Management Accounting and Sustainability

This assignment delves into the world of management accounting and sustainability, showcasing a curated list of academic papers and publications from reputable sources. The selected articles cover topics such as corporate governance, strategic management accounting disclosure, advanced management accounting, and the use of partial least squares structural equation modeling (PLS-SEM) in management accounting research. Additionally, it includes studies on the role of audit committees in financial expertise and earnings management, the potential of management accounting and control in global operations, and public value governance. The assignment provides a valuable resource for students, researchers, and professionals seeking to understand the current state of management accounting and sustainability literature.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essential requirements of its systems.................................1
P2 Various methods used for management accounting reporting..........................................3
M1 Determine the benefits of management accounting system.............................................4
D1 Integrated organisational process with in management accounting system and accounting
reports.....................................................................................................................................5
TASK 2............................................................................................................................................5
P3 Calculation of cost using different costing techniques......................................................5
M2 Apply a range of management accounting techniques....................................................9
D2 Produce financial reports to accurately apply and interpret data......................................9
TASK 3..........................................................................................................................................10
P4 Merit and Demerit of several planning tool used for budgetary control.........................10
M3 Different planning tools and their application...............................................................11
TASK 4..........................................................................................................................................12
P5 Comparison of the way in which organisation are adapting management accounting system
..............................................................................................................................................12
M4 Management accounting can lead organisation to sustainable success by responding to
financial problems:...............................................................................................................13
D3 Planning tools respond appropriately respond to solving financial problems:...............14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting mention about the utilization of the professional knowledge,
techniques, and concept in preparing the accounting information in a specific manner (Chenhall
and Moers, 2015). It will help to top management in the executing plans and policies, controlling
the business functions, decision making, optimizing the use of resources, disclosure to
management and safeguarding assets. In other words, management accounting can be defined as
the processing and presentation of financial and economic data. It would help to determine the
performance of management to implement different types of strategies, making a comparison,
budgeting, and forecasting. To understand in detail about management accounting selected
Merlin financial consultancy, which was established in 1988 and is based in London, United
Kingdom. The company provides financial reviews and Claritas reports as well as advisory
services in the field of mortgages and more on. It provides financial advice to manufacturing and
retail companies such as Airdri Limited, which is an Air Dryer manufacturer.
This report covers several topics like management accounting, systems, it is reporting, use of
various costing methods to calculate net profit. Along with, merit and demerit of planning tools
of budgetary control. Additionally, the way in which the management accounting system applied
to sort out of different financial problems.
TASK 1
P1 Management accounting and essential requirements of its systems
Management accounting – It is a process of determining and communicating financial
data within an organization. The manager of the company evolute the performance of a business
and their strategies to intensify it. Management accounting act of preparing a sense of financial
and costing data and translating that data into useful information for management and officers
within an organization. Marlin financial consultancy helps Airdri limited to applying it on a daily
basis so that the actual performance of an organization can be measured (Fullerton, Kennedy and
Widener, 2014) .
Management Accounting System – It is connected to an internal system which can use
by a company to measure and determine their processes for the management of an organization.
These systems are used by the manager in order to track the record of several functional and
operational sections of a business. There is mention about different types of management
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accounting system which are used by Marlin financial consultancy in the reference to provide
help of stakeholders of Airdri limited to understand the actual status of an organization. All of
them are as follows:
Cost accounting system – The particular system can help a manager for determining various
costs in reference to several activities like manufacturing. Marlin financial consultancy provides
advise to Airdri limited to apply the system to keep elaborated information regarding expenses
that are connected to Air dryer manufacturing and other services. It is essential for a business to
track the record of the direct and indirect cost of business (Honggowati and et.al., 2017) . It is
beneficial for enterprises due to provide help it information in reference all the expenses can be
gathered. The system mainly used as a framework for the analysis of profitability, stock and cost
control. To forecast the right cost is quibbling for profitable operations.
Inventory management system – It is mostly used by a manufacturing company to
manage stock inappropriate manner. This system is applied by Marlin financial consultancy for
their client of Airdri limited in order to keep the track record of all types of raw materials that are
used for production. With the help of a particular system get all detailed information and analysis
of each level of production to know the status of stock. There are three different types of
inventory management systems such as LIFO, FIFO, and AVCO.
 LIFO – In this system recently obtain stock is used for manufacturing activities.
 FIFO – The particular system earlier bought items are used for production activities.
 AVCO – There are goods are used on the average cost basis for manufacturing.
Airdri limited the applied FIFO system in reference to the preparation of the hand air dryer. It
is essential for all types of businesses to provide help to keep detailed information on inventory
which is utilized for business operations.
