Management Accounting Research and Practice

This assignment delves into the field of management accounting, examining its research and practical applications. It encourages students to analyze various perspectives on management accounting, including its role in lean manufacturing, earnings management, and public health-care organizations. The assignment also explores how industry context influences management accounting practices and discusses the evolving trends in sustainability/CSR reporting within this field.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Definition of management accounting and requirement of different types of management
accounting system..................................................................................................................1
P2 Methods of management accounting reporting.................................................................3
TASK 2............................................................................................................................................6
P3 Analysis to prepare P&L by marginal and absorption cost for Unicorn limited..............6
TASK 3............................................................................................................................................8
P4 Various strategies for budgetary control and their advantages and disadvantages in the
Unicorn limited.......................................................................................................................8
TASK 4..........................................................................................................................................11
P5 Compare the way of company are adapting management accounting system to respond to
financial system....................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is a process of preparing entire reports of management and
accounts that provide accurate and timely financial and statistical information required by
managers to make day to day and short-term decisions. In the management accounting, managers
use the provisions of accounting content in order to heal their inform themselves. This report is
based on Unicorn limited which is a finance company. In this present report, entire methods of
management accounting and techniques of cost analysis to prepare income statements are
covered. Along with this, different types of planning tools and their advantages and
disadvantages are discussed.
TASK 1
P1 Definition of management accounting and requirement of different types of management
accounting system
Management accounting system is a profession which include partnering in the
management decision making and that help managers in their daily working and decision. In this
system, managers usually use the provisions of entire information of accounting for better
informing themselves before the decision matters (Fullerton, and Widener, 2014). Management
accounting plays a vital role in the organisation because through it, managers can handle the
situations and solve the issues of employees. Other than that, they will be able in effective
decision making in the organisation.
Types of management accounting system:
Management accounting system is very useful in Unicorn organisation but they need
different types of this system for making good environment in the business and organisation.
There are different types of management accounting system which are mentioned below:
1. Cost accounting system
It is the main and important system in the management accounting. This system is a
framework used by organisation to estimate the cost of their goods for profitability analysis,
inventory valuation and cost control (Renz, 2016). It is the very valuable system in the business
because from it, managers can control their costing and thereby helps in reducing the expenses.
A cost accounting system requires five parts that include: an input measurement basis, second
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one is an inventory valuation method, a cost accumulation method, a cost flow assumption and
last one is capability of recording inventory cost flows at certain intervals. These five parts are
the valuable parts of the cost accounting. It may be noted that many possible cost accounting
systems can be designed from the various combinations of the available alternatives. Its provides
development in the business and the company. An organisation must know that which products
are profitable and which one are not and know that is it correct cost of the product or not. In the
business, it is necessary to know about product's costing (Messner, 2016). It is the main factor of
cost accounting for reducing the expenses which are not beneficial for the organisation. There
are two important cost accounting systems, first one is job order and second one is process
costing. Both systems are very valuable in the business. Job order costing is a cost accounting
system which accumulate the entire cost of manufacturing for each job. Process costing is a cost
accounting system which accumulate the entire cost of manufacturing for each process. Cost
accounting system is the very valuable for the business and owner of the organisation.
2. Inventory management system
It is the second important cost accounting system for the organisation. This system is
based on company's entire data which is being collected by the managers. It is the ongoing
process of moving parts and products into and out of an organisation's locations (Ax, and Greve,
2017). Managers manage their inventory on a daily basis. Through inventory management
system, company can manage their entire data of sale, purchase, sales return, purchase return and
deliveries. This data may be required in the future and it can be saved in the system, so managers
can easily search, when they need it. This is the very important part of doing business. It is the
mean by which companies remain sticks with all of the essential goods they need to sell. When
company sale their products and services in the market, then this all figure will be saved in the
inventory system, so managers can know those figures and make the report of income
statements. When company manages the inventory system, they face a lot of problem in the
system. In order to solve the problems and issues of proper inventory management, organisations
often turn to software that can help them in keeping track of all of their inventory. The
mentioned software works according to inventory system and helps company in saving their
date. Through inventory system, managers can make a report of income statements and know
about profitability of the business (Williams, 2014).
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3. Job costing system
This system is a process of accumulating information about the costs of the production
and services. Job costing system is very useful for determining the accuracy of the entire
estimation system (Dekker, 2016). It is the very valuable costing system in accounting
management for the business. A job costing system needs to accumulate the following three
types of information: First one is direct material, second one is direct labour and last one is
overhead. These three types of information is very useful in the business because direct material,
direct labour and overhead are very expensive part of the job costing system.
