Management Accounting Research and Practices

This assignment involves analyzing various books, journals, and articles related to management accounting research and practices. The provided references cover topics such as strategic management accounting, environmental management accounting, upper echelons theory, and business analytics in performance management. Students are expected to review these sources and provide a detailed response based on the given instructions.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
P1 Explanation of management accounting system and its requirements for different
management accounting systems.................................................................................................1
P2 Different methods of management accounting reporting.......................................................3
M1 Benefits of management accounting system and their application in the context of
organisation..................................................................................................................................4
D1 Evaluation of management accounting system and reporting which are integrated with
organisational process..................................................................................................................5
PART B............................................................................................................................................5
Annex (A)....................................................................................................................................5
Annex (B).....................................................................................................................................6
PART A...........................................................................................................................................7
P4. Advantages and disadvantages of planning tools for budgetary control...............................7
M3. Analyses the use of planning tools and applications for preparation and forecasting
budgets.......................................................................................................................................10
PART B..........................................................................................................................................10
P5. Organisations are adapting management accounting systems to respond to financial
problems.....................................................................................................................................10
M4. Management accounting in response to financial problem can lead organisations to
sustainable success ....................................................................................................................13
D3.Various planning tools to resolve financial problems..........................................................13
CONCLUSION..............................................................................................................................13
REFRENCES.................................................................................................................................14

INTRODUCTION
Management accounting is also known by managerial accounting. It is a kind of process
which is related to the preparing the management reports and accounts that provides financial
and non financial information to managers(Ward, 2012 ). This information helps the
management team to make future policies and strategies. Basically, it is a kind of accounting
method which provides the framework for internal management of the business. To understand
about the management accounting in broad sense Evolve consulting engineering company is
selected. It has its registered office at London UK. Company deals in providing services related
to structural and civil engineering to the individual clients and companies.
This project report consists the detailed information about the management accounting
meaning, their tools as well as their advantage, disadvantage. Apart from this, project report tells
about way in which organisations overcomes from financial issues with the implementation of
management accounting tools and techniques.
ACTIVITY 1.
PART A.
P1 Explanation of management accounting system and its requirements for different
management accounting systems.
Management accounting is a systematic process of preparing reports which helps in
management of internal part of business(Wickramasinghe and Alawattage, 2012). It is an
important tool in the context of management of companies. In addition, this accounting system is
becoming the key part of organisations because it provides needed information timely. Herein, it
is important to know that this is not compulsory for the organisations to prepare management
accounting report, it depends on the need of companies as well as there is no any accounting time
period of management accounting. Evolve consulting engineering company is using this
accounting system to enhance the quality of service providing. Management accounting system
includes different type of accounting systems which are following:
Price optimisation system- It is a kind of system which is related to the determining a
level of price which becomes suitable both for the company and customers. This is very
important tool because right price assigning is needed to attract the more customers. Apart from
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these features, it also provide a framework to analyse the customers reactions on different pricing
level which helps company in assigning the accurate price of services and products. Application
of this tool depends on the size and nature of company. Evolve consulting engineering company
implements this method in determining the price of their offered services. It helps them in
deciding the right price of their projects and other services.
Inventory management system- This management system is a tool which tracks the
movement of goods and services in the entire supply chain(Otley, and Emmanuel, 2013). It
benefits the companies in checking the small movement of moving parts in the entire operations.
Due to this accounting tool managers can ensures about the matching in demand and supply of
raw material. Eventually, inventory management system consists various types like
manufacturing inventory management, warehouse inventory management, retail inventory
management system etc. Herein, it is important for the companies to choose right inventory
management system because each has different features. Its all depends on the nature of
company's business and its network. Evolve consulting engineering company use this system in
managing the raw material of different projects because they are involved in the dealing with
construction projects of different clients. Company use warehouse inventory management system
to check the all equipments and raw material of construction.
