Management Accounting and Different Methods

This document provides an overview of management accounting, including its definition, different methods and systems, cost determination, and budgetary control. It discusses the advantages and disadvantages of various planning tools used in budgetary control. The document also includes case studies and examples from Pearl Chartered Accountants, a UK-based accounting consultancy organization.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P1) Explain management accounting and different kinds of management accounting system.. 4
P2) Examine the various method of management accounting. ..................................................5
TASK 2............................................................................................................................................6
P3) Determine the cost with the help of various methods such as cost examination and
developing income statement, marginal and absorption costs....................................................6
TASK 3..........................................................................................................................................12
P4) Discuss the advantages and disadvantage of different kinds of planning tool in order to
budgetary control......................................................................................................................12
TASK 4..........................................................................................................................................15
P5) Comparison between enterprises in order to effectively managing the function of
management accounting in order to solve the financial problems............................................15
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Management accounting is process which refers to organisation effectively recording
transaction as well as estimate cost and expenditure in order to find out the proper result which
are helpful to achieving organisation goal and objectives. It is method and process which refers
to manager properly implementing this strategies due to enhancing profitability and productivity.
It considered as various tool and techniques which are effectively applied due to enhancing
profitability and productivity (Alawattage and et. al., 2018). The report is Pearl Chartered
Accountants which refers to organisation are situated in UK as well as managing business
operation effectively and efficiently. The paper consist is management accounting system,
method as well as comparison between the organisation in order to effectively managing
management system and adapting various techniques in order to smoothly operating business
activity and operations. It involves various tools such as performance, account receivables,
inventory, budget report and so on.
TASK 1
P1) Explain management accounting and different kinds of management accounting system.
It is process which refers to effectively conducting management accounting activity and
task in order to managers taking effective decision which are helpful to attained organisation
goal and objectives. It involves managerial accounting in order to identify, analysing,
communication due to workforce effectively conducting financial accounting system within
organisation. It includes management accounting is process in order to developing financial
report and maintain proper transaction and entries which are used by financial department as well
as properly allocated resources (Baghoumian and et. al., 2017). In context of Pearl Chartered
Accountant, it is an accounting consultancy organisation in UK which are advice to many other
services in order to effectively developing management accounting department in order to
effectively accomplishing organisation goal and objectives.
Principle of management accounting
Accuracy: While formulation of reports and statement of management accounting it is
essential that all the data or information use while formulation of statement is accurate and

reliable , other wise, organization not able to proved accurate information towards their internal
users.
Communication: All the information must be forwarded towards the essential interested parties
of organization. Thus relevant information and decision took must be communicate to reach
department of organization.
Value analysis: All the data which is include at the time of recording transaction must be valued
in monetary terms. Only then manager able to formulate their statement of cost as well as record
transaction in journal formate.
It is essential to each and every business model in order to maintaining profit, financial statement
and balance sheet which are helpful for managers in order to making effective decision as well as
smoothly run the business functions. There are various management accounting system which
are used by an organisation so discussed below.
Job coasting system-: It is system which refers to organisation analysis the need of
particular product and service and the manufactured. In relevance of organisation, accountant
costing of each product and services and accordingly allocate resources effectively and
efficiently. In costing procedure involves the various elements such as receive enquiry about
product from client, price, order received, cost recorded and so on. It is helpful to developing
final report and financial statement which are providing by accountant. The main advantage of
this system which refers to evaluating need and demand of customers accordingly developing
products on the basis of cost.
Price optimising system-: It considered as effectively analysis prices of products and
each product has set different price due to fluctuation in demand and market situation. It is
essential to an organisation to control the price of product because customers are influencing in
the price of product and set accordingly (Daryanto, 2019). It is effective tool and techniques for
organisation in order to maintain adequate price of product in the marketplace.
Inventory management system-: It is system which refers to monitoring asset and stock
of company in order to properly used by organisation. In management accountability various
method are used in this system such as EOQ, JIT approach, ABC analysis and many more. All
this techniques are effectively implemented in order to maintaining the stock of inventory as well

a smoothly run the business activity and functions. Organisation effectively managing inventory
system sue to reduce cost and properly storage the stock.
Cost accounting system-: It is management system which refers to analysed the price of
product and services because it is beneficial for organisation in order to enhancing profitability
and productivity (Hertat and et. al., 2019). It is process which refers to effectively job order
costing as well as estimate of cost of goods and service because team members work in proper
coordination and collaboration. In reference of Pearl Chartered Accountants, it effectively apply
this system organisation analysis cost of product and services.
Accounting System Benefits
Job costing This system is implemented for the purpose of
finding out cost require to completion of
particular job and time require for completion
of each order to fulfilled demand of customers.
Price optimising system Manager of Organization apply this system for
take decision regarding which pricing strategy
is beneficial and help in generate profit.
Inventory management system This system is implemented for finding out
cost require to maintain inventory as well as
systematically cover up extra expense required
to managing stock of organization.
Cost accounting system This system is beneficial in order to find out
cost amount for run business operations. And
on the basis of that strategies formulate to
control or mitigate extra cost.
Hence, it includes all the accounting management system which refers to Pearl Chartered
Accountants are applied effectively and efficiently in order to their managers taking effective
decision regarding operations of business. It is process which majorly focusing on enhancing
profitability and productivity of an organisation. It includes various information due to proper
allocation of resources as well as managing internal management and determine price of product.

