Management Accounting Principles

This presentation provides an overview of management accounting principles and their role in decision-making processes. It discusses different types of management accounting systems and reports used in organizations. The presentation also includes calculations for preparing financial statements under variable costing and absorption costing. References are provided for further reading.

Title
Management
Accounting
Principles

Table of content
– INTRODUCTION
– Calculation for preparing financial statement (Part A)
– Income statement under variable costing
– Income statement under absorption costing
– Principles of management accounting
– Role of MA and MAS
– Types of MAS and their role
– Management accounting reports
– Method employed in preparation of income statement
– Explaining how MA is integrated within an organisation
– Discussion of benefits of key functions to enterprise
– Conclusion
– References

INTRODUCTION
Management Accounting described as accounting
method/mechanism which primarily focuses towards aligning all process of
gathering all key financial information which can be applied in decision-
making tasks. MA is adopted by business
enterprises for systematically reporting relevant and effective reports to top-
managing personnel with aim to support as well as increase the
reliability and accuracy of decision making.

Calculation for preparing financial
statement (Part A)
Overview of financial data:
Particulars Amount
Total fixed indirect production cost 84,000.00
Direct labor costs per unit 11.00
Direct material costs per unit 17.00
Variable expenses which vary in direct ratio to production per unit 7.00
Sale 3,000
Selling Price per unit 92.00
Production rate 3,600
Selling and Distribution 5,700.00
Administrative overheads 10,500.00
Interest expense 1,200.00

Income statement under variable
costing
ITEM Number of units £ P.U. AMOUNT £ AMOUNT £
SALES 3,000 92.00 276,000.00
MARGINAL COST OF SALES .. .. .. ..
OPENING STOCK 0 0.00
ADD: VARIABLE PRODUCTION COST: .. .. ..
Direct Material 3,600 17.00 61,200.00
Direct Labor 3,600 11.00 39,600.00
Variable Expenses 3,600 7.00 25,200.00
Total Variable Cost A 126,000.00
Less: Closing stock at end of year 1. [Opening
stock units + unit produced - units sold] find £
value. B
600 35.00 21,000.00
Marginal Cost of SALES A-B 105,000.00
Fixed indirect production cost 84,000.00
Gross Profit: sales - MCOS -FIXED
PRODUCTION COST 87,000.00
Selling and Distribution Overheads 5,700.00
Admin Overheads 10,500.00
Profit Before Interest & Tax (PBIT) 70,800.00
Interest Expenses 1,200.00
Probit Before Tax [PBIT-interest] 69,600.00
Tax @19% 13,224.00
Net Profit: profit before tax - tax 56,376.00

Income statement under absorption
costing
ITEM Number of units £ P.U. AMOUNT £ AMOUNT £
SALES 3,000 92.00 276,000.00
MARGINAL COST OF SALES .. .. .. ..
OPENING STOCK 0 0.00
ADD: VARIABLE PRODUCTION COST: .. .. ..
Direct Material 3,600 17.00 61,200.00
Direct Labor 3,600 11.00 39,600.00
Variable Expenses 3,600 7.00 25,200.00
Fixed indirect production cost 3,600 23.33 84,000.00
Total Production Cost A 210,000.00
Less: Closing stock at end of year 1. [Opening
stock units+units produced - units sold] find £
value. B
600 58.33 35,000.00
Absorption Cost of SALES A-B 175,000.00
Gross Profit: sales – COGS 101,000.00
Selling and Distribution Overheads 5,700.00
Admin Overheads 10,500.00
Profit Before Interest & Tax (PBIT) 84,800.00
Interest Expenses 1,200.00
Probit Before Tax [PBIT-interest] 83,600.00
Tax @19% 15,884.00
Net Profit: profit before tax - tax 67,716.00

Principles of management
accounting
MA concept proposes certain principles which acts as guiding framework for
adaption of managerial accounting and its systems. Here following is a
discussion on MA-principles in context of net plc, as follows:
– Influence
– Relevance
– Value
– Credibility

Role of MA and MAS
On most considerable role of management accounting within the context of
corporate business entity is supporting decision-making processes. This is
the main factor which makes it crucial for management. This as a whole
framework offers most relevant and credible information to management
personnel. It proposes certain systems which covers different major aspects
of entire business entity. These systems also play supportive and directive
role in adaption of whole MA mechanism within an enterprise.

Types of MAS and their role
Here following is comprehensive discussion upon role of different MA
systems in context of net Plc:
– Cost accounting system:
– Inventory management System:
– Price optimization system:
– Job costing system:

Management accounting reports
Beside all these systems there are also certain reports which are used within
MA framework to report key information to top-managing personnel. Here
following are several reports which are used by Next Plc, discussed below:
– Performance report
– Inventory report
– Cost Accounting Report

Method employed in preparation of
income statement
– Marginal Costing: Costs are categorized as per their behaviour primarily into
two categories, respectively fixed costs versus variable costs.
– Absorption Costing: This another major critical approach which emphasise on
assessing the overall production costs. Under it, fixed as-well-as variable costs
are cumulatively regarded as absorption costs to compute net profit sum.

Explaining how MA is integrated
within an organisation
Big corporations like Next Plc has multiple processes and each such
process has multiple tasks assigned to different personnel. Thus
management and tracking of all the processes and tasks is difficult task
therefore it is necessary for them to integrate all MA systems with
organisational processes. Such integration allow management personnel to
keep tack of each process and organise procedures in an effective manner.

Discussion of benefits of key
functions to enterprise:
All the functions of management accounting are embedded in its different systems as these
systems combines different specific functions as per objective of management accounting. In
this regard following are key benefits of different functions embedded in MA-systems in
relation to Next Plc, are as follows:
– Cost accounting system
– Inventory management System:
– Price optimization system
– Job costing system:

CONCLUSION
From above study it has been articulated that managerial
accounting is quite crucial for corporate business enterprise like
Next Plc to manage their business. It covers significant
techniques, systems, reporting methods and other approaches to
support business operations specially decision-making processes.

REFERENCES
Hariyati, H., Tjahjadi, B. and Soewarno, N., 2019. The mediating effect of
intellectual capital, management accounting information systems, internal process
performance, and customer performance. International Journal of Productivity and
Performance Management.
Tan, H.C., 2019. Using a structured collaborative learning approach in a case-based
management accounting course. Journal of Accounting Education, 49, p.100638.
Fleischman, R. and McLean, T., 2020. Management accounting: theory and
practice. Routledge.