Cost accounting system- Cost accounting system is related to calculate the total cost of
products or services. This is very crucial term to analyse that how much cost occurred in any
process and this system provides a kind of framework which helps in estimating the entire cost of
different products. In addition, this also helps for the companies in checking which products are
profitable and which ones are not. Basically, there are two types of cost accounting system which
are following:
Job costing system- Job costing system is a system which is related to the accumulating
information regarding to the cost of different services and products. It is an important method of
making analysis about the costing system of a company(Hiebl, 2014). This accounting system
consists mainly calculation of three kinds of cost information like direct material, direct labour
and overhead. In addition, it helps the companies in making estimation about the total costs
which may become basis of price setting as well as for comparing actual cost with estimated
budget cost. The selected company, Evolve consulting engineering applies this accounting
system for determining the total cost which occurs in their projects or other engineering services.
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Apart from this, it also help them in making estimation of future project's cost so that they can
make budget for that.
Process costing system- This costing system calculates the cost which occurs in each
process of manufacturing or service providing. It is suitable for those products and services
which goes through different processes. Process costing system removes the complexity of cost
that occurs in many processes. Evolve consulting engineering use this tool in different process of
their projects.
P2 Different methods of management accounting reporting.
Management accounting reports are those reports which shows the actual situation or
position of a business(Schaltegger, Gibassier and Zvezdov, 2013). These reports reflects a
picture that includes information about the company's financial and non financial health. On the
other hand, accounting reports becomes the basis of future decision making and planning. Evolve
consulting engineering company prepares various reports which helps them in checking their
financial growth and actual situation. It is important in the context of selected company because
they are involved in the field of civil engineering service providing. Basically there are following
types of management accounting reports:
Budget reports- Budget reports are may be defined as the reports that are related to the
making estimation of income and expenses for a particular time period. This estimation becomes
basis for future decision making and strategy planning. It is very crucial for the companies to
make these kind of reports because this helps in evaluating the performance of organisation and
individuals. This is possible because on the basis of estimated values organisation can compare
the actual performance and can check the level of performance. The selected company Evolve
consulting engineering company prepares budget report of their various projects of civil
engineering. It helps them in checking the progress of their various projects as well as they can
become able to compare the actual performance with budgeted values. Except from this
company can make new policies with the help of budgeted reports.
Account receivable ageing report- Account receivable ageing report is a kind of
primary tool to analyse about the amount that is due in the market by different customers and
companies. As well as it also checks the creditors of company that are incurred by the credit
transaction by company. Basically, this report helps to the finance manager to identify how much
collection they have in the market. It removes the possibility of bad-debts in the market. This
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report is prepared according to a proper format. Evolve consulting engineering company
prepares this report in checking their due amount in the market of various clients. This reports
helps to the company in making smoothness in the financial transaction. It is very crucial for
them because in the absence of this report they can't be able to check the due amount of their
creditors and debtors.
Performance report- It is a report which measures the performance of a particular
activity(Herzig, Schaltegger and Burritt, 2012). Herein, in the context of organisations, this
report analyse the performance of particular product or service in the terms of profitability. Main
framework of working this report is comparison of actual profit with expected level of profit. It
is suitable for those kind of organisations which provides various products and services and this
report helps them in check which services and products are beneficial and which ones are not.
Evolve consulting engineering company makes this report for a particular project which analyse
the profitability or loss of project. This report is almost necessary for the company due to their
nature of business. With the help of this report they can evaluate the efficiency of different
services and engineering projects.
Cost managerial accounting report- Cost managerial accounting reports are the reports
which are involved in the computing the overall cost of multi-pal products and services. This
reports helps in calculating each units cost. It makes easy in checking the each units efficiency
by comparing cost of unit with selling amount. Companies can become able to see their products
and services profitability and costs. In addition, with the use of this report organisations can
make cost estimation of various products and services. Evolve consulting engineering company
applies the concept of this report because it provide a view of cost which occurs in a project and
with the help of past report's data they make the estimation of total cost of different engineering
projects.
M1 Benefits of management accounting system and their application in the context of
organisation.