Price optimisation system – It is applied by every organization to set optimal prices of
their different types of product which are produced by the company. The system applied by
Marlin Financial Consultancy to prepare the record for Airdri limited to provide help to a
manager to set price structure in an effective manner and arrange everything. Different types of
product have different prices which are set according to their quality and usage that will able to
meet the expectation of customers or not.
Job order costing system – The particular system is assigned with accretion cost of
every manufactured unit of a business. Through the job order costing system, Marlin financial
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consultancy helps their customer Airdri limited to follow the system which can help to know the
specific cost of a specific job role. It is connected to every item that will sell out in the market. In
other terms, it is very crucial for the entity to provide help to determine of cost of various items
that are produced according to the requirement of customers (Kaplan and Atkinson, 2015) .
P2 Various methods used for management accounting reporting
Management accounting reporting – It is a process of preparing various types of
management accounting reports to mention different information in reference to the performance
of a company. There are different methods of preparing which are used by Marlin financial
consultancy to kind of several reports for their customer Airdri limited. There are defined
different management accounting reports -
Budget Report – It is part of an internal system that is very important for measuring
performance. It is prepared by every type of business like small, medium and large businesses to
understand an overall budget. Therefore, a company contains a list of all resources which are
carried out by budget. The manager of Merlin financial consultancy uses the report to compare
actual and standard spending of Airdri limited to forecast their performance for an upcoming
period of time. It is beneficial for the company to control all business functions as per the budget
plan. As a result, it can help to analysis that they are capable to achieve their projections that
were done previously.
Performance Report – This report mainly generated to analyze the performance of a
company as well as every employee at the end of the financial term. In the large organization, it
is prepared on the department basis. On the basis of performance, the report prepares strategic
decisions that can help in the future of an organization. The particular report used by Merlin
financial consultancy for Airdri limited so that data regarding employees and business
performance can be recorded. The report defined the strength and weaknesses of each employee
regarding their task. In the end, provide them a bonus and incentive to employees for their efforts
to provide help to achieve organizational goals and objectives. It is beneficial for Airdri to
prepare strategic strategies to intensify performance (Maas, Schaltegger and Crutzen, 2016) .
Accounts Receivable Report – The particular report is developed to prepare a list of the
owed amount of various customers. This report prepared by those companies who can provide
products to the customers on credit. In Marlin financial consultancy, it is used by staff members
to maintain all detailed information of all the outstanding amounts of clients of Airdri limited. It
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is beneficial for a company to an analysis of actual unpaid amounts by customers. It provides
help of an organization can tighten its credit policies so that the situation of late payments from
clients can be ignored.
Inventory Management Report – The main aim of this report to track record materials
at each production level. It is developed by Marlin financial consultancy for Airdri limited to
track record of an organization. It is defined to produce a particular item of how much material
used by the company. It is beneficial for business because it can provide detailed information so
as a result utilize resources in an appropriate manner and reduce wastages.
M1 Determine the benefits of management accounting system
Different types of system Benefits
Cost accounting system This system help to business to keep a record of several
costs connected with the business functions. Airdri limited
with the help of this system calculate direct and indirect cost
which is beneficial for analysis profitability as well as cost
control (Melnyk and et.al., 2014) .
Inventory management system It is beneficial for Airdri limited to track record of inventory
and get detailed information. It will apply a different system
of inventory to sell out in the market. Airdri mainly uses the
FIFO system and it will help top reduce wastages and proper
utilization of resources.
Job costing system It is related to a specific job role so it will beneficial for the
job costing system for the purpose of determining the cost of
various activities that are performed according to clients. It
will provide fair value of costs that are connected to
delivering particular job.
Price optimization system It is beneficial for an organization to set price structure for
different types of projects in an effective manner. This
system provides help to Airdri limited to understand
customer perception regarding their products then set
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optimal prices to increase the purchasing power of buyers.
D1 Integrated organisational process with in management accounting system and accounting
reports
Management accounting systems and reports are interconnected within the organizational
process. These systems and reports are an important part of an organizational process and help to
run business activities in a smooth manner. Different types of systems such as inventory
management, cost accounting and job costing conduct various activities and help to achieve
organizational goals and objectives. These reports are provided detailed information about
business functions and present in front of top management. On the basis of these reports they can
analysis of organizational performance then they will take an appropriate decision that can help
to conduct organization performance in a smooth manner (Nitzl, 2016) .
