Management Accounting: Principles, Systems, Techniques and Planning Tools

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
Part 1................................................................................................................................................2
Principles of Management Accounting.......................................................................................2
Role of Management Accounting and its systems.......................................................................3
Use of Techniques and Methods Used in Management Accounting...........................................4
Evaluating the integration of management accounting within the organization.........................6
Benefits of the Function to the Organization...............................................................................7
Conclusions for critical reflection of management accounting...................................................7
Part 2................................................................................................................................................7
Explaining the advantages and disadvantages of different types of planning tools used for
budgetary control.........................................................................................................................7
Comparing how organizations are adapting management accounting systems to respond to
financial problems.....................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
1

INTRODUCTION
Management accounting is the process followed to identify, measure, analyse, interpret,
and communicate financial information to the managers to achieve the goals of organization.
British Associative Foods is Britain origin MNC, headquartered in London and dealing in ma
manufacturing of food products. The current report will highlight the principles of management
accounting. The different types of management accounting systems are covered. The methods of
reporting the results of management accounting practices are explained. Using the techniques of
management that are marginal and absorption costing the income statements will be prepared.
Different planning tools of the budgetary control along with its advantages and disadvantages
will be discussed. The ways in which organization are adapting to management accounting
principles will be covered.
MAIN BODY
Part 1
Principles of Management Accounting
 Presentation of Unbiased Actual Data: It is one of the principles of management
accounting. As per this principle the information provide in management accounting
reports must be accurate & objective. This should not be subjected to anyone’s opinions
or desires.
 Accuracy of Accounts: All the accounts, reports, information & documents must be
accurate and serve the purpose of being competent for management enabling them to take
decisions that are accurate (Lebedev, 2018). Accurate decisions are must for organization
to accomplish its objectives.
 Stability and Consistency: The procedures and all policies based on which management
accounting is carried on must be stable and have consistency. It is crucial as any change
in such policies & procedures hamper the ability of management to take decisions.
 Punctuality: It is another management accounting principle. It states that it is essential to
take correct decisions and right time by the management when the related information to
all the accounts get presented in time.
 Principle of Exception: The aim of this principle is to make sure that the attention of
management draws on the issue that are important exceptionally. In case of observation
of deviation of any kind in the results that were planned and the actual ones, a report is
2

necessarily required to be prepared explaining the reason for such deviation or exception
in outcomes.
 Forecasting and Detection of Problems: Another principle of management accounting
says that it is the duty to get the management informed about the problems that exists
currently and the potentiality of problems that occur in future (Zahid and Vagif, 2020).
With this principle of management accounting along with the identification of problems
steps are initiated to address them.
 Measuring Efficiency: The skills of managers are managed on the basis of related
management activities through management accounting. There are certain techniques that
are used for this like ratio analysis.
 Maximum Use of Resources: This principle of management accounting ensures efficient
and effective utilization of organization resources. The maximum use of resources gives
maximum profit earning to the organization.
Role of Management Accounting and its systems
Cost Accounting System: Costing system or product costing system are the other names
for cost accounting system. This system provides a framework to the firms for forecasting the
cost of products it produces. It is essential for the purpose of analysing the profitability of the
firm, figuring out the value of inventory and cost control. To make the operations profitable it is
essential to have an accurate estimate of product cost. For ascertaining which products are
profitable it is prerequisite to know the accurate cost of each product. It is also essential in
knowing the amount of closing stock, finished products and work in progress at year end. The
cost accounting system are of two types mainly: job order costing and process costing.
Job Costing System: It is a method in accounting that is designed for keeping track of
individual jobs & projects. There are two types of costs that are assessed here namely indirect
and direct costs. These are bifurcated into three classifications, labour costs, material costs and
cost of overhead. Each of these bifurcates are termed into direct and indirect costs (Gonçalves
and Gaio, 2021). The revenue and costs that are related to a particular project are tracked in a
precise manner. The decision of a business regarding what is to be charges from the customer for
its offerings is the most impactful one. An organization like – with accurate job costing can make
improvements in its profitability and also effectively manage its employees.
3