Management Accounting: Types, Techniques, and Benefits

This document provides an overview of management accounting, including its essential requirements and types. It discusses the benefits of management accounting systems and their application. The document also covers various techniques of cost analysis and how to produce financial reporting documents. Additionally, it explores different planning tools used for budgetary control.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and its essential requirements and types........................................3
P2 Types of methods which are used for management accounting report..................................5
M1 Evaluate the benefits of management accounting system and its application......................6
D1 Critically examine how management accounting systems and reports integrated within the
organisational processes..............................................................................................................6
TASK 2 ...........................................................................................................................................7
P3 Calculate costs using appropriate techniques of cost analysis...............................................7
M2 Apply management accounting techniques and produce appropriate financial reporting
documents.................................................................................................................................13
D2 Produce financial reports that accurately apply and interpret data for a range of business
activities....................................................................................................................................13
TASK 3..........................................................................................................................................13
P4 Advantages and disadvantages of different types of planning tool used for budgetary
control.......................................................................................................................................13
M3 Analyse the use of different planning tool and their application for preparing and
forecasting budgets. ..................................................................................................................15
TASK 4..........................................................................................................................................15
P5 Compare how organisation are adopting management accounting systems to responds
financial problems.....................................................................................................................15
M4 Analyse how responding to financial problems, management accounting lead organisation
to sustainable success................................................................................................................17
D3) Use of planning tools to responds all the financial issues.................................................17
CONCLUSION..............................................................................................................................18
REFERENCES .............................................................................................................................19

INTRODUCTION
Management accounting refers to the computation of several accounts that are exploited to
make more profit by taking appropriate decisions. Within the business environment various
kinds of organisations that manages several information to run their business operations that are
required to business information’s as well as taking appropriate and effective decisions. Also, it
can say that management accounting considered as a provision of data that are organised by the
managers for identifying the business performance. All information’s as well as accounts are
managed by the accountant who have proper knowledge to prove the accounts and operates
business operations effectively. The purpose of management accounting is to manage and control
the financial data to attain business objectives. In this report, Alpha Ltd. Is chosen which is a
manufacturing company that produce different kinds of products. Under this report, discuss
about the difference between financial as well as management accounting, types of management
reports and their integration that helps to get business objectives. In addition, this report covers
planning tools as well as financial problems which can be solved by using appropriate
management accounting system.
TASK 1
P1 Management accounting and its essential requirements and types.
Management accounting: It is considered as most important practices of a business entity
which find, evaluate, manage and interpret accounting information’s to operates business
activities in a successful manner. Management accounting termed as an attractive approach that
can be utilised to highly control the information and raise business performance (Weetman,
2019). It is required for all kind of businesses that helps in maintaining all accounts as well as
develop company's productivity as well as profitability. The administrator of Alpha Ltd. Control
all accounting as well as financial information properly that assists to get high profits. All these
are managed by the accountant of a company who keep all the records and make them profitable
through using accounting principles.
Difference between financial and management accounting:
Basis Financial accounting Management accounting
Meaning It is related to the external activities and It is related to the internal activities of

performance of a business entity which is
essential to present to customers,
creditors as well as external parties who
have interest in the company’s norms and
activities.
a business which facilitates
information to manage by designing,
organising as well as managing and
controlling them.
Time focus It is mainly focused on the past
performance that assists to take further
actions.
This is mainly affect business
decisions which are related to the
future.
Concentrate It is concerned with the entire
organisational performance.
It concentrates on the different
segments of business organisations
where several information’s are
collected and managed.
Principle
followed
In this, required to followed the GAAP
principles that helps to perform the
financial accounting appropriately.
There is no standard principles and
rules of management in order to
follow while preparing accounts.
Different types of management accounting system: Cost accounting system: It is associated with price of the goods and services for
analysing the profitability of a company. Cost accounting system is exercised to
approximate the cost of products as well as services that are significant to accomplish
business objectives. It is needed in an organisation as it aids to examine the actual price
of products that are produced by a business (Malina, 2018). It is essential for Alpha ltd. to
recognise that product is more profitable or not, that is only probable through
approximating the value of products as well as services that are facilitating by a
company. Within the context to Alpha Ltd, administrator needs to custom cost accounting
management system to approximate the cost of their producing products that assists to
recognise the net income on such manufactures. Inventory management system: This is extremely associated with handling the inventory
as well as possessing appropriate records of stock. It is necessary to monitoring and
sustain the records of goods that have accumulated by company. Whereas, it is essential