P2) Examine the various method of management accounting.
It considered as organisation developing proper management accounting report because
record the proper transaction and entries which are helpful to smoothly run the business activity.
It is essential to organisation to developing financial report because organisation compare
previous report with next year and accordingly used resources. It is necessary for business model
to collection of information so accordingly taking decision of investment and achieving higher
rate of return (Holm and et. al., 2020). In context of organisation, it is essential to accounting
department in order to utilised data in proper manner. There are various accounting method
which are mentioned below.
Account receivable report-: It is report which are preparing by an organisation in order to
received the amount from debtors and effectively managing account receivable account. It
includes separation of customer invoice bill and organisation credit policy effectively. In context
of organisation, it involves properly arranging account receivable because sustain and survive in
the market.
Budgeting report-: It is another method which are used by an organisation in order to
effectively run the business as well as estimate budget in order to know about the revenue and
cost of company. It is budget preparing to estimate the expanses of previous year accordingly
think to expand the business operation and functions. It includes various tool and techniques
which are providing reward to employees due to organisation are financial sound as well as
given bonus. It is necessary fop organisation in order to motivating and encouraging employees
as well as achieving financial goal and objectives.
Performance report-: It is method of accounting management which refers to
organisation set the criteria and standard on the basis of evaluating financial performance of
company which refers to compare the actual performance with set criteria (Huyen and et. al.,
2020). It is focusing on make comparison different basis such as monthly, quarterly and yearly.
Inventory and manufacturing report-: It includes organisation maintaining inventory
and stock effectively and efficiently which refers to overhead, labour cost and many more. It is
essential to managing assembly line due to improving product and service which refers to
providing opportunity in order to enhancing profitability and productivity of company.
Advantages of implementing accounting system with reporting:

It includes management accounting and reporting effectively implementing due to properly
collection of information and effectively developing report which refers to achieving
organisation goal and objectives. It is process which refers to improving function and activity in
order to effectively run the business operations and accountability, better consistency as well as
minimizing redundancies.
TASK 2
P3) Determine the cost with the help of various methods such as cost examination and
developing income statement, marginal and absorption costs.
Income statement-: It includes organisation developing financial statements due to
managing profit and loss of company (Kumarasiri, 2017). It is statements which refers to
providing all the information regarding finance within specific period of time. It is tool and
techniques which are helpful to attained organisation goal and objectives as well as make
financial sound and position. It is tool which refers to organisation utilisation various tool and
technique in order to performing business function by employees. It considered as statement
which refers to developing financial statement managing account properly as well as calculating
revenue with the help of matching concept. It considered as various expanses and balance sheet
developing within specific period of time as well as concluding profitability position of
company.
Absorption cost-: It is another tool and method which refers to managing accounting cost
because it incurred on manufacturing product and services. It is cost which refers to adding
variable cost and fixed cost due to fixed overhead of each units in order to goods manufactur8ing
within period of time. It involves various costing techniques due to effectively implementing in
order to managing inventory and properly costing of stock (Mahmoudian and et. al., 2020). It is
process which refers to fixed charges are impact on particular product and valuation of
inventory. It is tool which refers to used various approaches in order to absorption costing
method due to tracking manufacturing product and profitability.

Marginal Costing: This is consider as part of costing technique. In this method while alucating
of value of profit in variable cost are consider thus it is known as marginal costing. This
technique useful in determine relation between variable costr and element of profit .
Preparation of income statement through absorption and marginal costing of Connect
Catering Services are as follows:

TASK 3
P4) Discuss the advantages and disadvantage of different kinds of planning tool in order to
budgetary control.
There are various method and approaches which are effectively planning budgetary
control method and process. It is important function in order to organisation effectively applied
tool and techniques which refers to developing budget in order to achieving organisation goal
and objectives. It is process which refers to estimation of cost and expanses due to effectively
enhancing profitability and productivity (Ostaev and et. al., 2019). It is important method in
order to effectively performing business activity as well as estimation cost and expanses in order
to managing business activity and task. There are various kind of approach and method which
are effectively implementing by Pearl Chartered Accountants so discussed below.

