Management Accounting: Meaning, Significance, and Systems

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
LO1..................................................................................................................................................1
P1. Explaining meaning of management accounting and significance of its systems...........1
P2. Explaining various methods that is been used for the reporting under MA.....................3
LO2..................................................................................................................................................4
P3 Calculation of marginal and absorption costing................................................................4
LO3................................................................................................................................................12
P4-Advantages and disadvantage of budgeting control planning tools................................12
P5. Evaluating the ways in which organization adopts systems of MA in responding to the
financial problems................................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is a process of preparing financial report and accounting of the
company. It is usually used for internal management and it is not regulated by any law. It is
significant tool that supports managers of company to make correct decision. Present report is
based on CORUS Company which is engaged in steel manufacturing and the business is running
for several years. Report will explain budgeting control tools which are very useful for evaluate
actual performance of firm. This report also includes marginal costing and absorption costing
calculations and interpretation of net operating income is added in study (Chi and Ho, 2017).
TASK
LO1.
P1. Explaining meaning of management accounting and significance of its systems
Management accounting refers to the profession that includes participating in the
decision making of management, devising for planning, system of performance management. It
provides for facilitating expertise in the financial reporting and also controlling for enabling the
management in formulating strategy of an enterprise.
MA is the presentation of the accounting information in a way that helps the internal
management in creating policy and routine operation of an organization.
MA means concepts and the methods that are essential for developing an effective plan
for selecting among the alternative action course and controlling through interpretation and
performance evaluation.
The 4 major principles of MA are as follows-
Influence- Effective communication of the crucial information ensures possibility for the
MA in cutting across the silos and encourages for an integrated process.
Relevance- MA seeks for best possible availability of the resources for the information
that is pertinent to decision that is to be taken (Alaeddin and et.al., 2019). By getting grips with
needs of the shareholders, it accounts for the most useful and relevant information in respect of
making decisions is been determined, arranged and gathered for an evaluation.
Value- It entails for assessing an information along with generating value pathway,
concentrating on risks, gauging for the possible opportunities, expenses and possibility of value

generation opportunities in the business. It links the process of an organization to its core entity
model and demand for an intensive knowledge regarding macroeconomic atmosphere.
Credibility- Stewardship forms a credibility where responsibility and the scrutiny assist
in making the decisions more and more purposeful. Experts under MA are been known to be
responsible, aware of an enterprise ideals and ethical (Sinaga and et.al., 2019). This leads to
improvement in the credibility, authenticity and the reputation of an organization with
strengthening the authority and the processes.
The 4 main MA systems are as follows-
Job costing system- It referred as the practice of collecting an information regarding the
cost attached with the particular production or the job. This system is vital for CORUS in
submitting the appropriate information in relation to the cost to customer under the contract
where the cost are been reimbursed (Quinn and et.al., 2018). It provides a useful information in
order to determine an accuracy of the estimating system of the firm, that in turn helps in quoting
the prices which allows for the reasonable profit.
Cost accounting system- It means the framework that is been used by CORUS in
estimating their product cost for analysing the profits, valuing inventory and controlling cost.
This MA system is critical for anticipating accurate cost that would be incurred in manufacturing
product for gaining profitable operations.
Inventory management system- It is the system that combines technology, procedures
and the processes for overseeing, maintaining and monitoring stocked products (Maas,
Schaltegger and Crutzen, 2016). Inventory management systems are important for keeping the
tabs on the present stock level and in understanding the items that are moving fast and slowly
that in turn enables CORUS in reordering with high level of accuracy.
Price optimization system- It present mathematical analysis for an enterprise that reflects
the response of the customers at different price level of an entity's products and the services
through the use of different channels. It acts as the most significant system of MA because it
helps CORUS in setting up the suitable prices for the product so that larger profits could be
generated.
Systems Benefits