Management Accounting System: Tools, Techniques, and Applicability

Management
Accounting

INTRODUCTION
This report is based on the Management accounting system their tools and techniques and
applicability in the working of the organisation. It is the branch of accounting that evaluates the
performance of the organisation and is only for the internal use by the management only. It also
comprises of the income statement computation using two ways of costing, i.e., absorption
costing and marginal costing. It is prepared with the professional skills and focuses on the fully
and effectively utilizing the resources, safeguarding them and enhancing operational efficiency
(Armitage, 2020). It helps in evaluation of the key areas that are have huge impact on the
organisation’s performance.
This report is concerned with the Connect Catering Services, which is the one of the best
organisations of UK. It has the headquarters in Oxfordshire, and started its operations in 1989, by
John Herring. A comparison is made with the similar organisation in using the accounting
system for solving the financial problems faced by them.
TASK 1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
Management accounting is also termed as managerial accounting that deals with the
public and private enterprises that helps the organisation to achieve its objectives and goals by
classifying, measuring, illuminating and communicating commercial information at internal
terms. It is the clear view of statistical data and its information and activities that refers the
finance and business policies that assist the planning and controlling operations of the enterprise.
 Measurement of presentation: It assist the enterprise in evaluating the workers
completion and their level of efficiency that compiles the acute and standardized
presentation which fits the divergence by it essential plan of actions can be implemented
(Bakhtiari, 2020). It may also formulate the policies that evolves that worker performance
as compare to other individuals in the organisation.
 Categorisation of risk: Another advantage of management accounting or managerial
accounting is recognising the risk element in the organisation by which it can be reduce

the organisational risk handling practices that dominate the employee presentation.
Accounting
 Allotment of resources: Enterprise is sufficiently capable to achieve the utilisation of
resources with efficiency that helps the various sections to have the distinct point of view
for every section and figures in the organisation (Farazdaghi, 2020). It also includes the
summarizing, analysing and coverage the resources that supervise the financial
information.
 Financial statement presentation: Management accounting submits the accurate
presentation of the business financial position that helps the statistical statements in
regards with information and data. The various factors that affect cost and financial
activities to overlooked it more reliably in the organization as for fundamental decision
making.
P2 Explain different methods used for management accounting reporting.
Management accounting is the method of communicating the sources of statistical
statements and information that serves the changes in the organizational complexities to make it
more specialized factors that indicates the proper accounting and audit.
 Budget: A budget is the total calculation of cost and income as it is a microeconomics
concept for particular time interval that follows the administrative body, governing body,
group of individuals, a business, and the list will continue. The process starts with set up
the assumptions for the future coming budget outcome in the financial year as it is a
financial program for particular interval that generally raise the occurrence of commercial
project.
 Cost Schedules: A cost schedule is the overall production of cost at various levels of
product and by which average cost and marginal cost can be measured and the curve of
cost schedule will draw. It is assumed that the organisation has prepare the short run cost
schedule and long run cost schedule individually (Gray, 2020). According to the
organisation it can assumed that the production with the out-dated or obsoleted
technology and methods surely involves the high monetary value.
 Variance analysis: It is the part of fund control activity in which a budget for income,
revenue and expenses is differentiate with the actual report of the enterprise and the

statement usually carry forward to classify the enterprise presentation in respect of the
plan and policies that ensures by the management.
M1 Evaluate the benefits of management accounting systems and their application within an
organizational context.
Management accounting is a process to determine, examine and conveys all important
information to managers which is helpful to make decisions and having knowledge about the
cost of accounting to achieve goals of organization in effective manner. Management accounting
is beneficial for every organization to plan all activities sequentially for effective operations.
There are various type budgets and accounts are prepared which are divided in various form such
as department and product. Actual performance is compared with standard set and if there are
some variances raised mangers find out reasons behind and take actions to solve them.
Management accounting explains responsibilities of executives and their area of working so
there is no confusion regarding work; everything is done in well-organized manner (Haslam,
2020). It Manages and coordinate all finance, production, and personal activities of an
organization to achieve objectives. It also removes all wastage and unnecessary activities which
saves time to perform activities and also improves efficiency of organization.
There is two-way communication in preparation management accounting like if there
some modifications are required in accounts than these information send to top management
which helps them to take decision and responsibilities of work and their assignment
communicate to lower level for their smooth working. Data provided by these accounts is quite
accurate and reliable which is helpful in maximization of profit. In an organization various
application are implemented such as measuring performance and efficiency of employees by
comparing their estimated and actual performance; if there is some deviation exist necessary
steps would be taken to correct them. Resources are allocated in all level of department and
divisions of an organization by the help of management accounting so employees can use these
resources optimally (Indrani, 2020). It gives exact financial position of an enterprise with
important data which helps managers to make policies and take effective and profitable decisions
for organization.

D1 Critically evaluate how management accounting systems and management accounting
reporting is integrated within organizational processes.
Management accounting is the process of finding, quantifying and interpreting the results
for evaluating the performance of the organization. It plays a vital role in the decision-making
process of an organization and has a growing expectation over the period of time. It provides the
organization the information related to its financial and operational efficiency in compliance to
the project undertaken. It comprises of the processes undertaken for installing control and
planning operations that supports an effective decision-making process. It helps the organization
in constantly measuring its performance and taking appropriate actions for increasing the
operational efficiency and enhance productivity (Javadian and Kootanaee, 2020). It also focuses
on providing quality products and services to the customers of the organization. The continuous
improvements done in the operational processes facilitates in simplification of the process,
eliminating waste of both time and resources and improving productivity at an optimum level.
The cost management done by the organization plays an important role in improving the
processes on a regular basis. A record of all the transactions including the receipts and payments
associated to a particular project are recorded at a place for evaluating the profitability of the
company and to minimize the costs resulting in higher returns. It also judges the effectiveness of
all major projects including the new activities taken up by the organization to ensues potential
returns.
Reporting Type Integrating with the processes of the organisation
Budget Report The integration of budget report with the processes of
connect catering services helps in provides a way for the
activities of the company for concentrating on the set targets
and goals to be achieved in the best possible manner.
Account Receivable Ageing
Report
The integration of organisational activities of connect
catering services in with the accounts receivable ageing
reports helps it timely collection of the receivables and
assures creation an appropriate credit policy. It also
facilitates in monitoring the accuracy and flexibility on a

regular basis.
Job Costing Report The integration between the Job costing reports and the
processes of the Connect catering services provides a path
for achieving the cost objective and assists in fixing the
prices of the products and services offered. It also aims at
minimising the cost of production.
Order Info. Report The integration of Connect catering services operational
process with the order info. reports provide the analysis of
information related to the sales and track the orders placed
by the customers and their fulfilment on time.
Performance Report The integration of organisational processes of Connect
catering services with the performance reports helps in
managing the future production plans and increasing
profitability with reducing the cost.
TASK 2
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.
Cost is the monetary value spent for precuring a particular product or service or the amount
invested on producing something (Kreilkamp, 2020). Few of the costs are explained below:
 Fixed Cost- It is the fixed expenditure incurred by the organization irrespective of the
change in output produced. It includes expenses like rent expenses, insurance payments,
interest expenditure, etc.
 Variable Cost- This expense varies with the change in the production of the outputs. It
increases with the increase in output level and decreases with the decrease in output. Few
examples of variable costs are direct material cost, labor cost, etc.
 Semi variable Cost- This cost is the mixture of both the variable and fixed component of
cost. They are fixed at certain level of output and increases when there is an increment