4. Price optimising system
It is an important system of the management accounting system and very valuable
method of the system. This system is based on how customers will respond when company set
their product's prices. When company produce their goods and services then they should know
about the response of the customers against prices. They should collect some information about
customer's review that their prices are according to customer or not. If customers cannot afford
that prices then organisation should reduce their prices. So, customer can buy the products easily.
Price optimising is the process of searching that pricing spot,or maximising price against the
customers willingness to pay (Christ, and Burritt, 2013). Companies change their process day
by day, but they should set their product's prices according to market Therefore, it is the very
valuable system in the management accounting system.
P2 Methods of management accounting reporting
This reports help owner of Unicorn limited and their managers monitor the company's
performance and are prepared frequently throughout accounting periods as needed. This is the
portion of making sure that company has complete the presentation of how business is perming
and what finance condition of the company (Bromwich, and Scapens, 2016). This report help
company and their managers of monitor the performance of the company and prepare the report
of the income statements.
1. Budget report
This report help Unicorn limited owners analyse their company's performance and if the
organisation is large enough then their managers analyse their entire department's performance
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and control costs. Budget report is the very important in the business, because it shows entire
organisation's performance in one report (Vosselman, 2014). Through it company's managers
can know about their departments work and productivity of the employees. When managers
found that their employees productivity in not matching with their target or goals then they have
authority of reducing the budget. Business owner and managers can also use budget reports to
provide incentives to employees. In this case, when company found that, their employees
productivity is better at their work place so company can decide their incentives and bonuses.
When employee's productivity is suitable for the company, then that entire employees will be
able for getting incentives and bonuses which provide by the organisation. Some of the fund
budgets may be given out up as bonuses to employees for meeting specific financial goals. If
employees gives their best then it will be more profitable for the company, that's why they gives
incentives and bonuses to their employees.
2. Accounts receivable aging
This report is a critical tool for managing cash flow for Unicorn limited that extend credit
to their customers. This report is based on the credit which given by the organisation to their
customers. A manager can use this report to find issues with the Unicorn limited collections;s
process. In the organisation, some time customers unable to pay their balances, the company may
need to tighten its credit policies (Figge, and Hahn, 2013). When they provide credit services to
their customers, then some of the customers will pay their balances in time but some of the
customers will not able to pay their outstanding amount to the company. In this case, this report
help company in making the list of customers of not paying their balances in certain time. When
that customers will not able to pay their balances, then company can take action against the
customers for getting their payments (Macinati, and Anessi-Pessina, 2014). So it is the report of
the cash flow and credit, when company need it they can use it and get back their amount which
provide to their customers.
3. Job cost report
Job cost reports show entire expenses for a specific project or department. They are
usually matched with an estimate of revenue so the company can evaluate the job's profitability.
In the Unicorn limited, lots of employee working and there are different types of department.
That department work according to their task and employees according to task and their profile.
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In the organisation, some department can gives their best but some of the department can not
able to gives their best at their work place (McLean, and Davie, 2015). So this report shows
about that types of departments or project which are not beneficial for the company and not
giving their best at work place. This report helps identify the higher earning department of the
business, so they can focus it efforts there instead of wasting time and money on jobs with low
profit margins. When company found about low profitable areas then they will stop the investing
in it and they increase their budget in the high profitable areas and department.
4. Inventory and manufacturing
It is the very important report in the business and it is very valuable for the Unicorn
limited. In this report entire data will save, that data can be in sales, purchases, sales return and
purchases return. Inventory and manufacture report is based on the company's entire data and
their security. This data is prepare by the inventory and manufacture report. Along with this
when organisation produce their goods and services, then they prepare a report for the raw
material, labour and consumed material. These reports generally include items such as inventory
waste, hourly labour costs or per unit overheads costs. The managers can compare the entire data
and productivity of the employees and work for their improvements, so they can offer bonuses to
the best performing departments (Soderstrom, and Stewart, 2017). Company know their cost in
inventory and manufacture, then evaluate the entire data according to their profitability. Further,
they can reduce the budget in this report or increase the budget in this report according to need.
So it is the profitable report for the business and Unicorn limited (Thomas, 2016). Through it,
company can evaluate the entire budget and increase their budget in best department and
decrease their budget in low profitable departments. So they can increase their profit and will
able to get the goals and target which set by the managers.
This four types of management accounting reports plays a vital role in the Unicorn
limited. Their managers can prepare the report and evaluates their budget. They can invest in
best areas or department of the company which is more profitable for the Unicorn limited.
Through this entire report, organisation can get the goals and target, and will be able to make
more profit from this report. This is the report of the company's entire task and operational work
which done by the different department. Some department will give their best and their
employee's productivity also best but some employees and departments are very low profitable
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for the company. So they reduce their budget in that types of areas and departments. It all things
possible by the method of management accounting reporting, so organisation know about their
performance and their employee's productivity. Further, they can improve the company's
performance and can able to work according to goals and target.