Management accounting system plays a crucial role in the organisations. It consists
different accounting system which have own importance and drawbacks(Lukka, and Vinnari
2014). The selected company use many accounting systems whose advantages are discussed
below:
Advantage of inventory management system-
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It is helpful in tracking the movement of goods and services in the different projects of Evolve
consulting engineering company.
Advantage of price optimisation system-
This system helps to the company in determining the price of various services and
civil projects so that they can earn profit.
Advantage of cost accounting system-
Cost accounting system is beneficial for selected company in computing overall
cost of projects and services.
D1 Evaluation of management accounting system and reporting which are integrated with
organisational process.
Management accounting systems and accounting reports both are linked with each other
in relation to the organisational process(Richardson, 2012). This is why because organisational
process can smoothly operate with the proper combination of accounting system and accounting
reports. For example: Evolve consulting engineering company prepare the different accounting
reports like budget reports, performance report etc. for this they need financial information from
accounting system so this is possible only due to integration of management accounting system
and reports.
PART B
Annex (A)
Budget 2019 2020 2021
Cost
Centre
Budgeted
production
overhead
costs in £)
Basis of
production
(overhead
absorption)
Cost
per
Hour Hours Cost Hours Cost Hours Cost
A 66000 22000 3 24200 72600 26620 79860 27500 82500
B 75000 15000 5 16500 82500 18150 90750 19500 97500
C 83600 41800 2 45980 91960 50578
10115
6 51500
10300
0
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Annex (B)
(a) Labour hour: -
Product X = £6000*1 = £6000
Product Y = £8000*2 = £16000
Labour hour = £2,64,000
------------
22,000
= £12 per hour.
Overhead absorption on labour hour: -
X Y
Overhead absorption = 1*12 = 2*12
= 12 = 24
Total Overheads = £6000*12 = £8000*24
= £72,000 = £192,000
(b) Using ABC approach: -
Machine hour per period:
Product X = £6000*4 = £24,000
Product Y = £8000*2 = £16,000
Cost driven rate: -
Production set up = £179,000 = 2893 per set up.
60
Order handling = £30,000 = 416.666 = 417 per order
72
Machine cost = £55,000 = 1.375 per order
40,000
Overhead using ABC approach: -
X
Set up = 15*2983 = 44,745
Order = 12*417 = 5004
Machine cost = 24000*1.375 = 33,000
Total 82749
Y
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Set up = 45*2983 = 134,235
Order = 60*417 = 25,020
Machine cost = 16000*1.375 = 22,000
Total 181,255
Activity 2.
PART A.
P4. Advantages and disadvantages of planning tools for budgetary control
Budgetary control is a technique or tool which helps in comparing the actual results
with the formulated budgets(Messner, 2016). The control system helps in fixing the objectives as
well as the efforts for the achievements of firms goals. Proper planning and controlling of all the
functions in distinct departments is done to achieve maximum profits with the help of such
controlling system. Such control provides various instruments to measure the managerial
performances to enable the weak spots and taking corrective measures. Such control requires the
proper support of top level management for making assumptions for the future conditions in
advance and restricting the resources. The accountants of Evolve Consulting Engineers considers
all the essential factors at the time of formulating the receipts and payments to coordinate the
activities for accomplishment of goals with profitability. Various planning tools used by the
accountants for budgetary control are as follows:
Contingency planning tool: Such tool helps in incorporating various risk factors for the
preparation of policies, plans for uncertain as well as unexpected future activities. Such planning
prepares the firms to act in positive manner for emergency situations. Developing various plans
helps in taking appropriate decisions for uncertain impacts. Effective planning for contingent
situations leads to dealing in timely as well as efficient operations. The experts of the chosen
firm manages the uncertain risks with the help of such tool.
Advantages:
 Contingency planning tool helps in managing risk for future uncertain or
unexpected situations.
 Such tool helps in formulating safety precautions to utilise them to perform in the
worst situations.
