Management Accounting and Techniques

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUTION..............................................................................................................................1
PART 1............................................................................................................................................1
Section 1..........................................................................................................................................1
1.1 & 1.3 Management accounting and its essential requirements with benefits and its
application....................................................................................................................................1
1.2 Management accounting reporting systems...........................................................................3
Section 2..........................................................................................................................................4
2.1 Calculation of cost under marginal and absorption costing...................................................4
2.2 Management accounting techniques.....................................................................................7
2.3 Financial reports accurately applying and interpreting data..................................................7
PART 2............................................................................................................................................9
Section 3..........................................................................................................................................9
3.1 Budget and different types of budget.....................................................................................9
Section 4........................................................................................................................................11
4.1 Comparison of organizations adapting management accounting........................................11
4.2Management accounting in improving the financial performance.......................................12
4.3 Planning tools in MA for reducing financial problems.......................................................12
CONCLUSION..............................................................................................................................13

INTRODUTION
Management accounting refers to the practice of gathering, analysing, interpreting the
financial information for the preparation of reports and records essential for decision making.
MA helps the management in establishing internal control of operations. This provides the
company to manage its business operations appropriately with the objective of maximising the
profits of company and minimising the costs and expenditures. Report will address the concepts
and methods of management accounting and its importance in the organisational context.
PART 1
Section 1
1.1 & 1.3 Management accounting and its essential requirements with benefits and its
application.
Management Accounting
It refers to the method of identifying, collection, measurement, communication and the
interpretation of financial information that is used by company to plan, evaluate and control the
operations of organisation.
Management Accounting Systems
Management accounting involves number of management accounting system.
Inventory management
This refers to system for management of inventory of the organisations. There are various
type of inventory in the organisation such as capital assets, raw materials and finished goods.
Inventory management helps the business in keeping proper track of all the inventory
movements. Inventory management involves practices such as jut-in-time that prevents storage
cost of inventory and makes the inventory available on time (Turner and et.al., 2017). Other is
material requisition that analyses the trend and stores inventory accordingly.
Application
Inventory management provides information that is used by management for taking
decisions related to inventory requirements.
Benefits
 Help in making forecasts about the inventory requirements of production.
 Saves time and cost of the enterprise in managing the inventory.
 Prevents overstocks for goods that go out of fashion very fast.
1

Job Costing System
Job costing is a method used in management accounting that allows the management to
calculate the cost of each job separately. It identifies the detailed cost of the job such as the raw
material, direct labour and overheads. This provides important information to management that is
essential for deciding the profit margins of the product. Job Costing system helps to identify the
cost of different jobs individually for preparing the finished goods.
Application
Job costing is used for getting accurate information related to the costs of job when
company wants to identify the cost for special orders.
Benefits
 Helps in identifying the costing of each job separately.
 Management after analysing the cost of job can decide the profit margins.
 To identify the cost of special orders by big clients.
Price Optimisation System
Price optimisation is a mathematical model used in management accounting. This is used
by managers of the company to evaluate the demand of products or services at different level of
prices. Demand of products varies according to the variation in prices which requires the
company to decide the prices after analysing the demand (Bui and De Villiers, 2017. This helps
in deciding the prices so that the demands could be increased and appropriate profit margins
could be earned.
Applications
This is system is used by organisation to decide the prices of its product after analysing
the demand at various prices.
Benefits
 Provides consistency to the business reducing the errors.
 Helps the management in deciding the profit margins of products or services.
 To decide optimum prices of the product to reach break even points.
Cost Accounting
Cost accounting system refers to management accounting system that records all the cost
information of the company. It is used to records all the cost incurred by the company for the
2