Management Accounting: Principles, Role, Calculations, and Integration within the Organization

Management Accounting

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Principles of management accounting........................................................................................3
Role of management accounting and management accounting system......................................4
Calculations for an income statement using Marginal and Absorption costing..........................7
Evaluating how management accounting is integrated within the organization.........................9
CONCLUSION................................................................................................................................9
TASK 2..........................................................................................................................................11
Different types of Planning tools and its advantages and disadvantages..................................11
Effectiveness of management accounting in dealing with financial problems.........................13
CONCLUSION .............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is the systematic process which is maintained by the company in
order to prepare reports about business transactions that help them to make strategic decisions.
The present study will provide detailed information about medium-sized organization, John
Good shipping, logistics firm in UK. The company allows their customers to interact directly
with its business system as they have invested in the upgraded shipping technology. In addition
to that, the report will provide information about principles of management account and its role.
Along with that, the study will calculate income statement using variable costing to support
business operations and its progress. Furthermore, the study will give information about benefits
of the function to the company and comparison analysis with the help of benchmarking and key
performance indicators to prevent financial problems. At last, the study will provide advantage
and disadvantages of various planning tools such as zero base budgeting and others.
TASK 1
Principles of management accounting
Management accounting plays a vital role in running business smoothly because it helps
managers of the company to track expenditures and income, provide detailed information about
business transaction so that they can make strategic decisions about business. Proper
management accounting is necessary to provide information to investors about business
transactions so that they can make decisions about financial transactions and investment
decisions.
The company used this method to find out the financial position so that managers and top
management team can make decisions on the basis of relevant data (Maheshwari, Maheshwari
and Maheshwari, 2021). The system of management accounting can provide different methods
and techniques to control the costs and budgets. The main objective and goal of the management
accounting is to avoid errors and mistakes which can be harmful for the company's performance.
1. Designing and compiling.
The principle of management accounting says that it is necessary for company to
maintain accounting reports, business transaction and other related information. It should be
designed in a proper way to meet organizational goals and deal with business issues. The

management accounting system and approaches should be compiled very systematically with the
help of relevant data based on the previous information.
2. Control at source Accounting.
This system is helpful to control costs of products and services which are incurred during
the business transactions (Principles of management accounting, 2021). For example- detailed
information about materials, power, repairs and maintenance and others.
3. Accounting for inflation.
The principles of management accounting says that it is necessary to maintain capital
which is contributed by the owner of the company concern in terms of real money through the
revaluation accounting method (Weetman, 2019). So, the firm must take rate of inflation into
consideration in order to judge the progress of the business.
4. Management by Exception
When the manager of company present important information to top-level management
team, they can easily find out the deviations. In other words, budgetary control in the firm and
standard costing method are followed in the system. Therefore, in this way the actual
performance of the company is compared with the previous data. Also, if the things are going
wrong, the unfavourable deviations are being informed by the team to managers so that more
action can be taken if necessary.
Role of management accounting and management accounting system
The major role of management accounting is to keep record about business transactions
so that managers can make budgeting decisions, planning about business and other important
decisions such as investment, risk management and cost control (Abdusalomova, 2019). It will
help the management of the company to perform all its business functions such as organizing,
staffing, controlling and directing. The managers of john good shipping make important
decisions, with the help of management system such as recording of business transactions,
planning for future goals and risk management. For example- it will provide information about
relevant cost analysis and expenses so that managers can advice beneficial suggestions for future
business activities to their employees.
Different types of management accounting system
Cost accounting system- This is the method used by company in order to estimate the
product cost for profitability analysis. By adopting this framework the manager of the company