TASK 2
P3 Calculation of cost using different costing techniques
Absorption costing – This costing method defined the production cost that has been
assigned to the units produced. There are mainly including the direct cost in the manufacturing of
goods and services. The finished product consists of direct material, labor, fixed and variable
production overhead. It is essential for financial and income tax reporting. It can show the effect
of opening and closing inventory. The main benefit of this method that there are defined about
the direct and fixed cost. It can present a more accurate picture to show profitability situation.
Marginal Costing – It is costing technique which is used for per unit to know production
and fixed elements remain constant throughout. It mainly used when an extra unit needs as a
result and there are including direct material, direct, and variable overheads. With the help of
particular technique analysis of marginal cost as well as contribution. The particular method used
by Galway plc for the reason of the decision-making process and helps to understand the value of
each level of manufacturing with the help of break-even analysis. It is beneficial for a company
because it is easy to understand and apply in an effective manner (Lindholm, Laine and
Suomala,, 2017) .
Income statement under Marginal costing method for month of May & June
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Particular May June
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(in £) (in £)
Total Sales 50 15000 25000
Less: variable cost
Opening stock - 3200
D.L. 5 2500 1900
D.M. 8 4000 3040
Variable Cost 3 1500 1140
Less: Closing stock -3200 -1280
Total Variable cost 4800 8000
Contribution 10200 17000
Fixed indirect production cost 4000 4000
Selling & Distribution costs 4000 4000
Administrative costs 2000 2000
Sales commission cost 750 1250
N.P. (Net profit) -550 5750
Absorption Cost per unit
Direct Labour cost per unit 5 5
Direct Material cost per unit 8 8
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Variable cost per unit 3 3
Marginal Cost per unit 16 16
May June
Opening stock - 200
Produced units 500 380
Sold Units 300 500
Closing stock 200 80
Income statement under absorption costing method for month of May & June
Particulars May June
(in £) (in £)
Total sales 50 15000 25000
Less: Cost of Goods sold
Opening stock
D.L. 5 2500 1900
D.M. 8 4000 3040
Variable production cost 3 1500 1140
Fixed indirect production expenditure 4000 4000
Closing stock -4800 2122.4
Total cost of goods sell 7200 7957.6
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G.P. (Gross profit) 7800 17042.4
Selling & Distribution expenses 4000 4000
Administrative cost 2000 2000
Sales commission expenditure 750 1250
N.P. (Net profit) 1050 9792.4
Absorption Cost per unit
Direct labour cost per unit 5 5
Direct material cost per unit 8 8
Variable cost per unit 3 3
Fixed indirect production expenses per unit 8 10.53
Total Absorption Cost per unit 24 26.53
May June
Opening stock - 200
Units produced 500 380
Sold units 300 500
Closing stock 200 80
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Material cost variances:
Given information is as follows-
Standard price(SP)- £10 @ per kilograms
Actual price (AP)- £ 9.5 @ per kilograms (20900/2200)
Actual quantity (AQ)- 2200 Kilograms
Standard quantity(SQ)- 1000 Kilograms
Material price variance (MPV)= (SP-AP) * AQ
(10-9.5)* 2200= £1100 F
Material usage variance (MUV)= (SQ-AQ)*SP
(1000-2200)*10= £12000 A
Material cost variance (MCV)= Standard material cost- actual material cost
Valuation of closing stock using LIFO
Date Reference Purchase Issues Balance (Inventory)
Units £/Units £ Total Units £/Units £ Total Units £/Units £ Total
05/01 Previous balance
(inventory) 40 3.00 120.00
05/12 40 3.00 120.00
Bought 25 units
at £ 3.60 each 20 3.60 72. 20 3.60 72.00
05/15 20 3.60 72.
Issued 36 units 16 3.00 48. 24 3.00 72.00
05/20 24 3.00 72.00
Bought 20 units
at £ 3.75 each 20 3.75 75. 20 3.75 75.00
05/23 Issued 10 units 10 3.75 37.5 24 3.00 72.00
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10 3.75 37.50
05/27 9 3.75 33.75
Issued 25 units 25 3.00 75.00
05/30 Issued 5 units 5 3.00 15.00 4 3.75 15.00
Valuation of closing stock by using weighted average method:
05/01 Previous balance
(inventory) 40 3.0000 120.0000
05/12 Bought 25 units at £
3.60 each 25 3.60 90. 65 3.2308 210.0000
05/15 Issued 36 units 36 3.2308 116.307
7 29 3.2308 93.6923
05/20 Bought 20 units at £
3.75 each 20 3.75 75. 49 3.4427 168.6923
05/23 Issued 10 units 10 3.4427 34.4270 39 3.4427 134.2653
05/27 Issued 25 units 25 3.4427 86.0675 14 3.4427 48.1978
05/30 Issued 5 units 5 3.44 17.2135 9 3.4427 30.9843
M2 Apply a range of management accounting techniques
Different types of management accounting techniques plays essential role in order to
prepare of the income statements. These methods apply by the Airdri limited to calculate net
profit of company at the end of financial term. They have used marginal costing method and
absorption costing method. These are important techniques which is useful to preparing of
different type of accounting reports (Bryson, Crosby and Bloomberg, 2014).
