Management Accounting Principles and Applications

This assignment delves into the core concepts of management accounting. It examines how various principles, tools, and techniques support organizational management in decision-making, strategy formulation, and performance measurement. The text emphasizes the importance of financial reporting, risk assessment, and adapting to changing social and environmental trends for long-term business success.

Management Accounting
Table of Contents

INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1: Different types of management accounting and its essential use:........................................1
P2: Different methods for management accounting reporting....................................................2
M1: Benefits of management accounting:..................................................................................3
D1: Critical analysis of reporting system ...................................................................................4
TASK 2............................................................................................................................................4
P3: Various costing methods used for calculating the net profits...............................................4
M2: Evaluation of accounting techniques...................................................................................5
D2: Critical evaluation of profit and loss statements.................................................................5
TASK 3............................................................................................................................................6
P4 Advantages and disadvantages of planning tools..................................................................6
M3:Evaluation of planning tools.................................................................................................8
D3:Critical analysis of financial problem...................................................................................9
TASK 4............................................................................................................................................9
P5: Various measures to resolve financial problems..................................................................9
M4:Evaluation of financial issues.............................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is an accounting tool which is used by the organisation in order
to gain the sustainability in an effective manner. However, this can be said that the management
accountant uses various MA tools in order to lower the per unit cost of production so that the
organisation can attain the sustainable development and also gain the competitive advantages
over the rivals. This report is based on the Rowlinson knitwear company which is specially deals
in the retail clothing segment (Vaivio and Sirén, 2010). With the help of management accounting
tools, company can use these accounting system which in order to lowering the cost of product in
an effective manner. Various management accounting systems are in order to optimise the
profitability. Apart from that, various budgetary planning tools are used by the Rowlinsion for
gaining the sustainability. Various management accounting systems are used for overcome the
organisation's financial constraints. The organization needs to implements and apply the accurate
strategies and management account techniques for their growth and endurance in the competitive
market. It also gives an important data to the managers from the past for taking the important
decisions regarding the organization policies and also makes a change in the strategies which
makes an organization to maximize the profit margin. This report is going to assists the
organization to improves the standards of the decision-making process. The use of absorption
costing and marginal costing methods of the costing system help the management to prepare a
well and accurate financial reports which are based on the organization preferences (Luft and
Shields, 2010).
TASK 1
P1: Different types of management accounting and its essential use:
Cost accounting system: This is the management accounting tool which is used by the
organisation in order to lower the per unit cost of production in an effective manner. Apart form
that the this is the modern tool for making the business objectives in an effective manner. This
has been seen that the most effective tool for gaining the competitive advantages over the other
rivals. Rowlinsion knitwear company is the small mid sized company which deals in the retail
clothing segments and its main aim is to render the product in a least effective price (Cadez and
Guilding, 2012). This is the main reason that is why, the company could gain the sustainable
development.
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Job costing system: This is the system for assigning product costs to an individual good
or batches of goods. Normally, the job order costing system is implemented only at the time of
goods produced are effectively diverse from each other. Since, there is a crucial variation in the
goods produced, job order costing system would form a job cost records for each item or job
order. This is used by the rowlinsion knitwear company at the time when the group of products
are made in a single lot. The cited company could use this tool in an effective manner.
Price optimization system: This is price optimization system which is used to optimize
the the price at which customer is willing to pay at an effective manner. Price optimization
system is the tool which is used by the management accountant in order to gain the sustainability
(Herzig and et. al. 2012). This is the tool which is used to set the price at which consumer is
willing to pay. Cited company is willing to pay to its price at an effective manner. By using this
tool, company can fix its products prices in an effective manner. However, there are certain tools
that can be used by the organisation in order to let the customers' perception about the price at
which they are ready to buy the product in an effective manner.
Inventory management system: This is the system which is used to optimise the
inventory so that the available resources can be used effectively. Now, management accountant
will optimise the inventory in an effective manner (Van der Stede, 2011). This is the most
effective manner in order to optimise the inventory in an effective manner. Inventory
management system is the tool which is used by the organisation in order to optimize the
inventory in an effective manner. By using this management accounting system, company could
optimise its resources an gain the sustainability in an effective manner. By using this tools,
company's management accountant could optimise its inventory management tools.
Now, these management accounting system are used to gain the sustainable in an
effective manner. Now, this is the responsibility of the management accountant for adhering
these tools in an effective manner.
