Management Accounting and its Role in Business Entities

MANAGEMENT
ACCOUNTING
Contents

INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2............................................................................................................................................8
TASK 3..........................................................................................................................................16
TASK 4..........................................................................................................................................18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21

INTRODUCTION
Management accounting is an accounting procedure that starts from collection of
monetary & non monetary data and ends up with preparation of internal reports (Liff and
Wahlstrom, 2018). In this accounting different types of systems are included and each of them
has integration with departments. The main objective of this project report is to make
understanding about concept of management accounting and its role within business entities. For
better understanding of various tasks of the project report a company has been chosen that is
continental clothing limited, headquartered in London, United Kingdom. The company operates
in process of manufacturing different range of cloths.
The project report covers about role of management accounting for business entities as
well as various types of accounting systems. In the further part of project report, financial
statements are prepared as per monetary data on assumption basis. In addition, various kinds of
budgets and role of management accounting system is covered in order to sort out issue of
monetary aspects.
MAIN BODY
TASK 1
Management accounting- The word accounting management (MA) is a method of accounting
concerned with the process of collecting business entities' monetary and anti-monetary data in
order to generate internal control documents (Fleischman and Parker, 2017).
Definition of MA:
According of IMA, “MA is a profession which consists partnering in better decision making,
planning and performance management systems in order to control management in the
formulation of an organisation's strategy”.
Management accounting system: The term management accounting systems can be defined as
those systems which are linked with process of various kinds of activities of monetary and non
monetary transactions. There are different types of accounting systems such as cost accounting
systems, job costing system etc.

Origin, role and principle of MA:
Origin- The source of MA can be traced back to the last 300 years when it was being used
throughout the industrialisation (Kerr, Rouse and de Villiers, 2015). Such accounting has grown
with the analysis of financial accounting. Nonetheless, this accounting is not necessary for
corporations in the present time frame.
Role of management accounting- MA plays a significant role in the context of business entities
for different departments. Specially, for managerial aspects this accounting is too crucial. Herein,
below some key role of MA are as follows:
 Helps in effective planning- When making effective preparation for various types of
existing resources, this accounting plays a key role. It becomes feasible as executives can
examine future-oriented behaviours that result when better planning based on the
information gathered. Such as in the aspect of above continental clothing limited, their
managers make effective planning for various kinds of activities and operations.
 Helps in better controlling- Furthermore, MA is helpful for companies to improve control
over different types of activities and operations. This is because executives are able to
concentrate on those tasks which lead to lower income or higher costs through the use of
key information from performance statements. Similar as in the above business entity,
their managers use this accounting system in order to control various kinds of aspects.
 Helps in better decision making- As well as the MA plays a key role for companies in
order to take key decisions of various kinds of aspects (Cooper, R., 2017). The manager
of above business entity, continental clothing limited company utilise key information
from this accounting that helps in order to take corrective steps on right time.
So these are main role of management accounting for each kinds of business entity. As well as in
above continental clothing limited company, this accounting is helping them in effective manner.
Principles of MA:
 Influence- It is a kind of MA principle that describes how interaction gives insight to
corporations. In general, the MA is helpful for the interaction of data on monetary and
anti-monetary elements.
 Relevance- According to this rule, the information given by MA must be relevant to the
activities of corporations.

 Value- The effect on value is projected. Management accounting ties the operations of
the enterprise to its core business structure and involves an extensive awareness of the
wider macroeconomic environment (Morillo, Díaz, Camacho and Montesinos, 2015).
 Credibility- Stewardship is a form of integrity. Responsibility and transparency make the
judgment-making process much more transparent. Controlling near-term corporate
interests against long-term shareholder value increases confidence and efficiency.
Difference between management accounting and Financial accounting:
Basis of
difference
Management accounting Financial accounting
Compulsory In order to implement, this accounting
is not necessary for corporations.
Although this accounting is
mandatory for corporations to apply
to the management of trading
activities.
Purpose The primary aim of this accounting is
to enable internal participants, such as
executives, to make better decisions.
This is essential for internally and
externally shareholders to obtain
information on the financial
situation.
Preparation of
reports
In this accounting internal reports are
prepared as accordance to format of
companies own suitability.
While in this, financial results are
compiled in compliance with IFRS
guidelines.
Different types of MAS:
 Cost accounting system- This is considered to be the type of management accounting
system which relates to practices for forecasting a wide range of activities as well as
operations regards to monetary aspects. It is essential for business entities in order to
keep cost under control of estimation. Such as in the aspect of above company, this
accounting is being applied in order to maintain cost of production below estimated cost.
 Inventory management system- Inventory management system refers to the practice of
buying, maintaining and using the stock of the organization. This included the handling
of raw. In terms of developing successful decisions relating to production, this is