D2 Produce financial reports to accurately apply and interpret data
As per the above data marginal costing method absorption method to prepare income
statements. As per the absorption costing method company is earning the net profit of £1450 in
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May month while in the June they are earning the revenue of £4550. While in the marginal
costing method, company is getting the lose of £ 550 in May month but in next month earning
the profit of £ 5750.
TASK 3
P4 Merit and Demerit of several planning tool used for budgetary control
Budget – It is a formal statement where presented of forecasted income and expenses that
will base on the different types of plans and objectives. Budget can be described as a forecasting
tool that can use for a specific period of time. Marling financial consultancy executes various
types of budgets for their client of Airdri limited as per requirement.
Budgetary Control – It is a procedure for managers to manage the financial goals of a
company with particular budgets. The variances are compared with actual results with a standard
result to adjust performance as per the requirement. With the help of a particular procedure set
long term financial objectives in reference to intensifying performance. Airdri limited used it for
the purpose of comparing actual figures with forecasted one (Otley, 2016) .
Zero based budget – The particular budget start from zero base. According to particular
budget analysis of each department from starting and justified of expenses for new period. It is
prepared by Marlin financial consultancy for their customers in reference to get optimal result
and identify those expenses which are not recognising in past budgets. It can reduce cost of
operation by record in the books. There are defined advantages and disadvantages of this budget Advantage – Zero based budgets analysing of all departments and allocate of resources to
reckon of actual data rather than of budgeted figures. It will improve of Co-ordination
and communication in between different types of system.
 Disadvantage – The main disadvantage of this budget that it will start from zero which is
complex and need to high money in vestments. To prepare of particular budget need to
highly qualified managers which have knowledge regarding to budget and it is not
possible for small size company.
Operating budget – The particular budget developed to project all the forecast of
income and expenses that are connected to expected sales and revenues of an organisation. It is
produced by Marlin financial consultancy for their client of Airdri limited to provide help of top
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level executives of entity. They will be analysed of all monetary resources to utilised through
enterprise or not. There are following advantage and disadvantage - Advantage – It will provide help to owner of business to know about financial resources
are properly used or not (Quattrone, 2016) . It determines about the past and current
expenses as per the requirement.
 Disadvantage – The disadvantage of this budget that it can overstate revenues and other
amounts in statements of business. In this budget easily manipulate of amounts from the
budget which is not good for organisation performance.
Master budget – It is an collection of all the lower level of the budgets which are
executed through various companies in reference to track the record of financial performance. In
the context of, financial consultancy prepare of master budget for the particular period of time.
There are defined advantage and disadvantage of this budget - Advantage – The particular budget can help to intensify of their skills to recognise of
financial problems in budget by determining all the small budgets. It can provide bird's
eye view to the business to the stakeholders in which they can evaluate financial problem
of an organisation.
 Disadvantage – Master budget is expensive for small companies and lack of specify doe
to gathering information of all the sections. This budget is difficult to mention because
high level of collective information (Renz, 2016) .
M3 Different planning tools and their application
Different types of planning tools are important for every organization to provide help to
management in reference to the decision-making process and increase the efficiency of the
company's operations. These planning tools can help to maximize profit and determine business
operations. They can help to maintain stability in the market and develop a strong financial
position. The planning tools such as zero-based budgeting, master budget and operating budget
applied by Airdri limited. The master budget can help to recognize the problem of business and
operational budget define the forecast of the cost to provide help for long term responsibilities.
Zero-based budgeting can help to analyse those expenses which are not incurred in past budgets.
In order to increase efficiency as well as profitability apply these planning tools in an impressive
manner.
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TASK 4
P5 Comparison of the way in which organisation are adapting management accounting system
Financial Problem - Financial problems are the problems which are related to the lack of
fund and cause of stress related money issues (Senftlechner and Hiebl, 2015) . These problems
create hurdles in order to perform daily operations and activities which are necessary to run the
business. An organization faces financial problems mostly at the time of recession take place in
the economy but inefficient or ineffective use of available funds also can cause the monetary
problems within the firm. There may be so many internal as well as external reasons behind the
lack of funds in an organizations. Some of them are as under:
Unforeseen Expenses: Unforeseen expenses are the sudden unexpected expenses which
are not estimated by the management of organization arise during the specific time period. These
expenses create stress for management because they are not planned and affect the budget and
revenue adversely. These expenses may be in form of new technology purchasing, legal
expenses, office expenses, new taxation policy etc. Airdri ltd also has to face these unexpected
expenses sometimes because of lack efficiency in forecasting.