P2: Different methods for management accounting reporting
There are various management accounting reports which helps the management for
making the final strategy for the sustainable development. However, this can be said that the
management accountant uses their tools in an effective manner. Various management accounting
reports are made by each of the departments in an organisation and they submit their reports to
their concerned authorities in an effective manner. Some of them are mentioned hereunder:
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Budget reports: This is the report which is made on the basis of forecasting of
operational data in an effective manner for a specific period of time. The budget is the main tool
which is used by the organisation in an effective manner. This could be said that the management
accounting system is the tool which is used by the organisation in order to know the expected
figure and made strategy in an effective manner. After that the actual data is compared with the
budgeted data and make the strategy to overcome the adverse figure in an effective manner by
using this report.
Inventory management report: This is the report which is made by the management
accountant by taking help of Inventory management system and submitted to the concerned
manager of the department. However, this can be said that the management accounting tools are
used by thee organisation in order to optimise the inventory management system in an effective
manner. This is the perfect tool which is set up in an effective manner. There are certain tools
that can be used by the organisation in an effective manner. However, there is a strong need to
made the report by using the management accounting tool.
Account receivable report: This is the account receivable report which is used by
management accountant in order to gain the sustainability. By using this report, management
accountant will identify the details of the various account receivables and make the strategy or
policies in an effective manner (P. Tucker and Lowe, 2014). However, this is the most effective
tool for making an effective policies. Although, by using this tool, company could use strategy
which is used to overcome the bed debts in an effective manner.
Job costing reports: This is the main tool which is used by the organisation's manager in
order to produce batches in a cost effective manner. This could be said that the management uses
this strategy by which the organisation could gain the sustainability in a longer term. However,
this can be said that the management accountant uses this report to optimise the resources in a
strong manner.
M1: Benefits of management accounting:
For gaining the sustainability of the cited organisation various management accounting
system is an essentially needed which firmly gain the sustainability in an effective manner. By
implementing all the concerned management accounting tools, company could gain the
profitability and productivity in an effective manner. Henceforth, recording and assessing the
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accounting information vai implementing accounting tools, management of the cited
organisation is required to the assess the financial viability.
D1: Critical analysis of reporting system
This is rightly said that each firm must need to control their accounting data in a most
effective manner so that the chances of mistake and error could be effective controlled.
Management accounting system is an an efficient tool that could assist the organisation's
manager to their routine transactions. The management of the cited organisation needs to
implement these system henceforth the profitability and growth could be enhanced. By this, aim
of the Rowlinsion company could attain their pre-set targets in a most effective manner. The
main objectives of reporting systems is to manage their costs and expenses and forecasting of the
future productivity.
TASK 2
P3: Various costing methods used for calculating the net profits
Marginal costing: This is the costing tool which simply used to make optimise the
profits in an effective manner. While calculating the marginal costing, all the variable costs are
to be considered while calculating the net profits. On the other hand, after calculating the
contribution, fixed cost is to be deducted from the contribution and get the profits in an effective
manner. This is the costing tool which is used by the management accountant in order to measure
the net profits in an effective manner. All the variable costs which are related to the cost of
production are considered in an effective manner. By reducing variable costs, company could
gain the contribution in an effective manner. After that, all the fixed costs are to be considered
and this is reduced from it. So that the net profits as per the marginal costing can be considered.
Absorption costing:This is the costing tool which comprises all the manufacturing costs
irrespective of fixed and variable costs. The major issues are the one under which absorption
costing are considered. This is the most effective tool which contains which covers all the
manufacturing costs which contains variable and fixed costing.
Calculation by using the Marginal Costing
Particulars Amount
Sales 35*500 17500
Less:
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Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
Computation through Absorption costing
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500 8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
M2: Evaluation of accounting techniques
This can observed that each company is required to have the strong and adequate
planning their forthcoming future. This could render them a forecasting of the total costs
expenses that could invest by the organisation. This is highly efficient techniques which are used
for enhancing the profitability and growth of the rowlinsion company. For the intention,
managers are keen to implement risk and additional costs which could emerge in a company that
could handled by implementing tools. Materiality is the other tool that could efficient in the
handling resources of the organisation.
D2: Critical evaluation of profit and loss statements
According to emerge valuable decisions, rowlinsion organisation is implementing of the
two reliable costing tools like marginal and absorption (Vaivio and Sirén, 2010). Under this, net
profit as per marginal costing are calculated as 7500 while on the other hand, by using absorption
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costing, net profits are calculated and 7800. the main difference between both of the costing
method is 300 which emerged due to the fixed costs. For the aim of future decision making, they
would opt the absorption costing as this is the main tool.
TASK 3
P4 Advantages and disadvantages of planning tools
Budget: It is said to be detailed information and well planned for a specific span of time
regarding organisation enterprise operations. It determines expenses as well as cost which a
organisation is investing over manufacturing services and products (Quinn, 2014). It is a design
of comprehensive of accounting and operations planning for a particular gap. Mainly, it is made
for more than one years but it is followed if their results are not in favour of organisation.
