Management Accounting: Importance, Systems, and Methods

Management accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
L01...................................................................................................................................................1
P1. Explaining MA and importance of its systems.....................................................................1
P2. Explaining various methods that are been used for reporting...............................................4
M1. Evaluating the merits and an application of the MA systems.............................................5
LO2..................................................................................................................................................6
LO3..................................................................................................................................................8
Planning tools and their use in management accounting............................................................8
LO4................................................................................................................................................10
Comparing and contrasting the ways in which the company can resolve its financial problems
by using MA systems................................................................................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
MA means framing and providing timely information in terms of statistical and financial
values to the business managers so that it could make for routine and the short term decisions
towards operational activities. The report is of KEF Ltd which is a medium sized organization
operates its business in the manufacturing segment. Furthermore, the study involves deeper
insights towards various systems of MA and its significance in the running the business
smoothly. Moreover, the report highlights the net profits occurred by applying marginal and
absorption costing tools. It also includes different planning tools and MA systems that are used
by the company for achieving its goals and overcoming the finance related problems in an
efficient way.
L01
P1. Explaining MA and importance of its systems
Management accounting refers to integral part of the management that is concerned with
determining, presenting, summarizing and reporting an information to the external and internal
users. It means such information that is been used for framing the strategy, controlling, decision
making and planning for optimum utilisation of the resources.
MA comprises of an internal systems that KEF Ltd utilise in measuring and evaluating its
internal processes for managing the activities of the company (Thomas, 2016). There are various
MA systems that helps in maintaining optimum inventory level, effective cost control and
performance measurement.
Integration of MA systems is crucial for KEF Ltd because it allows it in conducting an
integrated assessments and the audits with optimization of the resources and the procedures. It
also enables the company in reducing the time that is been taken for running certain activities,
eliminating an amount of the time interrupted and thus reducing the cost accordingly.
Origin of management accounting
It has firstly emerged as an important activity at the time of revolution of the early
industrial in leading enterprise and industry. It has been seen that MA is been introduced after
the financial accounting that could trace their origins towards its stewardship role within the
European trading merchant venture that begins in Italian Renaissance and also towards the tax
records which the government requires (McLaren, Appleyard and Mitchell, 2016). The two
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main industry that played a significant role in early history of the the management accounting
were the railroads and the textiles.
Role of MA
MA plays a critical role in enabling the managers for leading KEF Ltd in effective and
efficient way in relation to managing all the functions of an enterprise. MA provides for a short-
term planning and helps in assessing the data on the previous performance that could be
specifically useful as the model for the future performance (Aduda and Ndaita, 2017). It
performs for the series of the tasks that ensures the company in maintaining financial security,
handling all the financial matters and hence helping in driving overall strategy and management
of KEF Ltd.
Principles of MA
Compiling & Designing- This principle states that MA systems is been designed in such
a manner that presents for a relevant data. Furthermore, accounting information could be
modified and is adopted in meeting the needs of the management.
Management by an Exception- It is the principle that is been followed at the time of
presenting an information to the management. It reflects that the system of budgetary control and
the standard costing tools are been followed in MA systems.
Control at accounting source- As per this principle cost should be best controlled at a
point which are been incurred at the accounting source (Trigo, Belfo and Estébanez, 2016).
Qualitative and quantitative information is been prepared for exercising effective control by
evaluating performance of an individual workers, use of the services and details regarding the
material issues like power, machine, maintenance, repairs and vehicles.
Accounting for the inflation- In accordance to this principle, profits cannot be earned
until and unless the capital is been maintained in respect to real terms. It is important for
analysing value of the capital contributed by owners of concerns in context of real value of the
money through the revaluation accounting. In such a way, inflation can be taken into an account
for judging the real success of KEF Ltd.
Utility- The MA systems and the related forms must be used as long as it serves for a
useful purpose.
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