Disadvantages:
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 The planning tool leads to under estimating the situations as well as over estimating the
projections which limits the efficiency and innovations.
 Advance planning the situations requires keeping a back up of various resources to be
allocated in different divisions. Such planning leads to distortion of various resources.
Forecasting tool: The tool provides predictions for the chances of future circumstances
by considering the past or current budgeted activities(Vosselman, 2014). It helps in
understanding the patterns of movements for the purpose of formulating the strategies for future
events to maintain the efficiency in the risky situations. Such tool provides relevant information
and various opportunities to coordinate and control internal as well as external factors. These
tools provides the executives of the selected firm to analyse future situations and provide
guidance for dealing with complex events.
Advantages:
 Such tool helps in identifying the uncertain events to protect the performance and
overcoming the risky situations of the organisation.
 This helps in coming close to the future situations and providing guidance to formulate
strategies for various unpredictable conditions to perform operations effectively.
Disadvantages:
 The accuracy of the past or current data may not be same as for future. This restricts the
thinking capability of managers to forecast the future in accurate manner.
 It requires adequate information to predict the future assumptions on time. The
information may not be reliable for the future uncertain situations.
Scenario planning: The planning tool provides framework for evaluating the efficiency
along with effectiveness of certain future plans and policies to identify the uncertainties. It helps
in projection of future events by interpreting the past as well as present situations to formulate
strategic decisions for the growth of any organisation. The scenarios enables the managers to
consider the impact of unreliable conditions and prepare for the future. Such planning helps the
managers of the Evolve Consulting Engineers to predict the future by considering the impact of
various variables. It also helps in identifying driving forces along with critical uncertainties
associated with accomplishment of targets or goals.
Advantages:
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 The scenario planning tool helps in gathering as well as transforming various assumed
strategies of uncertainties into fresh perceptions.
 The planning tool helps in building various distinct sets of assumptions which guides the
firm to perform operations for long term.
Disadvantages:
 The tool requires much time to gather and analyse the past as well as present activities for
projecting the future events.
 The improper analysis leads to create more complex situations in the organisation by may
be unmanageable by the experts.
Annex (c)
Year X PV@ 12%
Dis Cash
Flow Y PV@ 12%
Dis Cash
Flow
0 -5000 -8000
1 2500 0.893 2232.143 1500 0.893 1339.286
2 1000 0.797 797.194 2000 0.797 1594.388
3 1000 0.712 711.780 2500 0.712 1779.451
4 500 0.636 317.759 1000 0.636 635.518
5 1500 0.567 851.140 1000 0.567 567.427
6 1000 0.507 506.631 2500 0.507 1266.578
Total 5416.647 7182.647
Payback Period = Initial Investment
Average Cash Flow
Project X = 5000 = 4
1250
*Average Cash Flow = 7500 = 1250
6
Project Y = 8000 = 4
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1750
*Average Cash Flow = 10500 = 1750
6
NPV: -
Project X = Dis Cash Flow – Initial Investment
= 5416.647 – 5000
= £416.647
Project Y = Dis Cash Flow – Initial Investment
= 7182.647 – 8000
= - £817.353
M3. Analyses the use of planning tools and applications for preparation and forecasting budgets
Budgetary control translates the deviations between the actual performance and
formulated budgets to control various operations for smoothly achieving profits(Fourie,
Opperman, Scott and Kumar, 2015). The planning tools used by the Evolve Consulting
Engineers are contingency planning tool, forecasting tools and scenario planning. All these tools
are very helpful in coordinating the present activities with the uncertain future events.
Contingency planning tool is useful in preparing the firms to act in positive manner for future
risky situations which are uncertain. Forecasting tools are useful to analyse the future situations
and accordingly formulating strategies to deal with them. Scenario planning are helpful in
considering the impact of distinct unreliable conditions and preparing for the future.
PART B.