Budgetary control: It is known as an main tools of budgeting that impact on management
to carry operations such as analysis, coordinating and planning. These are associated with that
parts of enterprise which are separate into different sections are called as centre of budget.
Generally, it gives an idea to managers about how they can mange resources without paying
extra price.
Process of budgetary control Consult with concern managers: It is important for managers to make effective analyses
by having each other information. They need to mange budget cost along with expenses.
It will aid them to interact in a proper information regarding organisation betterment. Effective assumptions: After having feedbacks from managers they require to have
assumptions for protecting future losses (Morales and Lambert, 2013). The main aim is to
plan a budget to control upcoming extra cost as well as activities. It includes different
expenses which are inured by organisation. Fixed companies data for budget to achieve objectives: In this procedure, a effective list
of data in detail is made by considering into account data which are collected from all
departments. It help in manager to prepare a plan according to set standards. Measurement of data with budgeted: Organisation performance measure actual data for
comparing with budget. It will aid them to estimate proper possibilities of growth
modifications of available resources.
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 Review analysis: This is a final stage, of controlling budget process as managers observe
all above steps are following in a same direction or not. It all are in effective way then it
is transfer to top authorities for future approvals.
Planning tools: In a company, planning can be considered as the technique of
management which is linked with aims determination of organisation in order to direct their
future estimation and mission of organisation (Luft and Shields, 2010). In regard of meeting
those objectives, manager need to improve their plans such as business plan as well as any other
business activities. Here are mentioned some of those:
Forecasting tools: This often begin with some certain assumptions that support the
effective decision making, management abilities and knowledge. This is majorly known as
historical information utilisation for the upcoming trends setting activity.
 Advantages: This is required for organisation to set some pre-determined aims or
objectives. Through this, manager can assume their sales and cost sum which they predict
top meet within a certain time period. Disadvantage: This does not certain more specific firm estimation of entire expenses that
happen or can happen in organisation. This influence the aims of organisation which are
higher than the operation cost.
Scenario tools: As per this tools, manager utilise scenario tool for analysing alternative
choices according to the condition . This can help in operational management, functional
activities and planning of Rowlinsion organisation (Fullerton, Kennedy and Widener, 2013).
This changes as per the company demand as well as manage incurred cost by firm.
 Advantages: Through the utilisation of this tool, manager of organisation can meet some
certain ideas of opportunities, selection and implementation i.e. uncertain. Disadvantage: This does nor often accurate as well as suitable for organisation as this is
more time consuming despite of other tools.
Contingency planning tools: This refer to the tool of budgeting and planning that is
designed for evolution of organisation for crisis situation in more efficient manner. Developing
a contingency plan that can help in performing the organisational activities in effective manner
through handling management and financial resources of organisation.
 Advantage: This can assist in weed out unnecessary expenses of sited organisation as
well as can help in saving company from critical condition.
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 Disadvantage: Few conditions are more complex cause of their complex traits which is
its major drawback.
M3:Evaluation of planning tools
By evaluating the budgetary-control, company would get to know about the various
planning tools which could be used by the organisation in order to render an efficient tools in an
effective manner. It is a control technique where the manager of the organization compares the
actual results with the planned budgets. If any variances or differences are arises than the
manager exercises the control action and again revise the original budgets for future propose.
The Bugetary control provides many advantages to the managers of an organization:
The key area of the budgeting is that it cooperates the activities of the departments or
sections of an organization. It translate the all strategic plans into active action. The budgets
specify all the resources which are used in the business and also gives outline where the
business can generate the revenues (What is Budgetary control, 2017). It also improves the
communication system in the organization between the employees. It improves the allocation of
the resources, because all the requests are specify and clarified in each departments. It also
provides a corrective action tool with the reallocations of the activities.
However, in the organization the budgetary control makes the problems. These are
discussed as follows:
All the budgets are made on the estimates basis. If all the estimates are wrong , the whole
budgets will be deceptive.
The future is unpredictable and uncertain, which effects the budget because all the
budgets are prepared for the future purpose and that’s why it does not show the reality. It is rigid
in nature. When the managers find the variances or deviations from the actual performance with
the planned or budgeted performance, these deviations cannot fixed by the mangers if these are
come from external environment (Vasile and Man, 2012). It is changed or revised from duration
to duration because of changing scenarios. If so, it generates more administration expenses in an
organization.
If the budgets are changed so frequently, the employees cannot do their work more efficiently
and also lose their trust in the budgeting. It also arises conflict between the managers of each
department. The reason behind is that every department managers want to get extra allocation of
resources through the budgets and they also blames to other departments for pit falls.
