Management Accounting Principles

Management Accounting
Principles

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK ONE......................................................................................................................................3
PART A...........................................................................................................................................3
1. Management accounting (MA) and its principles...................................................................3
2. Role of MA and MA system...................................................................................................3
Way Management accounting is integrated within an organization...........................................6
PART B............................................................................................................................................6
TASK TWO.....................................................................................................................................7
PART A...........................................................................................................................................7
Comparison and contrast between planning tools that are used for budgetary control in
accounting management..............................................................................................................7
PART B............................................................................................................................................9

INTRODUCTION
Management accounting is an important part of accounting with the main aim of
providing in-depth and meaningful information to the internal managerial team. It is different
from that of financial management as it considers both monetary and non-monetary aspects
while taking decision. This report provides an insight about the MA and its systems and
techniques that can be used for various purposes. The different planning tools in mA and the
usefulness of MA in responding to financial problems.
TASK ONE
PART A
1. Management accounting (MA) and its principles.
MA is basically the technique or a process which is being used for the purpose of analysing the
business operation and its performance through the way of preparing the relevant reports and
accounts for assisting the management in undertaking the decision.
Principles of MA
Designing and compiling: The business related information should be compiled and
recorded in an appropriate manner which can be easily understood by its users and meets with
the business requirement.
Management by exception: It useful while presenting the information, which means that
the budgetary control system and the costing techniques is being applied (Ameen, Ahmed and
Abd Hafez, 2018). Through this way, the pre-determined budget is compared with the actual
outcome in order to determine the deviation.
Absorption of Overhead Costs: The overhead cost pertaining to the production is
absorbed in a pre-determined basis. Therefore, the method selected should bring in the accurate
and right result.
2. Role of MA and MA system
Role of MA
Developing financial strategies: With the help of the budgets and other useful reports,
the management accountants of the organization can undertake decisions with regard to forming
strategies.

Monitoring expenses: The management of the organization can prepare different types of
budgets which can be static, flexible or the rolling out, that permits the leader or the managers in
effectively monitoring the expenses (Ghasemi and et.al., 2016).
Maintaining profitability: The management accountants can make use of various tools
which will help in ensuring the profitability by the way of break even analysis. It will help
determine the various cost incurred by the organization.
Management accounting system and its benefits
Cost accounting system
It is used by the manufacturers for the purpose of recording the various production
activities with the help of perpetual inventory system. It used for determining the cost and
profitability associated with each of such activity.
Benefits:It helps the management in measuring the efficiency in regard to the cost and time.
This also assist in reducing the expenditure which is unnecessary.
Application: This system is basically used by the manufacturing companies in keeping track of
the cost incurred in different process.
Inventory management system:
This MA system works on ensuring that the goods are moving at the right place and at
the right time (Shields and Shelleman, 2016). In simple words, it records the movement of stock
from one process to another and the timely delivery of the same to its end users.
Benefits: It works on reducing the inaccuracies which earlier caused due to human error. It also
helps in maintaining the right level of inventory which leads to reduction in wastage.
Application: This system is mainly used by the organizations which are required to maintain
huge stock of inventory.
Job costing system:
Under this system, the cost is assigned to the various activities with respect to the specific
job involved. It is useful in keeping track of the cost pertaining to each job which is important for
the business operation.
Benefits: The profitability attached to the each job can be easily determined and it also provides
with the basis in determining the cost of the other similar jobs.
Application: It is mainly useful in the construction industry or the other industry where cost is
required to be allocated to the multiple projects.