P5. Organisations are adapting management accounting systems to respond to financial problems
Financial problems: These are the problems which leads to have long term impact on
the business entities(Albu, and Albu, 2012). It consists of various hurdles which emerges in the
path of achieving the success. Every organisation is suffering from such problems and at the
same time formulating various strategies, plans to overcome from these to achieve the
profitability. These are the obstacles which prevents the working to achieve the desired results of
any company. Evolve Consulting Engineers is not different from other companies. Selected
organisation is also facing certain financial problems and accountants with the help of executives
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formulating various strategies, programmes to overcome such situations. Some of the problems
faced by chosen entity are as follows:
 Money management: Money management is very essential for any firm to operate its
workings. The construction projects requires huge money and various unexpected events
happens which results in delays from the customers and restricts the sells of the
organisation which in result disturbs the management of money. Thus, the management
of Evolve Consulting Engineers formulates various strategies to overcome such problem.
 Lack of working capital: Working capital is required to manage the daily expenses
covering all the operations(Schläfke, Silvi and Möller, 2012). The selected construction
firm has various projects and some are ready to sell. But due to less capital availability, it
fails to implement promotional activities to attract new customers which is affecting their
daily operations.
 Payment delays: The delays in payment occurs when the organisation have insufficient
funds to pay their bills. This is very critical situation as it affects the image as well as
profitability. The chosen construction company lacks the availability of credit to cover
the payments.
Financial governance: Financial governance helps in providing various tactics for
collecting, calculating, controlling as well as presenting all the financial related information in
prescribed manner. Such governance ensures that a firm is accountable to its members,
government authorities, contributors to complete the financial transactions. The regulations are
formulated for controlling the accuracy of financial statements. It describes various techniques to
tracks transactions, manage performances as well as controls data and operations of any
organisation.
Management accounting approach: Such accounting approaches are the use of tools
which helps in resolving various problems to achieve short term and long term goals
organisational goals in efficient manner. Evolve Consulting Engineers accountants follows the
described management accounting approaches:
 Benchmarking: it is an approach which helps in comparing the organisational process
and performances with other businesses working in same industry. Such approach helps
in evaluating how a company performs considering its competitors. It helps in
identifying various gaps where improvements are required for performing better. This
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approach provides a framework to the firm to perform against their comfort zone to
focus on changes as well as provides various directions to operate in changing
environment. The managers of Evolve Consulting Engineers designs and implements
new as well as innovative strategies to remain in competitive advantages.
 KPI: Key Performance Indicator is a kind of performance measurement. Such indicator
puts the formulated strategies into actions for collecting along with monitoring the
performances towards the goals and objectives(.Schaltegger and Burritt, 2017). These
are the measurements which assists in decision making by providing all the informations
and feedbacks. Performance indicators plays crucial role in determining growth along
with success of business entity. It encourages a learning atmosphere to increase
employee retention by establishing accountability responsibility relationships. The
management of Evolve Consulting Engineers uses such approach to analyse the progress
by considering the performance. It also helps in identifying the key area where
performance is low and accordingly sets strategies to overcome their financial problems.
Comparisons between Evolve Consulting Engineers and Balfour Beatty
Evolve Consulting Engineers Balfour Beatty
Problem: Such construction entity is facing
various financial problems which restricts it to
move towards the path of success and growth.
The financial problem faced by chosen firm is
payment delays and poor money management.
These problems limits the managers to cover
their expenses as well as implementing various
promotional activities for attracting new
customers which is affecting their daily
operations.
Such construction entity faces the problem of
poor money management as well as requires
higher costs for constructing new projects or
buildings. Due to such issues the organisation
is not able to implement various promotional
programs to attract and get advances from its
potential customers.
Approach: The accountants of the selected
firm uses KPI approach to resolve its financial
problems. Such approach helps in providing all
the information for performance measurement.
The selected firm uses benchmarking approach
to overcome from its financial issues. This
approach helps in comparing the strategies as
well as performance with its competitors in
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identifying gaps where improvements are
needed for performing better.