TASK 2
P3 Analysis to prepare P&L by marginal and absorption cost for Unicorn limited
For preparing a report of income statements of the Unicorn limited, there are different
types of methods available in the management accounting. Organisation able toknow that
business is generating profit up to which extent in the market. In order to formulating income
statements account for Unicorn limited (Fullerton, and Widener, 2014). There are two types of
methods are taken into account i.e. absorption as well as marginal. Then such statements along
with interpretation are stated as below:
Income statements by marginal costing :
Particulars Amount Amount
Sales 700 * 35 21,000
Cost of production 13 * 700 9,100
Less: Closing stock 13 * 100 ( 1,300 )
Variable cost of sale 7,800
Contribution 13,200
Less: Variable sales overhead
1 * 600
600
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Less: Fixed costs; Production
overhead
2,000
Administration cost 700 3,900
Net profit 9,300
From the above report it is conclude that Unicorn limited is able to earnsales worth of
21,000 at the end of accounting period. It generates on this value of profit and revenue which is
worth of 9,300 GBP. There are some outcomes, which can be said that, management of Unicorn
limited can decrease entire variable expenditure in the year (Bromwich, and Scapens, 2016). As
it further, in the next time when managers such expenses then can enhance net profit of business
in next year.
Income statements by absorption costing :
Particulars Amount ( £ ) Amount ( £ )
Sales 700 * 35 21,000
Less: Cost of production 16 *
700
11,200
Less: Closing stock 16 * 100 ( 1,600 )
9,600
Production of sale 9,500
Gross profit
Less: Variable sales overhead
1 * 600
600 11,500
Less: Fixed costs;
Administration cost
700
Selling cost 600 1,900
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Net profit 9,600
According to absorption costing there is P&L account prepared and it can be discovered
that at the same revenue i.e. 21,000 GBP, net income earned by Unicorn limited in 9600 GBP.
There are some difference can be determined when comparing it with marginal method. Number
of costs differ in both the methods are reason of the differences. Absorption costing is the more
valuable then marginal costing, because it is the more profitable for the Unicorn limited
organisation (Kothari, and Roychowdhury, 2015). Through it company easily can get their
target and goals which set by the managers. Marginal costing consists of only variable
expenditure incurred in the organisation whereas absorption consists of variable and fixed both.
Entire companies using absorption methods at time of managing income statements , because it
covers all expenses associate in the company.
Difference between marginal and absorption costing :
 Marginal costing applies on individual unit production and absorption costing applies on
all production costs to all units produced.
 Only variable cost is applied to inventory under marginal costing and under absorption
costing fixed overhead costs are also applied.
 The revenues and profitability of every individual sale will appear to be very higher
under marginal costing and profitability will appear to be lower under absorption costing.
 Under the marginal costing uses the contribution margin for the measurement of profit
and gross margin is used under absorption costing.
 Marginal costing is fixed and variable and absorption costing is production, selling and
distribution.
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TASK 3
P4 Various strategies for budgetary control and their advantages and disadvantages in the
Unicorn limited
Budgetary control is a system of management control in which actual income and
spending are compared with planned income and spending. Through it managers can changes in
the plan in order to make more revenues and profit. It refers to how well managers usses budgets
to monitor and control costs and operation in a given accounting period. Other than that,
budgetary control is the process for managers to set target, goals and financial performance goals
with budgets. Further, they compare the actual results, and improve the performance of the
business, as it is needed. It is the valuable factor for the Unicorn limited, because there are lot of
issues and for solve their problems they need to use budgetary control (Lorenz, 2015). Through
it, company can plan for the future and compared with the actual performance for finding out
variances. It is the reason of improvement and through it company can get the target and goals
which set by the managers. That goals are very important for the organisation, in order to achieve
target and goals , company should make a planning for control the budgets. So they can able to
earn more profit and revenues in the business. There are different types of planning tools for
budgetary control and that is mentioned below:
1. Financial budget
This budget is based on the organisation's cash and profit. It is the process of determining
of how much money company will earn during a specific period of the time and planning how
much they will spend, save and borrow. In the Unicorn limited, lot of departments, employees
are working and lot of activities are running, but for manage the entire factors in a business , they
need lot of fund. So they should make a plan for financial budget, so they can easily get the
target and goals. When company's employee work together and accomplish their task, then it is a
good for the organisation, but some of time some employees can not able to give their best at
their work place. So Unicorn should make a plan for the employees and reduce their budget on
low profitable departments or employee of low productivity. It can help company in increasing
their profit and brand value. This is the best planning for control the budget, beacause through
financial budget company can reduce their budget in lot of departments who can not able to give
their best at work place. Company should to know about their employees who give their best in
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the business and for them, company should provide them incentives and bonuses, so they can
work hard and motivate for their work. There are some advantages and disadvantage of financial
budget which are mentioned below:
 A big advantage of financial budget is financial awareness, but some time company has
to research for financial awareness and planning so it is big disadvantage of this budget.