Budget-: It is process which refers to financial statement developing proper estimation of
cost, revenue, sales, profitability and expanses in order to attained within period of time. It is
important process which refers to effectively managing internal management and to measure
actual performance with the set standard (Pelz, 2019). Budgetary control is techniques which are
effectively determination of sales and accordingly budget he figures within period of time. It
considered as proper calculation of budget which are mentioned below.
Flexible budget-: It is tool and techniques which effectively used in budgetary control
and properly measured the activity and task of an organisation. In relevance of organisation, it
includes properly monitoring and controlling sales due to effectively measures the standard sales
within the specific period of time.
Benefits-: It is budget which are helpful to measuring the required level of production. In
this budget developing sales as well as generating more revenue due to organisation survive and
sustain in the market for longer period of time as well as reducing inventory cost.
Limitation-: It includes organisation hiring and recruiting trained employees in order to
effectively managing business activity and operations. Flexible budget is not effective applied in
order to financial sound as well as organisation incurred heavy cost due to trained employees.
Master budget-: It is tool which refers to conducting budget as well as divisional budget
and make combination on single department. It considered as proper financial planning, cash
forecasting, budgeting statements and many more (Suomala and et. al., 2017). In context of
Pearl Chartered Accountants, it involves developing budget on specific period of time for
financial year.
Benefits-: It is budget which refers to managing information and activity in order record
estimation of expanses and revenue for functions and activity. It considered as summarises all
the budget activity in order to developing proper budget.
Limitation-: The main disadvantage of this budget which refers to developing various
changes in order to meeting all the budget requirement and activity. It is essential to developing
changes and directly impact on organisation profitability and productivity. It is essential to
managing financial statements and activity due to attained organisation goal and objectives.
Capital budgeting-: It includes organisation developing proposal of investment in order
to accomplishing specific activity and task. It considered as organisation focusing on various
financial task in order to purchasing plant, machinery in order to take effective decision

regarding investment proposal (Tang, and et. al., 2019). It utilisation various resources properly
in order to organisation developing new product and services as well as taking an effective
decision regarding managers. It is procedures regarding investment money for new plant and
machinery as well as appropriate arranging financial resources.
Benefits:
 It considered as developing effective planning due to minimization risk regarding
investment proposal as well as various risk are associated with this techniques. It is
essential to applied this tool in order to reducing the risk with this project. It involves
organisation formulating various strategies in order to developing effective budget as
well as estimation on return on investment.
 The major benefits for this tool due to effective comparison between the performance
organisation as well as proper estimation of cost and expanses and accordingly
developing project report of finance.
Limitations-:
 It considered as capital budgeting is lengthy process and time consuming so accordingly
managers facing difficulty to preparing and proper arrangement of investment proposal. It
includes various risk which are dangerous for financial project and investment as well as
impact on financial performance of company.
Cash budget-: It is method of budgeting which are effectively applied in order to proper
managing cash inflow and outflow as well as organisation profitability and productivity depends
on this factor (Tucker and et. al., 2017). It is method which refers to effectively developing all
the transaction and activity as well as properly allocating resources properly. It is essential for an
organisation in order to maintain liquidity and financial position of company.
Benefits:
 It is an appropriate tool and techniques in order to managing financial position and
condition of an organisation in order to proper record of cash inflow and outflow as well
as smoothly run the business operations and activity.
 It is method which refers to organisation effectively and managing budget because
organisation properly operating business function and activity as well as smoothly run the
business functions.

 It is tool and techniques which refers to developing budget due to successful survive
business model. It is process which refers to properly allocation of resources and record
expanses and revenue due to effectively achieving organisation goal and objectives.
Limitation:
 The biggest disadvantages of cash budgeting in order to managers facing difficulties due
to record transaction and entries. In context of organisation, it includes managers are not
properly record the transaction and entries due to used advanced techniques and tools.
 Cash budget is process which refers to particular amount of money are spent in order to
managers recording the transaction and entries.
Therefore, it includes various approaches and tools in order to effectively implementing
budgetary control process. It includes organisation developing various strategies due to
effectively conducting financial statements as well as attained organisation goal and objectives
(Baghoumian and et. al., 2017)(Daryanto, 2019)(Hertat and et. al., 2019)(Holm and et. al., 2020)
(Huyen and et. al., 2020). It is essential to maintaining proper record and transaction due to
maintain liquidity as well as effectively conducting business activity and operations. Managers
used this method and approaches in order to making effective decision regarding finance as well
as enhancing profitability and productivity.
TASK 4
P5) Comparison between enterprises in order to effectively managing the function of
management accounting in order to solve the financial problems.
In relevance of organisation, it includes management accounting is important concept
which refers to business effectively and efficiently operating business function and activity in
order to know the demand and need of product and services. It is concept which refers to
organisation managing business activity and function in order to attracting large numbers of
stakeholders.
Tools of management accounting:
Benchmarking: This tool is used to set benchmark of target and on the basis of that
manager evaluate performance of organization , This is consider as effective tool through which
manager able to set their standard target and give rewards if department complete their set target.
On the basis of that they increase their effective rate of production.

