Management Accounting: Systems, Reporting, Cost Analysis, Planning Tools

This document provides an overview of management accounting, including the essential systems, different methods for reporting, techniques of cost analysis, and the merits and demerits of planning tools. It also explores how management accounting can help in adapting to financial problems.

MANAGEMENT
ACCOUNTING

Executive Summary
As per the above report it has been summarized that management accounting is collect
information and present through reports in order to help to take effective decision. There are
taking different system like price optimization, inventory and others. Along with apply different
tools to prepare and forecast results like zero based, master and cash budget. There are compare
select company with other to prepare effective strategies.

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1.......................................................................................................................................................3
P1 Essential requirement of various systems of management accounting..............................................3
P2 Different methods for reporting.........................................................................................................4
TASK 2..........................................................................................................................................................5
P3 Techniques of cost analysis................................................................................................................5
TASK 3..........................................................................................................................................................6
P4 Merit and demerit of planning tools...................................................................................................6
TASK 4..........................................................................................................................................................8
P5 Compare to adapting management accounting system.....................................................................8
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................11

INTRODUCTION
Management accounting is providing financial data in such a manner as to support
administration in developing a company's strategy and day-to-day activities. It concerns the
company's use through reporting data gathered with the assistance of financial accounting and
cost accounting for policy development, preparation, monitoring and action taking (Cattarino and
et.al., 2016). Management accounting is a discipline involving engaging in decision-making
processes, developing scheduling and process improvement programs, and delivering financial
statements and monitoring services to assist administrators in formulating and executing the
policy of a company. To develop knowledge about MA, select GSQ Ltd company which is UK
based medium sized organisation. It is clothing based producing that can set up close relationship
with foreign factories to carry out high quality garments. This report comprises of several system
as well as reports to present actual position of business. Along with apply different planning
tools that help to forecast future activities with their merit and demerit. Additionally, identify
financial problem that arise in business then apply effective system to sort out them.
TASK 1
P1 Essential requirement of various systems of management accounting
Management accounting is a procedure of recognition, analysis, accretion, preparation,
interpretation and discussion of financial information which is utilized by the administration in
order to planning, analyzing and controlling of an entity and ensure for the proper application of
accountability.
Management accounting system is internal part of any business in which manage all the
reports and books to present in front of top management. N the basis of these collective
information they are taking right decision in regard of further investments. The DSQ limited
company applies different types of system to analysis the requirement in company. These are
mentioned below such as:
Cost accounting system: This is an accounting method that can assess what an organization has
to do, which lets management make choices based on enterprise expenses. Cost accounting
system primarily used mostly by manufacturers after subjective inventory system is implemented
to document manufacturing practices. The specific program communicates with other agencies
and they have all the details available to determine the costs. Based on these facts, set costs for
various items and sustain the purchasing and compute clusters. Through the system recognize
management problems and try to sort out it (Commerford and et.al, 2016).

. The essential requirement of this system in GSQ LTD Ltd to know flexibility and
simplicity in products as well as cooperation with several departments to gather all appropriate
information.
Inventory management system: This system is mainly applied by the manufacturing
organisation to analysis the level of stock at each level and accordingly investment amount in the
purchasing of raw material. Management of inventory and non-capitalized company assets is
supervised. The GSQ Ltd company applies this system to evaluate the usage of material and
track the record. To measure the valuation of inventories applied three methods such as:
 LIFO: According to this method an organisation can sale out the stock that was coming in
last of financial year.
 FIFO: In this method sell out those inventories are first which were coming first in the
business.
 AVCO: As per the method all the amounts are set in average cost then sell out n the
market.
The DSQ limited select FIFO method to proper arrange all the inventories effectively and
utilize all the resources. The requirement of this system treat inventory as money, aware for regular
stock to understand how much inventory utilize for production process (Cools, Stouthuysen and Van
den Abbeele, 2017).
Price optimization system: This system was used to regulate costs of various goods and
to establish an efficient framework that can fix prices for their goods. Use this method to
evaluate consumer dynamics and know people's opinion of their goods. Manufacturing company
GSQ LTD has generated numerous kinds of products, and rates for their goods ought to be
established. Therefore the organization determines the pricing level and the market for the study
of its commodity afterwards the pricing of specific goods decides.
P2 Different methods for reporting
Management reports seek to educate executives about multiple parts of the business, to
enable them make better decisions. They gather and analyze data across different client divisions
monitoring Key performance indicators (KPIs) in a comprehensible manner. To collect
information of different departments produce different types of reports such as:

