Management Accounting: Principles, Role, Cost Analysis, and Planning Tools

Management Accounting

TABLE OF CONTENTS
Introduction .....................................................................................................................................3
PART 1............................................................................................................................................3
1.Principles of management accounting.....................................................................................3
2.The role of management accounting and management accounting systems............................4
3 Calculate costs using appropriate techniques of cost analysis for formulating an income
statement using marginal and absorption costs...........................................................................6
4. Evaluating how management accounting is integrated within the organization.....................9
CONCLUSION................................................................................................................................9
PART 2..........................................................................................................................................10
1.Explaining the use of planning tools used in management accounting ................................10
2.Comparing different ways in which organizations could use management accounting to
respond to financial problems...................................................................................................12
3. Recommendations.................................................................................................................14
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is the systematic process in which company prepare reports
about business transactions that help them to make strategic decisions. The present report will
provide detailed information about medium-sized organization smith brothers deals electrical
engineering contractor and providing services in high voltage projects. In addition to that, the
study will calculate income statement using variable costings in order to support business
success. The present report will provide principle of management accounting. Further the case
study will give information about role of management accounting system and benefits of the
function to the company.
PART 1
1.Principles of management accounting.
Management accounting is the method used by company in order to find financial
information so that managers and top-level management can make decisions on the basis of
relevant data. The detailed information provide highlights about company's wealth and financial
position of the firm. Management accounting done by company should be ensured proper
utilization of available resources effectively (Management accounting and its importance, 2021).
The system of management accounting can provide different methods and approaches to control
the costs. The main objective of the management accounting is to avoid errors, mistakes and
minimize losses in order to make profit, so it will ultimately increase productivity.
Designing and compiling
Accounting reports, transaction and other related information should be designed in
proper way to meet organizational goals and deal with business issues. The management
accounting system should be compiled systematically with the help of relevant information based
on previous data.
Control at source Accounting
Management accounting helps to control costs which are incurred during the business
operations (Mahmoudian and et.al., 2021). The detailed information about raw materials, repairs
and maintenance etc. are provided in the form of qualitative and quantitative information.
Accounting for inflation

It is important for management team of the company to assess the capital value
contributed by the owners of the firm. Therefore, management accounting system keep track on
rate of inflation to judge the real value of the money. The rate of inflation is taken into
consideration in order to evaluate the business performance and financial health of the company.
Utilization of resources
The business available resources should be effectively used in order to maintain cost,
expenses and other activities. The management accounting system should be ensure about that
the firm utilize its available resources.
Forward looking approach
The management accounting system can guess the problems through different method in
order to provide future looking approach.
2.The role of management accounting and management accounting systems
The major role of management accounting is to conduct a relevant information which is
based on cost analysis, expenses done by the company, profits made by the firm and give
recommendations for future business activities (Gunarathne, Lee and Hitigala Kaluarachchilage,
2021). The managers of the smith brothers do their duties such as recording of transaction, risk
management, planning for future goals, managing organization investments in order to make
decisions.
Management accounting system plays a vital role in forecasting future related business
needs and for strategic planning with the help of market research. The management team of
smith brother can analyse and maintain reports such as liquidity, cash flow statements and other
transactions.
Different types of management accounting systems.
Cost accounting systems- It is the system used to estimate the products costs for
profitability analysis, inventory valuation and cost control. The major role of cost accounting
system is to lower the cost of the business transaction in order to make profit margins. By
controlling relevant items in the firm, the managers can improve profit maximization
(Maheshwari, Maheshwari and Maheshwari, 2021). Smith brothers management team uses this
system to make good costing system by ensuring proper accounting for overheads, labour and
raw materials.