies of outsourcing. In Accounting Forum (Vol. 39, No.
1, pp. 66-82). Taylor & Francis.
Nitzl, C., 2016. The use of partial least squares structural equation modelling (PLS-SEM) in
management accounting research: Directions for future theory development. Journal of
Accounting Literature. 37. pp.19-35.
Sunarni, C. W., 2013. Management accounting practices and the role of management accountant:
Evidence from manufacturing companies throughout Yogyakarta, Indonesia. Review of
Integrative Business and Economics Research. 2(2). p.616.
Suomala, P. and Lyly-Yrjänäinen, J., 2012. Management accounting research in practice:
Lessons learned from an interventionist approach. Routledge.
Tappura, S., and et.al., 2015. A management accounting perspective on safety. Safety science.
71. pp.151-159.
van Helden, J. and Uddin, S., 2016. Public sector management accounting in emerging
economies: A literature review. Critical Perspectives on Accounting. 41. pp.34-62.
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management accounting. Accounting and Business Research. 44(2). pp.181-203.
Online
Management accounting reporting. 2017. [Online] Available Through:
<https://www.completecontroller.com/types-of-managerial-accounting-reports/>
Budgetary Control. 2019. [Online] Available Through:
<https://www.myaccountingcourse.com/accounting-dictionary/budgetary-control>
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