Management Accounting: Importance, Systems, and Reporting Methods

MANAGEMENT
ACCOUNTING

INTRODUCTION
Management accounting (MA) may be elaborated as a form of accounting that is
associated to process of identifying, modifying and analysing quantitative & qualitative
information. The objective of this accounting is to help management department of corporations
by providing internal business reports(Quattrone, 2016). Main objective of this accounting is to
enable corporations to take corrective actions for better internal management. Herein, it is
essential to know that this accounting is useful for internal stakeholders including managers,
employees etc. The project report is based on detailed analysis of this accounting and its
importance for accountants and managers. In order to make better understanding of this
accounting a company has been chosen that is 'Warburtons the bakers'. This company was firstly
opened as grocery shop in year 1870 and in year 1876, owner started business of baking bread.
In the current time period, this company is one of the biggest family owned bakery business in
the United Kingdom. There are almost 4500 employees who work in different bakeries in the UK
and across the UK.
The project report is categorized into different activities and each activity consists various
information. Such as first activity includes information about MA, its objectives and reporting
methods. While second activity consists information regards to calculations about income
statements, variances as per the given data. The third activity covers information about various
planning tools of budgetary control and in the last activity implementation of MAS is analysed in
order to solve financial issues.
MAIN BODY
ACTIVITY 1.
1.0 Introduction to MA.
MA- It is an accounting that is related to procedure of making arrangement of financial
and non-financial data for preparing internal reports. Main objective of this accounting is to
contribute in process of internally judgement-making by providing needed data about company's
transactions (Renz, 2016). The scope of MA is not limited to any particular aspect as it is linked

to various functions. Such as it helps in budgeting, forecasting, stock management and many
more.
1.1 Comparison between MA and financial accounting.
Basis Management accounting Financial accounting
Information
included
In this accounting, financial and non-
financial information is required.
While under it only financial
information is required.
Presentation of
outcome
Prepared internal reports under this
accounting are shown to internal
stakeholders.
On the other hand, in this accounting
prepared financial statements are
shown to both stakeholders.
Importance This accounting is useful for better
decision-making of internal aspects.
It contributes to stakeholders in order
to know about actual financial
condition.
1.2 Introduction to management accounting system (MAS).
The MAS are those accounting systems which manages various functions of business
entities by providing proper guidelines to manage (Ji, 2017). These accounting systems
contribute effectively in order to better management.
1.3 MAS:
(a) Cost accounting system- This is a process of forecasting expenses and cost in order to
complete different functions & activities. This accounting system has different types of features
such as recording of revenues and expenses occurred in process of manufacturing, offers
statistical data for producing different budget (Tucker and Schaltegger, 2016). Basically, it’s
objective is to provide needed financial data about estimated expenditures to executives which
can help them in producing competitive policies and plans. For instance in the 'Warburtons the
bakers’ company, it is implemented by financial executives so that they can compare actual and
estimate costs.

(b) Inventory management system- It is integrated with measurement of quantity of stock on
daily basis so that usage of stock in manufacturing process can be calculated. It has some
features such as it helps in setting a range on how much quantity of a particular item will be
needed in warehouses, setting up automatic restock of products. The key objective of this
accounting is to help production managers in better management of inventories by providing
essential information regards to level of units of raw material at the end of month or accounting
period. In this accounting system different techniques are applied like LIFO, FIFO etc. Like in
the above 'Warburtons the bakers' company, they implement it, in the process of manufacturing
of bakery products. By help of this, they become able to efficient utilisation of stored raw
materials.
(c) Job costing system- It is a process of compiling information regards to cost associated to a
particular manufacture and service job (Kumarasiri and Jubb, 2016). Due to this accounting
system, it becomes easier for managers to assess cost each activity separately along with cost of
number of people allocated in process of completing that activity. There are some key features of
this accounting system like identification of each job clearly, all types of costs are assigned
separately. The objective of this accounting system is to help in better planning, control over
expenses etc. For instance, in the above company, this system is compulsory to them in order to
compute cost of each job that occurs in completing any activity.
(d) Price optimisation system- This is a process of setting suitable prices of product and service.
In order to set prices, under this a detailed analysis of customers' demand for products, market
condition etc. is done. The key feature of this accounting are as like collection of data of
customers' perception, setting price as per the demand. This is useful for determining prices of
products and services in according of demand of customers. Like in the above company, they
apply it, to set prices of their product and service as per the demand in market.
1.4 Benefits of MAS.
MAS Benefits
Cost accounting system The application of this system is to predicting futuristic

expenditures. In the 'Warburtons the bakers' company, this
accounting system is contributing them in keeping cost of
operations below the estimation.
Inventory management system It is being applied in order to measuring quantitative aspect of
stored materials in warehouses. In the 'Warburtons the bakers'
company, their manufacture department utilise key information
from inventory sheet and take suitable action.
Job cost system The application of this system is to calculating cost of job of
each activity involved in completing any task. Such as in the
above company, it is helping them in order to provide essential
information to finance department about cost of each job
allocated to various activities.
Price optimisation system As above described, this is aligned to procedure of setting
prices of product and service as per the customer demand. In
the 'Warburtons the bakers' company, they implement it for
setting up prices of their bakery products that satisfy the need
of customers and company.
1.5 Application and integration of management accounting systems and reporting methods in the
in business processes of Warburtons.
The success of corporations depend on the way in which they manage operations of
different departments. For this purpose MAS and reporting helps a lot. It is so because
application of MAS is integrated with business process (Collis and Hussey, 2017). Such as in the
above 'Warburtons the bakers' company, their operational process are integrated with both MA
reports and MAS. For example their finance department is integrated with cost accounting
system as well as production department with stock management system. This integration help to
companies to achieve targets in less time and effective manner.