Key performance indicator: It is also consider just like as tool of benchmarking, however
manager need to set key target and evaluate performance. These target are based on past data. On
the basis of key performance indicator performance of each department is evaluate which useful
in increase cash flow and overcome financial problem.
There are ample numbers of policies and procedures are formulating by an organisations
due to effectively developing financial statements for stakeholders and make effective
comparison (Daryanto, 2019). There are various financial problems which are faced by an
organisation due to effectively attained organisation profitability and productivity. It is essential
to developing financial statements for attracting stakeholders and effectively survive and sustain
business model in the market. There are ample numbers of resources which are effectively
applied due to developing proper statements.
In context of Pearl Chartered Accountants, it involves management accounting used
various procedures and policies due to organisation sustain and survive in the marketplace. It
includes various financial solution so effectively find out the measures in order achieving
organisation goal and objectives (Hertat and et. al., 2019). There are ample numbers of tool and
techniques are implementing effectively which refers to developing performance indicators
under budgetary control as well as solve the financial problems. There are many challenges
which are faced by small business in order to solve the problems as well as putting efforts due to
developing goodwill in the market. In context of organisation, it considered as making many
changes due to environment changes very fast and adapting more advanced technology in
finance and accounting system. There are various method of dealing in this situation which are
discussed below.
Method Pearl Chartered
Accountants
Lost Withiel
Liquidity, solvency and debt
ratio
They use this approach to
effectively implement the
liquidator's solvency and the
equity ratio methodology,
useful to meet the financial
obligation and also necessary
for the calculation of the debt
Whereas they used with
different manner to analyse the
performance in market as well
use several other factors in
order to get known about
financial situation of company.
It became vital to make

equity ratio of the company
(Holm and et. al., 2020). This
process is useful for solving
finance related problems such
as the solvency ratio, the
liquidity ratio and the leverage
ratio. The company will also
be able to know the financial
conditions. Liquidity
conditions need to be
developed to liquidate the
shares and to effectively
measure and complete the task
to meet the borrower's
requirement.
payments of all liabilities for
maintaining the good will and
image of firm at market. It is
an important process that
assesses liquidity and solvency
for short- and long-term cash
conversion. Also considered
company use different ratio to
measure & solve the financial
problem challenged by an
organization (Nuhu, Baird and
Appuhamilage, 2017)
.
Profitability ratio This is considered as another
significant methods that is
used by most of companies for
evaluating profitability
situation of company. It
involve analysis of revenue
generation of firm and give
idea about those financial
problem that are faced by
company. This tends to a tool
and technique that helps
entities in measuring the
profitability condition of firm
like company is in loss, profit
or nil (Huyen and et. al.,
2020).
The main and primary
objective of all small and large
organisation is to maximize
profitability and improve
productivity of company. With
relevance to this, the small
company majorly focus to
enhance their profitability and
productivity by expanding
their business. For this, it is
vital for them to use their
limited resources in optimized
manner and accomplish their
goal accordingly. Also need to
use financial ratio in effective
manner. With the help of

number of activities that are
related with profitability ratio,
company can accomplish its
goal related to enhancement of
profitability.
Therefore, it includes various functions that assist entities of organisation in gaining
growth and success. It includes the use of different tools and techniques to maintain transparency
and the book of accounts then only management team will able to maintain the record and
perform all activities successfully. It aid organisation to use all business function in effective and
right manner for sustaining in competitive world as well as to able to compete with other players
of market. With the help of various measure, company can improve their number of areas. Under
this, there is comparison in between Lost withiel and pearl Chartered accountants, like hoe they
manage their accounts and what are the reason of their success that make them different from
other business man. It involve number of ration that are useful for companies (Pelz, 2019). By
calculating all ratio in effective manner for providing various information and to use significant
aspects that help company to accomplish their gaol and objective.
CONCLUSION
From the above report, it has been concluded that management accounting is process
which refers to effectively arranging resources due to attained organisation goal and objectives.
It considered as manager preparing financial statement so accordingly gathering information in
order to effectively recording transaction which refers to achieving organisation goal and
objectives. It involves managers used various tool and methods in order to effectively preparing
financial record as well as smoothly run the business functions and activity. It is essential to
record the proper financial transaction which refers to effectively managing liquidity in the
business model.

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