for the company Alpha ltd. to accomplish the business activities properly by handling all
inventory. This system covers several methods to achieve the inventory like Just in time,
perpetual stock inventory and so on. Whereas, Alpha Ltd needs to succeed as well as
track the inventory that aids to generate profits properly. Job costing system: It is associated to analysing the expenses in to each job that are
sorted in to numerous activities and functions. The prerequisite of such system in big
portfolio in which extensive products ranges are manufactured. It is essential for the
Alpha ltd. In order to allocate the larger business activities in to small and grow profits
consequently. Whereas the manager of Alpha Ltd required this system to organise cost in
to different activities that aids to runs a business appropriately (Bedford, 2018).
 Price optimisation: It is essential to use by the Alpha limited in order to sets optimum
prices of their products for creating is able to satisfy customer’s expectations or not.
P2 Types of methods which are used for management accounting report.
Management accounting report: It is considered as a crucial tool for a business organisation
which assist to perform the activities in a successful manner. A company have clear
information’s and view that states how a company require to execute and how get a high
profitability by considering the management as well as finance activities. As the company Alpha
Ltd. Defined as a manufacturing business whose manager emphasise on the management
accounting and manage several kinds of accounting systems.
Types of management accounting reports: Several kinds of management accounting report
are discussed below: Performance report: It can be used for the motive of keeping all the records of a business
performance of Alpha Ltd. This is to be prepared by a manager in order to collecting as
well as recording information’s regarding the performance and workers of a firm. This
will help in providing bonus and incentives to their workforce as per their efforts towards
the task achievement that are assigned to them separately (Azudin, 2018). Inventory management report: This kind of report can be exercised to possess the
records of inventory that is kept by the Alpha Ltd. It is advantageous for the company as
it assists in knowing the company’s stock status which is already delivered to its clients.
 Account receivable report: This is related to the formulating a list of several customers
and can exercise while a firm Alpha Ltd. Facilitates goods and services to them on a

credit basis. This assists in ascertaining the unpaid amount that are due by customers and
resolve the specific financial issue regarding the late payment by clients.
M1 Evaluate the benefits of management accounting system and its application.
Management
accounting systems
It's benefits
Job costing system It is mainly related to the process of an organisation that facilitates
information towards the many business activities. The company Alpha
Ltd. Exercises job costing system and take advantages of estimating
the cost into various activities that make easy management and
operations.
Cost accounting system It is helpful for organisations as it assist to calculate the cost of all
goods as well as services that are facilitates by the organisations. This
will minimise the cost of producing which benefit to Alpha Ltd. By
reducing operating cost and get high profitability.
Inventory management
system
This is benefited for the business organisations as it helps in tracking
raw material as well as finished goods within the time frame. Through
this system the company Alpha Ltd. Can lead heir own inventory that
assists to generate huge profit by reducing the storage cost.
Price optimisation This method is beneficial for the Alpha Ltd. In order to set particular
product prices which are needed to satisfy the customers expectations
and requirements.
D1 Critically examine how management accounting systems and reports integrated within the
organisational processes.
Several kinds of management accounting system adopt by businesses and formulate
accounting reports that assists to improve the procedure of company. Accounting system as well
as management reports are combined within business procedure such as inventory management
system that is exercised to lead stock appropriately that aids to formulate inventory management
report which states how much stock are presented in warehouse (Kerzner, 2018). Whereas, cost

accounting system is exercised by business organisation to estimate the exact value of product
that they have creation which made-up cost report that are linked with organisational procedure.
Company should use system as well as reports accurately that assists to achieve all tasks properly
and rise productivity and profitability.
TASK 2
P3 Calculate costs using appropriate techniques of cost analysis.
Marginal costing method: It is planned in the costing method that is used to understand the
profits of a company by seeing variable as a product cost. This will help to maximise the
company’s productivity as well as profitability as manager examine all functions as well as uses
methods to identify the level of profit.
Absorption costing method: This is exercised by the company to calculate the profitability by
captivating the all costs. This includes fixed as well as variable cost while formulating income
statement that assists to states and know the profits (Eldenburg, 2019).
Cost analysis: This can be stated as a process that is in used to identify the importance of many
actions that are taken by Alpha limited for earning profits. This will assist in examining the
decisions that were framed by company in order to attain long term objectives.
Cost variance: This is used by Alpha limited to examine the gap between actual as well as
budgeted cost of manufacturing.
Calculation of profit by using Marginal costing method

