Management Accounting

Management Accounting

Table of Contents

INTRODUCTION
MA means an application of the concepts and techniques in processing projected and
historical monetary data of an entity for enabling management in creating the plan for sensible
economic purpose & making logical decisions in view to accomplish the goals. The present
study is based on ABC Ltd. Medium sized firm operating in the production sector. Furthermore,
the study involves significance of MA systems and use of the different planning tools. Moreover,
it also highlights the system that helps the firm in resolving the financial problems.
LO1.
P1. Explaining the meaning of MA and providing essential need of different MA systems
MA refers to presentation of accounting information for the purpose of formulating
policies that is to be adopted by management and enable in running the routine operations of the
company (Hariyati, Tjahjadi and Soewarno, 2019). It means as describing an accounting
systems, methods and the techniques that with ability and the special knowledge helps the
administration in its respective job for maximize the profits & minimizing the losses.
Importance of MA systems are as follows-
Cost accounting system- This system that is utilized by ABC Ltd for anticipating cost of
their goods in analysing the profits, valuing inventory and controlling the cost. It helps in
estimate correct products cost that is crucial for achieving profits in the business operations. It
also enables the managers in analyzing profitable & non-profitable goods through anticipating
correct product cost. Further, this system helps in anticipating closing value of an inventory,
finished goods, WIP for preparing true and fair final reports.
Price optimization system-It means the use of statistical or mathematical tool for
determining the way in which the customer would respond towards different pricing of the
products and services (Rozhkova, Blinova and Rozhkova, 2017). This system plays an important
role in setting up the most suitable price at which the company can attract large customers and it
results to increase in its sales and profitability levels.
Inventory management system- This system that traces flow of goods in an entire supply
chain starting from transit to delivering the customers. It assists the managers in analysing the
need and availability of an inventory within the workplace. This MA system also helps in
maintaining centralized record of each and every asset and the item in control of an enterprise by

facilitating single source of the truth for locating all the items, supplier & vendor information,
total number of the specific items present in stock and the specifications.
Job costing system- It involves process of accumulates information about costs
associated with specific production unit. Such information might be required for the purpose of
submit cost in order to customer under agreement where the costs are been reimbursed (Hopper
and Bui, 2016). This information is crucial for ABC Ltd in identifying accuracy of the firm's
estimating systems that should be able in quoting the prices that allows for the adequate profits.
The information facilitated by such system can also be use for transmission inventory costs to the
manufactured goods.
P2. Explaining different MA reports
While conducting MA, managers depend on the standard final reports containing
earnings statement, balance sheet, and cash flow statement. In addition to this, they too make use
of the additional reports for analysing information of an entity with regard to its budgets, cost
report and the performance report. There are several methods that are been used by the managers
for the purpose of reporting that are as follows-
Cost report- In these report managers includes complete information relating to
product’s price, labour expense, overhead & the other price into account in charge to identify the
price of all items adequately (Phan, Baird and Su, 2017). The overall costs is been separated by
total of items created under this report. In this type of report, overall data is presented in succinct
& the final cost related statement helps the managers to ensure proper control on the price of the
goods against selling costs. It also enables managers of ABC Ltd in proper planning and in
managing the income limits.
Performance report- Accountant in MA uses the spending plans for contrasting the
genuine use & the income with the deliberate sums. After identifying the new budget, change
projected are assessed and overall facts about such amount are been planned on this report. This
report plays a crucial role for firm in keeping appropriate gauge of their scheme towards their
mission.
Budget report- The principal element of MA is making a plan of the expenditure plans
where the budget are prepared by using previous period financial policy & acclimating to the
future prospect anticipation (Ionescu and Bigioi, 2016). In this the manager lists down all sources
of an proceeds and the disbursements where the company try for accomplishing its goals &