 Through financial budget company get the lots of business opportunities and from that,
they can get the more profit and revenues. Disadvantage from it, that company need more
time for making such types of planning and strategies.
 Financial budget increases power of the Unicorn limited, money availability,
accountability and confidence of the Unicorn limited, but for this entire factors they need
some fund and they need to invest in entire department.
2. Operating budget
This is the combination of known expenses, expected future costs, and forecasted income
over the course of a year. Operating budget is the important in the Unicorn budget, because it is a
small organisation and they need to more fund for operating their entire departments. If they will
not make a planning for operations department, then their employees will not be able to give
their best at their work place. It can be dangerous for the organisation, so they should make a
planning for the operating budget. In the organisation, they need to know about their planning
and manage the entire department in great way. A company has different department for
different types of task and work, so they manage the entire department in the business. When
they reduce their budget in the operating budget then their employees will not be able to give
their best at work place and it will not beneficial for the organisation. So company should make a
strategies for the operating budget. Further, their employees will be motivate and then they will
able to give their best. From their motivation company can get the best revenues and profit from
the business. There are some advantages and disadvantage of operating budget which are
mentioned below:
 Unicorn can easily manage the current expenses but they need to cover of past expenses.
 Through operating budget, they can projecting future expenses, so it will help in future
and company will be able in decreasing their expenses. Disadvantage of this point is,
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company can not be sure for future expenses, if they will require more fund then, they
can not arrange the fund.
 Company's accountability can be great but they need more knowledge, information and
time for managing their entire accounts.
 Employees satisfaction but few employees can not able to get incentives and bonuses of
the company which provided for their productivity.
 They can manage the entire expenses in good way, but Unicorn limited is small company,
so they need more employees and system for the operating budget and it can be
expensive for the business.
 Through operating budget, company can operate their entire department very smoothly
but for it, they need more budget for the operating budget planning.
TASK 4
P5 Compare the way of company are adapting management accounting system to respond to
financial system
In the Unicorn limited, they prepare the planning and strategies for accomplish the task
they face different types of issues and problems, that can not be beneficial for the business. Due
to some problems and issues, they can not able to accomplish their task on time at their work
place. So company should start different types of activities which can be beneficial for the
business. If company will not adapt the best management accounting system, then they will not
be able to get their goals and target and it will not be beneficial for the organisation
(Management accounting, 2017). There are different types of way , if company will adapt then
their accounting system will be best in the industry. Some ways are mentioned below:
1. Balance scorecard
This is the most important way of management accounting system in the Unicorn limited.
The balance scorecard is a planning performance management tool that can be used by the
managers to keep track of the execution of entire task by the employees within their control and
monitor the consequences arising from these actions. This is a strategic planning and
management system that Unicorn limited use to: communicate what they are trying to
accomplish, Align the daily basis task that entire employee is doing with strategy. Other than
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that, they use to priorities projects, products, and services of the organisation, and measure and
monitor progress towards strategic targets. Through it, company can know about entire
performance of the organisation. Further, they can improve performance of the employees and
departments.
2. Financial governance
Financial governance is the most important for good governance because the
consequences of failure can be so devastating for a council. No matter how good the rest of a
council's governance may be financial failure can bring it undone. When Unicorn limited need to
save their data, then they can adapt this type of accounting system for their business. Finacial
governance is very secure system of management accounting, and its software is very important
and profitable for the business (What is management accounting, 2017). It is the very valuable
system for the organisation. Through financial governance, entire financial process can be secure
in the company. They can secure their entire data of employees, departments, products, services
and financial process. All of the companies require that their financial processes are managed
according to a rules and regulations, but if they will not use such type of system then they will
not able to get this types of benefits in the business. If they will use this types of accounting
system, then they will able to get more profit and increasing their brand value for the business.
CONCLUSION
In this report it has been recognised about management accounting system, their entire
types of method and management accounting reporting. Through this report it is conclude that
Unicorn can recognise about their advantage and disadvantages of the management accounting
and management reporting system. Other than that, it is also conclude their P&L account and
different types of planning which can adapt by the Unicorn limited organisation.
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REFERENCES
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Christ, K. L. and Burritt, R. L. 2013. Environmental management accounting: the significance of
contingent variables for adoption. Journal of Cleaner Production. 41. pp.163-173.
Dekker, H. C. 2016. On the boundaries between intrafirm and interfirm management accounting
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McLean, T. and Davie, S. 2015. Management accounting, engineering and the management of
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