M2 Apply management accounting techniques and produce appropriate financial reporting
documents.
There are several techniques that can be used by the businesses in order to calculate
profits by including several information’s. it states that which methods are more appropriate to
gain profits. A company adopts marginal and absorption costing that aids to formulate effective
financial report that makes huge profits. All tools and techniques are evaluated by the manager of
business organisation that assists in determined how they get profits by exercising appropriate
techniques that procedures to higher productivity.
D2 Produce financial reports that accurately apply and interpret data for a range of business
activities.
Financial reports are referred as a business document of core activities that shows how much
a business is required to earn profitability. While financial reports are not effective then business
has an alternative to change the system as well as techniques in order to create financial
statements. This is to be prepared by the management of a company to understand about the
income as well as expenditures for running a business operation successfully (Booth, 2018). This
is also considered as the manager should apply suitable techniques as well as methods to
formulate the financial reports which assist to describe the profitability as well as productivity of
a business organisation. The corporations are mainly focusing on financial reports in order to
manage as well as monitor the records of finance at a time of excess. Whereas, properly
applications of financial reports are essential for company that assists to show the firms profits.
TASK 3
P4 Advantages and disadvantages of different types of planning tool used for budgetary control.
Budget:
It denotes to the approximating tool which is in practice to study the forthcoming
expenditures and revenues associated to the definite period of time. As Alpha limited use several
kinds of budgets according to their requirements.
Preparing a budget:
At the time of budget preparation several phases are takes place which are needed to be
surveyed by the administrator of Alpha limited in order to examine the existing conditions of the

company and available resources. After that frame many plans which are permitted by manager
in the improvement of an organization.
Different types of budgets can be considered as follows:
Capital budget: In this, Alpha limited is exercised to record all data which is associated to
the many activities as well as functions in which a large capital investment is also measured.
Alpha limited utilised this budget for investigating financial performance and formulate plans for
a particular period of time (Singhvi, 2018).
Advantages Disadvantages
Capital budget accounts all the action of all
schemes where the company participated large
sum of monetary resources.
Absence of specificity is a disadvantage of this
budget as it contains the shared information
records of all sections of company.
Operating budget: It is associated to that kind of budget in which total expenses as well
as income of all projects are valued that is completely founded on the forecasted sales and
revenue of Alpha limited.
Advantages Disadvantages
It displays a vibrant insight to the company’s
manager that financial resources are
appropriately in used or not.
In this management of statistics could be
completed purely so it is a drawback of
operating budget.
Some alternative budgets are also considered as follows:
Zero base budgeting: This type of budget is beginning with the zero amount and utilised
for mitigating the all expenditures for each new period of time. It is mostly used by Alpha
limited for reducing the operational cost of company.
Advantages Disadvantages
It is precise in nature as it is framed for each
original accounting year with a zero base.
This is not appropriate for the short period of
time scheduling as it can be favouritisms by the
company manager.

Cash budgeting: It is associated to the cash inflows and outflows of each revenue and
spending over a time period. It is predictable to be surveyed by Alpha limited monthly as well as
quarterly in order to possess the track information of monetary resources (Agrawal, 2018).
Advantages Disadvantages
It assists in investigating company’s loss
simply in its financial statement.
It limits the organizational capability to deal in
credit dealings.
Balance scorecard: It denotes to the supervision tool that measures the performance of a
business entity that can be used by the manager of Alpha limited in order to examining the all
activities as well as recognise that workers of the company are under their control or not.
M3 Analyse the use of different planning tool and their application for preparing and forecasting
budgets.
It has been discussed form the above description that a business organisation should require
to use planning tools in their operations that helps in making high future profits. Through
applying these tools, a manager of a company can analyses the requirements of business and set
a estimated budget after analysing and examining the information’s which assists to make
effective plans for future and raise the profitability (Abernethy, 2018). For example: Alpha Ltd.
Use planning tolls to deal with the financial challenges which are required to be resolved in order
to increase their manufacturing level. This is essential for business to emphasise on upcoming of
a firm by making appropriate goals for future to attain high profitability and better or effective
achievements.
TASK 4
P5 Compare how organisation are adopting management accounting systems to responds
financial problems.
Financial issues: All the issues are challenged by business organisations to overwhelmed
the challenges that are happening due to deficiency of money for performing operational
functions. Alpha Limited is a medium sized pizza producing company that operates its business
in United Kingdom is fronting some financial problems. These are considered as follows:

 Unnecessary expenses: All the expenses that are not associated with the functions of an
organisation but confronted by the company termed as an expenditures. Whereas, within
the Alpha ltd. These kind of issues are occurs while manager have to usage money to
remove these in order to execute the operations thoroughly. It generates issue of lower
funds for the achievement of future goals.
 Improper organisation of bookkeeping: When sum of dealings are not documented in the
book correctly then its outcomes in money related issues for company. Whereas, the
company Alpha ltd. also looks this kind of problem that impacts on the organisational
effectiveness as the management will not have enough money to operate and perform
them.
In order to overcome from these issues a company Alpha limited implement many tools
and techniques that are discussed as follows:
 Key performance indicator: It is associated to the measurement device which assists in
finding the performance of a business organization. Primarily there are two types of KPI
approach such as financial and non-financial in which financial term is utilised to
evaluate the unnecessary expenditures and non-financial involves organizational
difficulties and supply chain. Alpha limited usage key performance indicator for
identifying the unexpected expenses problem as it assists in defining the unwanted costs
(Cleaver, 2019).
 Benchmarking: This type of instrument is utilised to monitor and measure the business
performance as well as compared it with their rivals. This is to be exercised by Alpha
limited to evaluate the issues of late payments by their clients and compared it credit
policy with competitors as well as creating effective decisions.
 Financial governance: It can be measured as a traditional of numerous financial
standards as well as principles that are required to be implemented by the company in
order to contract with the financial monetary problems. Through this, Alpha limited
overwhelmed from the unexpected expenditures, late payment etc. challenges by
captivating appropriate decisions by receiving effective solutions for all issues. It is also
exercised for directing and governing the strategies of business organization in order to
examine that suitable monetary principles are surveyed or not successfully in an
organization.

Comparison among two companies are as follows:
Basis Alpha ltd. Pizza express
Problem Currently, a company is suffering from
the ineffective cash flow management so
that they are not capable to manage their
cash inflows and outflows effectively.
This company is facing the issue
regarding their credit policies which
leads in negative impact on their
fund recovery.
System The above issue can be resolved
appropriately by using management
accounting systems which emphasised
on the sales as well as computerised
transactions in order to manage cash
flow effectively.
For this, in order to solve specific
issue a company will choose price
optimisation system that assists in
the recovers debts and credit within a
short time period.
Approach In order to manage their performance a
company can use KPI as a tool which
helps in managing their whole
performance and results in more
improvements.
In this, company can adopts
benchmarking tool in order to
planned effective policies and
practices.
M4 Analyse how responding to financial problems, management accounting lead organisation to
sustainable success.
Within the context of Alpha Ltd. Several kinds of management accounting techniques are
exercised for analysing and handling financial issues like unnecessary expenses, inappropriate
bookkeeping etc. In order to resolve these issues a company can use several techniques such as
benchmarking, Key performance indicator as well as financial governance. Through these
methods financial challenges are analysed and realised appropriately by formulating appropriate
strategies (Masuyama, 2018). Whereas, Key performance indicator assists to evaluate the
financial problems and benchmarking helps to analys the improper financial records as well as
financial governance used to design all information as per the accounting concepts and execute
all business operations under legal circumstances so the chances of financial challenges could be
minimised.

D3) Use of planning tools to responds all the financial issues.
Planning tools are considered as a strategic management tool that are used by a business
organisation such as Alpha Ltd. In order to know about the issues as well as responds on them
appropriately that assists to accomplish the organisational objectives. This assists to set a budget
and monitor as well as control the entire budget that raise firms productivity as well as
profitability. The management of Alpha Ltd. Using several kinds of planning tools such as cash
budget, master budget and zero based budget also that assist in planning the financial plan
systematically that results in sustainable success of an organisation. Cash budget assists to
manage information of cash items, master budget is exercised to maintain records of all
transactions as well as zero based budget is utilised in further activities of business that aids to
resolve financial challenges which occurs within the company's production and operational
procedure (Hopkin, 2018).
CONCLUSION
It has been summarized from the above assignment that management accounting defines as
an activity of measuring, evaluating and monitoring the performance in order to make strategic
decisions for the future. Various systems and reporting are exercised for management accounting
to understand the actual position of a company. Many planning tools are needed to estimate
budgets by examining the advantages as well as disadvantages of each tool. Numerous financial
issues that are faced by a company which can be resolved by using effective and appropriate
techniques like benchmarking, KPI, financial governance and so on in order to deal with them in
a successful manner.

REFERENCES
Books & Journals
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controller. U.S. Patent 9,964,935.
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