Management Accounting - British Telecom

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.Explanation of management accounting and the essential requirements of different types of
management accounting systems.................................................................................................3
Price-optimizing systems: ...............................................................................................................4
2.Benefits of management accounting systems and their application within an organizational
context..........................................................................................................................................5
3. Different methods used for management accounting reporting:..............................................5
TASK 2............................................................................................................................................6
1.Costing Method:........................................................................................................................6
TASK 3............................................................................................................................................8
1. Different planning tool used for budgetary control with their advantages and disadvantages 8
2.Different planning tools and their application for preparing and forecasting budgets:............9
TASK 4............................................................................................................................................9
1. Comparison of organisation adapting management accounting systems to respond to
financial problems:.......................................................................................................................9
2. Evaluation of planning tools to respond financial problems................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is a systematic and organised process that includes activities
such as identification, analysis, recording, and presentation of financial information and such
information is internally used by managerial personnels for decision making, planning and
operational control. It assists management in an organisation to effectively perform and
implement all necessary process and activities like formation of plan, managing activities and
functions, staffing, administering and controlling. Management accounting refers to set of
activities related to evaluation of business expenditure and functions or activities to formulate
internal financial report and account to provide assistance to managers in decision making
activities in order to attain business objectives (Lavia López and Hiebl, 2014). It helps
managerial personnel to track significant business events that happens in organisation or nearby
the organisation while analysing needs of organisation. Appropriate and effective decision are
taken for steady improvement in business organisation's performance. This report describes
management accounting and its various aspects in the context of British Telecom (BT). This
report also covers advantages and disadvantages of different types of planning tools used for
budgetary control, use of different planning tools and their application for preparing and
forecasting budgets and a brief explanation about extent to which management accounting
systems helps to respond financial problems.
TASK 1
1.Explanation of management accounting and the essential requirements of different types of
management accounting systems.
Management accounting system is applied in the BT for collecting, processing and
communicating various managerial information that helps in management plan and in
formulating company strategy.
Essential requirement:As should be clear by now, the various processes of management
accounting system is the process of creating and using cost, quality, and time-based information
to make effective decisions within the organization. Many people in the organization play a role
in this process. The internal audit department has the responsibility of ensuring that controls are
followed and operations are efficient. So the application of system of management accounting in

organization is very significant as it ensures achievement of targeted performance. Different
types of management accounting system are as follows:
Cost accounting:
It is a framework used to calculate the company's products profitability evaluation of
inventory and estimation of their cost. The cost of producing a product and availability of
products is determined for preparation of financial reports. For example ABC costing system is
based on activity costing and Hybrid costing system is based on combination of features. With
the help of these accounting methods British telecom company is able to control the cost of
company and became the largest telecom company in united kingdom.
Inventory accounting:
Inventory accounting is the type of accounting that deals with evaluating and accounting
of company's assets. Stock of company typically involves goods like unprocessed goods, in-
progress goods and finished goods that are ready for sale. It involves determining the changes in
the value of goods. Depreciation obsolescence and changes in the demand and supply are
estimated. BT controls number of big subsidiaries. It provides fixed line, mobile, broadband and
digital television Wi-Fi services to it's consumers. Recently company has removed the usage of
huawei equipment in order to continue with it's policy (Leitner, 2013).
Price-optimizing systems:
Price optimization is system is a systematic mathematical analysis used by business
organisations to define how customers respond to prices for its services and products through
different channels. It helps to choose prices that will help management to achieve its objectives.
This system aims to provide customer satisfaction while optimising price of product and
services. In BT, minimum data tariff is charged by company to increase their customer using this
system.
Job Costing System:
A job costing system combines process of collecting information about various cost
related with a specific job or task. Output of this system used to report cost data and information
to customer under an agreement where costs are incurred. In BT this information is also used to r
determine correctness of an organisation's forecasting system, that helps to determine prices that
ensures profitability of company. The information can also be used to assign invariable costs to
manufactured goods.