Late Payment by Customers: The organization which run their business on credit basis
have to provide their products and services to the customers on credit norms. Some times
customers take more time than allotted to make their payments which may cause shortage of
funds to firm. Due to this, the cash flow plans or budgets made by the management do not
implemented on time and sometimes business has to suffer huge losses. This term take places
due to the weak implications of credit policies within company. The selected firm suffers with
this financial problem because its internal system is weak (Tucker and Lowe, 2014) .
There are so many tools and strategies which can be adopted by the respected firm in
order to find out the reasons behind problems regarding finance. Some of them are presented for
the firm:
Key Performance Indicator (KPI): KPI technique is an indicators to measure the
performance effectiveness of the firm. In this method, upper management focus on the key
objective of organization while lower management evaluate and focus on the various
departments operating within organization. The management of chosen firm can focus on
estimating the possible expenses that may occur suddenly and reasons behind these sudden
expenses.
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Benchmarking: Benchmarking is a process to set some performance measurements for
activities as well as personnels working within organization. Companies analyse the performance
and work process of competitors working in the same situations successfully and adopt their
operating methods to set their benchmarks accordingly. Airdri ltd can oblige its management to
adopt the benchmarking technique to recognize late payments from its customers.
Financial Governance: Financial governance is a framework to collect and analyse the
financial data and information in order to control and solve the financial problems. Financial
governance helps in using the financial control techniques and find out effective solutions so that
performance level can be improved and productivity can be increased (Englund and Gerdin,
2014) .
After identifying the financial problems of the firm with the help of KPI and
benchmarking techniques, Airdri limited is applying strong financial governance into its
premises. Company is ensuring that all the standards are being followed in process of preparing
accounts. Company is strictly making and following credit period and payment policies and also
making provisions for unexpected expenses.
Comparison between Airdri limited and Galway PLC:
Airdri limited Galway PLC
The company faces problem of lack of liquid
funds due to late payments from its customers
because the poor accounting system and not
making provision for sudden expenses.
Selected firm is continuously facing problem
of excessive costs or increase in
manufacturing and production costs. Due to
this company's profit margin per unit has been
decreased.
The organization solves this problem with the
help of management accounting system and
follow the guidelines and strategies according
to accounting standards.
Respected firm defeat the problem with the
help of price optimisation system which helps
in reducing the costs and opt out the optimum
price.
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M4 Management accounting can lead organisation to sustainable success by responding to
financial problems:
In today's competitive working economy, an organization needs an effective system that
can helps to solve its financial problems. Management accounting is a tool that involves different
types of tools and methods to solve various financial problems according to the situations. With
the help of KPI, benchmarking, balanced scorecard and other techniques an organization is able
to find its loop holes and weak points on time. Performance indicator helps in tracking the efforts
of the workforce as well (Smith, 2017) . With all these financial governance tools management is
able to summarise all information and optimise it in order to enhance the productivity and
control the workforce working in the organization. In order to achieve the objectives and attain
the sustainable success, an effective management accounting system plays very important role.
D3 Planning tools respond appropriately respond to solving financial problems:
Various types of planning tools and techniques provides assistance to achieve the
objectives of an organization by evaluating estimates, preparing budgets, reducing costs and
increasing revenue. These tools helps the management to plan and execute daily transactions and
operations by preparing operational budgets for various departments working in organization.
Master budget provides overall view of operational and functional structure of firm and helps in
allocation of funds in different departments fairly and zero based budget provides help in
justifying the reason behind every cost centre so that ineffective and unwanted costs can be
ignored. All the financial problems which are either created by external factors or internal factors
can be reduced with the help of these planning tools (Badolato, Donelson and Ege, 2014) .
CONCLUSION
From the above discussion it is concluded that management accounting plays significant
role in every type business because their systems and methods can help to improve efficiency
and profitability of company. There are company has been applied different types of systems
such as inventory management, cost accounting, job costing and price optimization. These are
related to specific business activities. The company prepare various types of report which can
provide detailed information top top management. As a result it can help to decision making
process and improve efficiency. There are preparing income statement with the help of
management accounting techniques which is absorption costing and marginal costing. The
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