Management Accounting: Systems and Reporting

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems...........................................................................................1
P2 Explain different methods used for management accounting reporting...........................4
M1 Evaluate the benefits of management accounting systems and their application within an
organisational context.............................................................................................................5
D1 Critically evaluate how management accounting systems and management accounting
reporting is integrated within organisational processes..........................................................6
TASK 2............................................................................................................................................6
P3 Calculate costs using appropriate techniques of costs analysis to prepare an income
statement using marginal and absorption costs......................................................................6
M2 Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents..............................................................................................11
D2 Produce financial reports that accurately apply and interpret data for a range of business
activities................................................................................................................................11
TASK 3..........................................................................................................................................12
P4 Explain the advantages and disadvantages of different types of planning tools used in
budgetary control..................................................................................................................12
M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets...............................................................................................................13
TASK 4..........................................................................................................................................13
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems................................................................................................................13
M4 Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success.....................................................................................16
D3 Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organisations to sustainable success.........................................................17
CONCLUSION..............................................................................................................................17

REFERENCES..............................................................................................................................18
APPENDIX....................................................................................................................................19

INTRODUCTION
Management accounting is defined as the framework that is concentrated through entities
for assuring that the operative practices which are performing through them within a year. This
render advice to manager in order to formulate effective strategies related to business growth as
well as attaining longer objectives. With the assistance of this, they can able to ascertained that
internal records that are kept through staff are efficacious or not (Ax and Greve, 2017). As per
the scenario, the undertaken organisation for this report is Openhouse Products Ltd., which is a
British manufacturer. It design as well as manufacture bags and operates in manufacturing
industry. It render a huge range of off shelf bags and medical equipments as well as
consumables. Its headquarters is in UK. The main objectives of this report is to maximise the
understanding of management accounting in effective and efficient manner. So, this report
covers role of management accounting, several management accounting system, computation of
income statements by using marginal and absorption costing as well as benefits and drawbacks
of various kinds of planning tools which is utilised into budgetary control. Apart from this,
comparison among firms how they are adopting management accounting system for responding
to financial issues are also discussed in this report.
TASK 1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems
Management accounting is defined as the practices that is comply through entities for
analysing the plans which are developed for the effectiveness of company that outcomes in
favourable or adverse manner. Within Openhouse Products Ltd., their managers comply it for
ensuring that they will develop their business in upcoming times with the assistance of recent
strategies that are make through them. The main aim of this is to accumulate the detailed data for
generating internal reports which assists respective organisations manager to take significant
decision into several circumstances (Bennett and James, 2017). Moreover, this plays vital role
for Openhouse Products Ltd. Some of them are discussed below:
Company's background
Openhouse Products Ltd. Design as well as produce bags which is basically for
emergency service as well as health sector, however, its range of products do not stop. It also
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supply a huge range of off the shelf bags and medical equipments and consumables. This is
developed in year 1992 by Brian Jones. Helpful in effective controlling: Management accounting is advantageous for entities to
develop effective control over several forms of operation as well as practices. It is so as
through using key data from internal report, managers become competent to concentrate
upon that practices which are result into low profitability or high costs. In context to
Openhouse Products Ltd., it manager can control several aspects in efficacious manner
through assistance of management accounting. Helpful in effectual planning: The management accounting plays a vital role in respect
of developing efficacious planning of several kinds of available resources. This is only
possible as according to the accumulated data, managers of firm can competent to
examine future practices that aids into effectual planning. For example: Within
Openhouse Products Ltd., its several department managers develop better planning with
the assistance of generated internal reports as per this accounting.
 Helpful in decision making: Management accounting also plays crucial role as this
assists organisation to develop efficacious decisions (Bromwich and Scapens, 2016). For
example: The manager of Openhouse Products Ltd. can competent to take effective
actions as well as decisions with the aids this particular accounting.
Management accounting system is considered as the internal system that is utilised
through ample number of firms for the intent of observing as well as assessing overall direct and
indirect procedures of business entities. Openhouse Products Ltd. Utilised few systems of
management accounting which are described below:
Inventory management system: Whole firms that are manufacturing as well as
delivering their products to utilise that. This directs managers for evaluating that, entity is
competent for accomplishing users needs with adequate stock that can be utilised through them
for performing business practices like promotions, advertisement and many others. With the
assistance of this, company may able to maintain as well as observe stock in systematised way.
Thus, this is crucially needed for them (Christ and Burritt, 2017). The three examples of this, that
are utilised through firm as per their preferences these are mentioned underneath:
 LIFO: It is considered as the methods which directs firms to utilise currently needed
inventory for performing out overall implementational business practices.
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 AVCO: This is considered as the average cost method that directs firm to utilise stock
for business practices through considering overall costs based on average.
 FIFO: It is defined as the types of inventory management system that permit entities
to utilise that products for operation which are produced earlier.
Cost accounting system: These are defined as the set of frameworks that are
concentrated through huge and small enterprises for the intent of examining actual cost that are
associated with firm's operations (Collis and Hussey, 2017). Within Openhouse Products Ltd.,
these are applied through managers fro ascertaining that the operative activities may produced
higher profitability through evaluating their cost. This is needed for entities to utilise this as with
the aids it most effective practices can be find as this render information of exact cost that incurs
into manufacturing procedures. There are two crucial kinds of cost accounting system that are as
follows: Direct costing: This is considered as the particular kinds of costing, into which only the
changeable expenses are preferred for the intent of developing efficacious decision for
upcoming times. Overall costs that are fixed for all the year are not considered in this.
 Standard costing: This is refers as the cost system, into it approximated cost is minimises
from the exact one for ascertaining the variances among as well as the reason beside this
in order to develop the futuristic decisions in efficacious and appropriate manner.
Job order costing system: This is defined as the management accounting system which
directs administration for allocating costs to whole business practices as per its nature. This is
mainly utilised through entities at the time they are doing the several practices that are
adequately different from one another. As Openhouse Products Ltd. Design as well as
manufacture various kinds of bags so with the assistance of this accounting system its production
section can able to evaluate the cost of each units of manufactured bags.
Price optimisation system: This is considered as a forms of management accounting
system which is aligned into systematized procedures of directing firms for using strategies of
corrective pricing. It becomes possible only because of this, an efficacious investigation is
performed regarding requirements, demands etc. of users (Dekker, 2016). According to this,
organisation get to know that which kinds of modification are required to be performed into
recent pricing pattern. Therefore, this system of management accounting is helpful for firms to
set out the price level which may assists in enhancing overall revenues as well as sales. For
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