Management Accounting and Systems

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Understanding of management accounting and management accounting systems....................1
Benefits of management accounting systems.............................................................................2
Methods used for management accounting reporting.................................................................3
Management accounting systems and management accounting reporting integrated with
organisation.................................................................................................................................4
TASK 2............................................................................................................................................5
P3 Calculation of cost and income statement using absorption and marginal costing...............5
Task 3...............................................................................................................................................7
Pros and Cons of using different planning tools in accounting..................................................7
Different planning tools and their implication in budgeting and forecasting.............................9
Adapting management accounting systems to address financial problems..............................11
Management accounting helpful in leading organisation to sustainable success.....................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is also known as managerial accounting which is a tool or process
that provides financial information or resources to mangers for short and long term decision
makings of firm. Management accounting is used within organisation only which is only thing
that separates it from financial accounting. Finance administration of company provides
statistical data such as financial statements, and invoices to managers of company and then
mangers take financial decisions for firm on basis of these documents. Management accounting
is a process of presenting financial data and business data for internal management of the
organisation with help of various management accounting tools and practices. This report is in
context of Eastern Engineering Co. Ltd. which is a medium-sized manufacturing company. This
is a study note on role and functions of management accounting with management accounting
systems, and range of techniques which are used by organisation.
TASK 1
Understanding of management accounting and management accounting systems
Application of professional skills in preparing financial and accounting information for internal
management of company which uses this information in management operations such as
planning, controlling and formulation of policies is known as management accounting
(Alawattage, and Wickramasinghe, 2018). Basically management accounting helps managerial
team in providing accounting and financial data so that managers can execute business
operations efficiently. Companies use various management accounting systems which are
explained below.
Cost accounting system: This is a form of management accounting which is used by
mangers of company to capture company’s total cost of production by evaluating variable cost
and fixed cost for all operations. This is a systematic set of practices for collecting and reporting
financial data of cost of manufacturing goods and services. Cost accounting used by internal
management of company unlike financial statements which are useful external users. This
include whole input costs which is needed in production including fixed cost and variable cost.
There are different types of managerial accounting such as lean accounting, marginal costing,
standard costing, and activity based costing. Cost accounting does not have to meet any GAAP
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which stands for generally accepted accounting principles because it is used by internal
management of organisation so it varies in each company and department of companies.
Inventory management system: This is a procedure or technic by which company keeps a track
of its stock of goods and services from manufacturing to sales. Inventory management is a
combination of technology and procedures which monitors and manages stocked products such
as raw material, finished products or assets of company (Clarke, and et. al. 2019). This system
helps company in keeping a check on what items are in stock company currently have, record of
assets company has, and provides a resource for all information regarding inventory of company.
To keep a check on inventory technology which includes hardware and software is used by
company with help of inventory management software company can access to central database,
report generation, forecasting of future demand etc.
Job-costing system: This system refers to process of determining cost of specific job or project.
This system is applicable when various jobs or contract are operated in an organisation and
company want to manage and control each project or job (Diab, 2020). With this systems
workforce can identify cost of each job separately as well as profit or loss form each job can also
be calculated. Job-costing system help sin determining cost of jobs for future planning so that
actual cost and estimated cost can be compared for knowing the effectiveness.
Price-optimising system: According to this system demand for product varies at different
price levels so price-optimisation helps in collect all that together with cost of production and
inventory levels to fix suggest prices that can improve company’s profit on particular product. If
product is priced by ignoring factors of demand it can impact profit of company thus price-
optimising helps in evaluating what is the amount that customers are willing to pay for product.
Relative value of goods and services keeps changing so price should be fixed by considering
that.
Benefits of management accounting systems
These systems help organisation in taking effective financial decisions so that company can
achieve its organisational goals and business activities and be executed more efficiently
(Hosseinzadeh, and Davari, 2018). Following are some benefits or advantages of management
accounting which can help Eastern Engineering Co. Ltd.
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