M4. Management accounting in response to financial problem can lead organisations to
sustainable success
Management accounting provides framework to the business entities to achieve
sustainable success by responding towards the financial issues in effective manner(Suomala, and
Lyly-Yrjänäinen, 2012). The accounting helps in integrating various systems by providing
financial as well as non financial information to the accountants for decision making. Such
system helps the organisation to address all the issues which restricts them to achieve growth.
Management accountants uses KPI and benchmarking to resolve their issues. The executives of
Evolve Consulting Engineers applies the KPI approach to provide all the information for
performance measurement where as the management of Balfour Beatty uses benchmarking
approach for comparing the strategies, processes and performances with various rivals to identify
gaps where improvements are needed for performing better.
D3.Various planning tools to resolve financial problems
Planning is a function which includes formulating plans, strategies in present for the
future of any organisation for the purpose of maintaining the flow of business
operations(Hartmann, Perego and Young, 2013). The Evolve Consulting Engineers and Balfour
Beatty suffers from various financial problems as the environment is dynamic which leads to
evolve certain unexpected situation. The accountants of the Evolve Consulting Engineers applies
some planning tools such as contingency planning tool, forecasting tools and scenario planning.
These tools plays important role in analysing and predicting various risky, unexpected
circumstances for the purpose of improving the growth strategies for achieving profits to resolve
its financial problems smoothly.
CONCLUSION
From above project report is has been concluded that though management accounting
system is not compulsory for companies but after analysis of its important it can be said that it is
becoming a key part for companies. It consists different tools and reports which are integrated to
the organisational process. Apart from these, this accounting system plays a crucial role in the
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internal management of business with different planning tools and techniques. As well as
organisations use this accounting method to solve their financial and management issues.
REFRENCES
Books and journals:
Ward, K., 2012.Strategic management accounting. Routledge.
Wickramasinghe, D. and Alawattage, C., 2012.Management accounting change: approaches and
perspectives. Routledge.
Otley, D. and Emmanuel, K .M. C., 2013.Readings in accounting for management control.
Springer.
Hiebl, M. R., 2014. Upper echelons theory in management accounting and control
research.Journal of Management Control. 24(3). pp.223-240.
Schaltegger, S., Gibassier, D. and Zvezdov, D., 2013. Is environmental management accounting
a discipline? A bibliometric literature review.Meditari Accountancy Research. 21(1).
pp.4-31.
Herzig, C., Viere, T., Schaltegger, S. and Burritt, R.L., 2012.Environmental management
accounting: case studies of South-East Asian companies. Routledge.
Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting
research.Accounting, Auditing & Accountability Journal. 27(8). pp.1308-1338.
Richardson, A .J., 2012. Paradigms, theory and management accounting practice: A comment on
Parker (forthcoming)“Qualitative management accounting research: Assessing
deliverables and relevance”.Critical Perspectives on Accounting. 23(1). pp.83-88.
Messner, M., 2016. Does industry matter? How industry context shapes management accounting
practice.Management Accounting Research. 31. pp.103-111.
Vosselman, E., 2014. The ‘performativity thesis’ and its critics: Towards a relational ontology of
management accounting.Accounting and Business Research. 44(2). pp.181-203.
Fourie, M .L., Opperman, L., Scott, D. and Kumar, K., 2015.Municipal finance and accounting.
Van Schaik Publishers.
Albu, N. and Albu, C .N., 2012. Factors associated with the adoption and use of management
accounting techniques in developing countries: The case of Romania.Journal of
International Financial Management & Accounting. 23(3). pp.245-276.
Suomala, P. and Lyly-Yrjänäinen, J., 2012.Management accounting research in practice:
Lessons learned from an interventionist approach. Routledge.
Hartmann, F., Perego, P. and Young, A., 2013. Carbon accounting: Challenges for research in
management control and performance measurement.Abacus. 49(4). pp.539-563.
Schaltegger, S. and Burritt, R., 2017.Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Schläfke, M., Silvi, R. and Möller, K., 2012. A framework for business analytics in performance
management.International Journal of Productivity and Performance Management.
62(1). pp.110-122.
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