Management Accounting and Essential Requirements

MANAGEMENT
ACCOUNTING

INTRODUCTION
The MA is as significance as financial accounting. It can be defined as a different part of
accounting in that internal reports are prepared for internal stakeholders (Cooper, 2017). These
reports can be prepared only by this accounting because it consists monetary and non monetary
information. In today's context mostly organisations are implementing this accounting because of
its increasing importance. With the use of it, managers of companies can evaluate the actual
financial performance that helps in preparing competitive strategies and plans as well as in
major decision making. For better understanding of it, BAM construction limited company is
selected which is basically a civil engineering company. It is located in London and deals in
small, large construction projects. The project report contains two activities in which, first
activity describes about management accounting systems and reports as well as income statement
is produced as per given information. Further, in second activity planning tools and role of MA
systems to solve the monetary issues is included. Along with solution of given practical parts is
mentioned.
ACTIVITY 1
PART (A)
Management accounting and essential requirement of different accounting method.
Types of MAS:
 Price optimisation system- This is a part of management accounting that is related to
sales department of companies. It is so because this provides a detailed information
regarding to consumer's feedback at different price (Jacobs, 2012). With the help of it
companies can fix price of produced items on that customers can be satisfy. Such as
above BAM construction limited company, they operate in wide range of construction
projects and they determine the expected price of their civil engineering projects with the
help of it. This helps them a lot because as per their customer's reaction on various prices
they set the estimated price. Hence, it is essential for companies to draw an effective
pricing pattern which can benefit to companies as well as can satisfy the customers.

 Job costing system- This is associated with finance department of companies (Guthrie,
Parker, 2014). In this, various cost such as labour cost, material cost etc. are estimated
and calculated. By implementation of this organisations can assess the total cost of their
various kind of jobs allocated to multiple operations. Such as in BAM construction
limited company, there are vital range of labour cost, material cost etc. All these costs are
being managed by above accounting system. So overall, this is essential to companies for
proper management of cost in the various operations.
 Inventory management system-In this system, a detailed track record of various kind of
stocks like WIP stock, raw material, finished commodities etc. is included. Along with
under it, the information related to how much quantity of material is consumed and how
much is remaining. On the basis of it, companies' production department takes crucial
decisions. Herein, the context of above selected, BAM construction limited company
their contractors use this accounting that helps them in effective allocation of raw
material in construction projects. It is essentially required in organisations for two
purposes which are keeping track record of materials as well as for taking important
decision in relation to production and purchasing.
 Cost accounting system- This is associated with finance department of companies
(Mussnig, 2013). In other words, this accounting system forecast and calculate actual
amount of cost that occur in multiple operations. The primary objective is to keep total
cost of various activities under control as much as possible. With the effective
implementation it, organisations can evaluate about how much cost will be occurred in
production of one unit and on the basis of it they try to keep below forecasted amount.
Such as in the BAM construction limited company, their finance department is using this
accounting system to track the difference between actual and estimated cost. Thus, this
accounting system is essentially required by companies to keep the cost below budgeted
cost.
Various kind of MA reporting.
MA reports are written document which are prepared as per the organisation's
quantitative and qualitative transactions of a fixed time period (Harrison and Lock, 2017). These
reports are being used by managers of companies as they take important decisions on the basis it.