Benefits of Management Accounting System

This article discusses the benefits of management accounting systems such as cost accounting, inventory management, job-costing, and price-optimizing systems.

Management Accounting

INTRODUCTION
Task 1
Benefits of management accounting system
Management accounting is a technique which is used in decision making process by
mangers. In order to take essential decision, following system of management accounting
uses by managers:
Cost Accounting System: This system is implemented by mangers to evaluate cost of
each operational activity of business organization. It includes, job costing, process costing,
standard costing and marginal costing methods through which managers identify cost and
profitability of the organization. Following are the benefits:
 This system is used for identify profitable and no profitable business activites.
 Manager use data collec.ted from marginal and standard costing procedure in
making their future policies( Rasid, S.Z.A., Isa, C.R. and Ismail, W.K.W., 2014).
 Costing system use for calculate periodical profit and loss of the business entity
 These system are implement for allocate cost according to the department, units
and procedure of production, it will help in controlling cost of materials
Inventory Management System: It is most useful system, managers use this system to
evaluate cost of managing inventory. Various techniques are uses, EOQ, VED ABS
analysis for calculating different level of inventories and implement policies of mange and
control stock of materials at each stage of operations. Following are the benefits of
inventory management system:
 This system is use for increase efficiency and enhancing productivity in business
operations.
 ABC analysis is use for evaluate necessary activites for run business organization
through this method additional cost incurred on maintaining wastage stock has been
reduce.
 Management of inventory help in maximize sales Various inventory tools use for
avoids duplication in ordering stocks
 It will use for effectively utilize resource of organization
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Job-costing system: This system is formulated for evaluate cost of each unit of business
organization. With the use of job costing system, mangers can track, level of stocks require
for manufacturing process, cost of processing etc. This technique is favourable for
necessitates the application of a system of budgetary control .Benefits of job costing
system is mention below:
 It records cost more accurately and facilitates cost control by comparing actual with
estimate
 This system is use to identify which job is more profitable as compare to others
 This will help in making future policies regarding job process.
 Determination of predetermined overheads rate in job costing system necessitates
the application of a system of budgetary control (Spraakman, O'Grady, Askarany, .
and Akroyd, 2015).
Price-optimizing systems: It is use for determining price policies, and strategies through
which organization can manage their profitability rate. Business organizations use various
pricing polices, price penetration, discounting price discrimination, to take decision
regarding their price which will satisfied customers s well as beneficial for attain profit to
the entity. Following are the advantages of this system:
 This system is use for evaluate customers reactions on different prices of a
products.
 Price optimization system is use for achieving objective of maximum profit of the
business organization.
 This system is use for find overpriced items with low market share, which increase
sales and revenues.
 Business organization implement this system to maintain their position in market
economy.
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REFRENCES
From books and journal
Rasid, S. Z. A., Isa, C. R. and Ismail, W. K .W., 2014. Management accounting systems,
enterprise risk management and organizational performance in financial institutions. Asian
Review of Accounting, 22(2), pp.128-144.
Spraakman, G., O'Grady, W., Askarany, D. and Akroyd, C., 2015. Employers’ perceptions of
information technology competency requirements for management accounting
graduates. Accounting Education, 24(5), pp.403-422.
Carlsson-Wall, M., Kraus, K. and Lind, J., 2015. Strategic management accounting in close
inter-organisational relationships. Accounting and Business Research, 45(1), pp.27-54.
Wouters, M. and Kirchberger, M. A., 2015. Customer value propositions as interorganizational
management accounting to support customer collaboration. Industrial Marketing
Management, 46, pp.54-67.
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