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D3:Critical analysis of financial problem
This can be concluded that in a company, there are diverse kinds of issues that could
influence the profitability and sustainability. There are various kinds of issues which are totally
linked up finance like cost efficiency, performance and control. These kinds of issues are
required to be solved out in most effective manner in order to enhance the productivity of the
rowlinsion company (Parker, 2012). But before going to enhance the sales of the organisation,
there is a strong needs to make certain tools that could use various management accounting tools
that could use in order to gain the sustainability for the firm. The financial related problems are
those which could be used by the organisation for rendering an efficient tool for gaining the
viability.
TASK 4
P5: Various measures to resolve financial problems
This can be observed that there are various measures which can be used by the
organisation in order to work for some of the motive. But they can't implement various
management accounting tools so that the they could measure the performance of the organisation
in an effective manner. However, there are diverse financial related problems which could be
demonstrated in a company. This is linked with the operational, investing and financial point of
view. Basically, these kinds of issues are used by the outdated tools. the main financial related
problems are:
 Profitability: there are various issues that are demonstrates with the profits which are
connected with the Rowlinson company. This could enhance the additional costs and
burden on them in order to attain the pre-set objectives.
 Cost ineffectiveness: There are various issues which exists with the production process
of goods and services. This emerges as the inadequate application of the cost accounting
system.
 Performance control and management: This is connected with the financial position of
the organisation. By assessing the performance of organisation in an adequate manner.
This would emerge mismanagement of operations (Otley and Emmanuel, 2013).
For overcome of the above mentioned tools, above mentioned financial problems of the
managers could us following tools which are elaborated as under:
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 Knowledge Processing Indicators: KPI demonstrate that one of the important
techniques that is implemented for the aiming of solving financial problems by
comparing data of the organisation. This must be of last and current working in a firm
which could be assessed.
 Benchmarking: This could be said that the process of evaluating the performance of the
performance of the organisation's sound and services or processes against other firm
which assumes to be the best in the industry. This kinds of tool is implemented by the
management of the organisation for ascertaining the internal opportunities.
Following are the best and accurate ways to make sure that the sound financial
governance in an organization is:
1. All the compliance should be up to date.
2. Controls are automated.
3. Risk assessment should be conduct frequently.
4. In every financial year, an organization conducts internal and external audits.
 Skills of the management accountant: -Management accounting skills are required for the
decision-making process and making reports and required documents for organization
businesses in achieving the goals and targets. It helps the organization in making future
planning for a business and also prevents the undefined problems such as misuses of the
resources. A well-defined report which results are produced assists the managers in
setting the goals and objectives but also helps in the achievement of it.
 Make the systems and strategies for an organization should be strong: The strategies and
systems for an organization should be well- defined for the achievement of pre-decided
targets and goals. The strategies development should be strong to compete the
competitors in the market. There should be full disclosure of the financial statements and
reporting of the strategies should be in a report in the effective manners.
 Identify the social and environmental trends:-An organization should determine the social
and environmental trends which have an encroachment on the organization’s ability
(Boyns and Edwards, 2013). There are two types of environment: external and internal
both the environment should be considered by the organization to make the plans.
M4:Evaluation of financial issues
 Problems regarding financial should be identified:
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 By using the standards which can use for measured the problems or differences in the
performance of the organization.
 By using non-financial and financial major performance signals to measures the
performance of the organization in the present as well as the future.
 Financial major performance signals are: Ratios like liquidity ratios; profitability ratios,
leverage or capital structure ratios are used to determine the liquidity position of an
organization and also measures the profitability and operational efficiency. It is also
helpful to find out where the organization is lacking.
 Non-financial major performance signals are: Human resources management is the key
asset of an organization without it organization cannot achieve their targets and this
involves the employee’s turnover ratios and a number of jobs offered by the organization.
Goods and services quality and goodwill of the organization reflects the growth in the
future and customer satisfaction regarding the products (Arroyo, 2012).
Financial Governing body:- Financial governing body is the rigorous set of rules and regulations,
guidelines which are delivered or issued by the regulators to make sure that the financial process
in an organization is well governed. A major part of the financial governance is the organization
capability of reporting which involves internal audits, data managing,and reporting of the
financial statements in truth without any discrepancies.
CONCLUSION
It can be concluded that the various principles, tools, and techniques of the management
accounting assist the organization management to get and find the required information by the
accountant and other managers of the organization for execution their functions which is
required in the business. The various important application of the tools of management
accounting systems which provides the organization management to set and prepare the
strategies for their business and makes the plan which basically makes a full concentration on the
long-term sustainability of the organization business. This also assists the organization to
develop or prepare the most important financial reports which are based on the correct and
trustable data. The data which is based on the organization performance with respect to their
strategies and plans.
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REFERENCES
Books and Journals
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