Budget report: Budget management accounting report play a major role in assessing the
company's efficiency. Each company, like small firms, wise departments and huge companies,
prepares it. GSQ Ltd is equipped to forecast increasing organization's potential revenue and
expenditures, and evaluate market operations. GSQ LTD should try to accomplish its targets to
priorities. This will support managers lead in making schedules and controlling revenue and
expenditures to meet targets and priorities.
Accounting receivable report: It is a vital report that can be used to control the profitability to
expand mortgage lending for that company. Most of the reports hold different columns for the
payment as 30 days, 60 days and 90 days. This report helps to recognize issues with the aid of a
formal study. In the sense of GSQ LTD Restricted, recognize those individuals who cannot pay
the full amount so that transaction can be received on time to plan effective method (Coyne,
Coyne and Walker, 2016).
Inventory report: This report is related with the manufacturing department in which
mentioned quantity of all types material which is utilized by company. There are providing detail
information in regard of stocks and their utilization. The GSQ Ltd company produces this report
to collect information accordingly order for more inventories to continue production procedure
without any restrictions.
TASK 2
P3 Techniques of cost analysis
Marginal costing: Marginal Costing is the calculation of costs of production by
identifying difference in between fixed costs and variable costs and the impact of benefit from
adjustments in the amount or form of production. The aim of the marginal cost analysis is to
evaluate the stage at which an enterprise can obtain efficiencies in order to maximize output and
financial activities. GSQ apply this method to calculate net profit for particular financial year.
Absorption costing: Absorption costing also known as' absolute costing' is a typical
value ascertainment method. This is the method of adjustable and static pricing of all expenses of
procedures, systems, as well as goods. In this strategy, cost per unit only remains like that when

production volume maintains that same. Yet as the output amount increases the cost per unit
often increases due to the existence of fixed costs that behave identically.
Cost per unit
Selling price per unit 30
Less: Direct materials per unit 8
Direct wages per hour 9
Variable manufacturing overhear per unit 2
Variable selling expenses per unit 4
Total 7
Absorption
Particulars Amount
Sales 66000
Less: Cost of sales
Production Cost (78000* 0.65) 50700
Semi variable (78000 * 0.20) 15600
Total variable cost 66300
Less: Closing stock 10200 56100
Gross Profit 9900
Marginal
Particulars Amount
Sales 66000
Less: Cost of sales
Opening inventory 0
Production cost
(780000*0.65) 50700
Less: Closing stock
(12000*0.65) 7800
42900 42900
Contributon 23100
Less:
Fixed overhead 16000
Fixed selling expenses 5200 21200
Net profit 1900

TASK 3
P4 Merit and demerit of planning tools
Budget: The budget is described as a detailed document which represents a fiscal
approximation of the administration's revenue and expenses for a particular timeframe. In the
future it will help to understand the business's performance and financial status. The aim of
managing strategies and performance monitoring, including expenditure on capital assets,
introduction of new goods, recruitment of staff, setting up incentives and regulating business
ventures (Dauth, Pronobis and Schmid, 2017).
Budgetary Control: This specifies how well a management should plan schedules to
track and regulate operating expenses, especially the time of accounting. Budgetary monitoring
is known as a mechanism for managers who can then equate projected budget amounts with
projected output measurement quantities.
Cash Budget: Cash Budget is the projection of the company based on cash. Cash budget
gives an accurate estimate about cash position during the period. Cash budget is made after sales,
purchase and capital expenditures budgets. A company’s cash budget has a vital role in
managing the cash flow of the company. Cash budget and income statement are not the same.
Cash budget shows if the company is in any short fall so that it can be balanced and corrected so
that payment won’t be due. Cash budget concludes all the cash outgo like forecast period,
payment of expenses accrued in the previous periods.
 Advantage: This budget can provide all the summary of the cash transactions that occur
in the particular financial year. With the help of this budget identify deficit and
profitability as per the situation. It helps to present actual financial position of business
effectively.
 Disadvantage: The main disadvantage of this budget that theft of danger and set limit to
to develop a create profile. Along with it is not always reflects on a right profit.
Master Budget: Management of the company prepares a strategic plan for the future of the
company which is called master budget. While preparing the master budget, they chart and

document all the aspects of the company’s operations so that they can create future predictions
(Golyagina and Valuckas, 2016). Master budget includes various other budgets like sales budget,
merchandise purchase budget, production budget, manufacturing budget, selling budget, capital
budget, cash budgets, budgeted financial statements, general and administrative expense budget.
GSQ Ltd management use master budget to make long term decisions and current year
forecasting. Master budget can also be used for expansion planning of the company. There are
defined advantage and disadvantage of this budget that helps to understand its effectiveness such
as:
 Advantage: It is summary of all the budget so it helps to management to take effective
decision in particular period of time in regard of future.
 Disadvantage: To prepare this budget require experts which is not easily available in the
business to every organisation cannot able to prepare this budget.
Zero based Budget: The company management prepares a budget from the scratch and zero
base which is named as Zero based budget. Like other budgets, zero based budgets is not
prepared on the basis of previous expenses but it is prepared on the basis of actual expenses for
the new period. In this method, all the expenses must be justified to remain in the budget. The
company management starts from scratch and decide if every operation or activity is worthy or
not. Goal of zero based budget is to reduce business expenses by eliminating all those expenses
which are not giving benefits to the company. Such as, GSQ Ltd use this budget to analysis the
all the departments from starting.
 Advantage: Through this budget analysis of every department from starting and conduct
depth analysis. Thus it helps to take right decision in regard of business entity
(Mizikovsky and et.al, 2016).
 Disadvantage: To prepare of this budget require to too much time as a result company
take late decision. So it impact on the future investment of GSQ Ltd.

TASK 4
P5 Compare to adapting management accounting system
Financial Problems: It is a situation that occurs in the business entity due to face
financial problem in particular financial year. Currently, every organisation faces these types’
problems. The GSQ Ltd company also face some financial problem that impact on the business
stability and financial position in direct manner. There are defined some problems in detailed
manner:
 Unplanned expenses: This problem occurs in the business when they may take place in
an organisation that are not planned or estimated previously. GSQ LTD Ltd is also face
these types problem when require to maintenance of machinery. To tackle these types of
problem create funds that help in critical time. Therefore, it is dealing with the funds that
outcome in less sources of monetary (Qian, Hörisch and Schaltegger, 2018).
 Poor management of money: Due to improper management of cash received and
payment of business activities like GSQ LTD Ltd. When an organisation cannot properly
manage these problem so they face financial problem. Thus, executives have not all the
proper information in regard of the actual availability of funds for the different business
activities. So it impact on the spending on the finance.
Management tools: The management tools are helping to identify these problems in the
business so accordingly apply effective management system. There are defined different types of
tools such as:
KPI (Key performance indicator): Key performance measure can exploit financial and
un-financial results analyzes. This will track core business efficiency and take important
decisions to improve competitiveness. Thus, the success metric may classify problems linked
with particular project due to total expenditures and total capital gain. In the case of GSQ LTD
production, KPI is applied to learn in regard the financial issue that is linked to the lack of
money management.
Benchmarking: This is a strategic method used only to assess business output and define
financial issue. Benchmarking will help to establish expectations and assess the business success
in terms of its competitors. Throughout GSQ Ltd, the management tool can be used to resolve

the problems of bulk buy as business operations need company to be managed. Helping to
always get prospective outcomes is beneficial (Saleem Salem Alzoubi, 2016).
Financial Governance: The specific management tool can be used to efficiently address
the financial problem. Financial governance is characterized as the best leadership instrument as
it offers the best remedy towards any financial issue that the business may face. This will help
improve business efficiency and collect valuable knowledge for managing and organizing
monetary resources and labor force. With regard to TPG processing, the question of lack of
money management can be solved by documenting every payment and testing capital usage. It
can deduct money incompetence, and growing a company's productivity. To employ professional
workers to assemble large orders to handle various orders as well as produce in particular time
period.
Financial governance can be used to track an organization's approach as it offers input on
different strategies. If any monetary issue is identified in the business, it will direct how to use
this approach effectively.
Comparison of the GSQ Ltd and Airdri limited is as follows in which both of them are using
management accounting to respond financial problems:
Management
accounting
technique
GSQ Ltd Airdri limited
Benchmarking Management within the organisation are
using this technique to deal improper
money management by comparing its
credit policies with competitors.
Managers use this technique to
compare its position with other
companies to reduce possibility of
lower profits.
Key
performance
indicators
Financial KPI is used by managers in
order to find the causes of sudden
expenses so that the possibility of these
expenditures could be reduced.
Management within the company are
using non financial KPI to find errors
in supply chain management
(Sledgianowski, Gomaa and Tan,
2017).

CONCLUSION
As per the above report it has been concluded that management accounting is essential
for every type of business entity. It helps to take effective results in certain period of time. There
are applying inventory, price and other system to analyzing the position of business. Along with
collect specific information in regard of different departments by accounts receivable and other
reports. There are used various tools like zero based, master budget to forecast future activities
effectively. To identify financial problem use KPI and benchmarking.

REFERENCES
Books and journal
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emerging technologies. Journal of Emerging Technologies in Accounting. 13(1).
pp.161-169.
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top management and accounting quality: The CFO’s international experience
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accounting techniques in textbooks. Accounting Education. 25(5). pp.479-501.
Mizikovsky, I.E. and et.al, 2016. Basic accounting and planning aspects of the calculation of
intra-factory turnover of returnable waste. Journal of Economic & Management
Perspectives. 10(4). pp.340-345.
Qian, W., Hörisch, J. and Schaltegger, S., 2018. Environmental management accounting and its
effects on carbon management and disclosure quality. Journal of cleaner production.
174. pp.1608-1619.
Saleem Salem Alzoubi, E., 2016. Ownership structure and earnings management: evidence from
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161.
Sledgianowski, D., Gomaa, M. and Tan, C., 2017. Toward integration of Big Data, technology
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Accounting Education. 38. pp.81-93.