Management Accounting and Systems

This presentation covers information about management accounting system, different types of reporting that help in dealing with various financial problems. Various techniques of management accounting also defined in this presentation.

MANAGEMENT ACCOUNTING
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Covered content
• Introduction
• Management accounting and systems
• Difference between management and financial accounting
• Management accounting reports
• Management accounting techniques
• Conclusion
• References

Introduction
This presentation covers information about management
accounting system, different types of reporting that help in
dealing with various financial problems. Various techniques
of management accounting also defined in this presentation.

Management accounting and
Systems
Managerial accounting can be defined as the tools and
techniques that prepare and present available data and
information in such a professional way. It may help the
management in order to make its planning and decisions in
an effective manner so that efficiency and performance can
be attempt at its fullest.

At the beginning of nineteenth century, big private
organizations felt the necessity of a procedure that can
effectively measure and control over internal production
centres in order to survive in economy. Managerial
accounting plays a crucial role in managing and
operating internal activities of an organization.
Origin, Role and Principles of
Management Accounting

Difference between Financial and
Managerial Accounting:
Aspects Financial Accounting Management Accounting
User Financial accounts are prepared to
provide information to external
stakeholders.
Managerial accounts are creates to help
the internal users, specially management.
Format An specific formate provides by the
governance is followed in preparation of
these statements.
These statements are not mandatory to
be prepared hence haven't any particular
format.
Data This approach only covers funds and
money related data and information.
Monetary as well as non-monetary
material is included in this accounting
process.

Management Accounting System
Management accounting system is a process of collecting,
classifying, recording, summarising and presenting financial
and non-financial meaningful content in order to help the
administration in determining, planning and organising its
policies and procedures.

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• Inventory management system
• Cost accounting system
• Job costing system
• Price optimising system

Inventory Management System
It is the most essential system for an retailer company
as inventory is the main source of revenue in such
firms. This system helps to keep a record of products,
company holds during a particular time period,
estimate required raw material, materials tracking,
automated reordering etc.

Cost Accounting System
It has been found that in order to effectively producing profit
from business activities, it is required to know the cost
allocated with the specific activity. It includes events
founded on accepting, recording, analysing, grouping and
summarizing costs related with valuable goods and services.

Job costing system
Job costing system is evolve to calculate the cost of
particular task or unit. This system is beneficial to
determine the expenditures related with specific job
involved in production activity and other division.

Price Optimisation System
Price optimisation system is a mathematical tool that
aids in analysing the perception and behaviour of
customers regarding the prices of various products in
different markets.

Characteristics of good Management
accounting System
Accuracy: The accounting system should include all the
substantial content and factors so that it can help in making
effectual decision.
Reliability: The information rendered by the system must be
trustworthy and conformable.
Up-to-date: Managerial accounting system must comply with
updates in policies and information on time to time so that
effective decisions may be taken on time.

Management accounting reports
Management accounting is used to help the management
in examining and performing day to day functions in
organization and planning & making decisions for
upcoming period of time. It is important for the
management accounting system to be effective and
understandable so that these planning and procedures may
work impressively.

Inventory Management Report
This report is very important for company as it helps to
maintain inventory hold during a year. It covers essential
detail from purchase raw material to finished products ready
for sales. In this context of client company managers are
required to maintain a proper record of available raw material,
goods that are already in transit and actual goods in
warehouses.

Accounts receivable aging report
Receivables are the expected payments due from the customers or
retailers. Accounts receivable ageing report is a list of unpaid
customers of respective firm that provides necessary information
about sum of amount due from the customers, over due receivables'
dates, interest on due amount, contact details of creditors and other
important details regarding payments from the customers of selected
organization.

Performance report
It is a detailed statement that includes performance based
appraisals to staff so that they may get motivated and
work productively. A company can grow by rewarding
over achievers while lading off under performers.

Management accounting techniques
Cost is a monetary value which a company like Lion Hudson
Plc spends in order to produce something valuable such as
inventory. Cost analysis refers to measure of cost which is
incurred in different production process. There are different
cost which are incurred. Some of these are as follows:

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Marginal costing: This technique is used by the enterprises in order to find
out the break even point so that required stock of inventory and desired
profit can be derived.
Fixed costs: These are costs which are remain same irrespective of its volume
of production.
Variable costs: These are costs which are always relevant in all alternative
course of action and it increases in total with increase in volume of
production.

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Cost allocation: It is a process in which cost is identified and
allotted the cost to cost objects. For example, a product, a sales
region etc.
Normal costing: It is a method of costing that is used in cost
derivation. It is consist of actual cost of material, actual cost of
direct labour and absorbed overhead based on recovery rate.

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Standard costing: It is another technique of cost
accounting in which management compares the actual
cost which standard cost figures to identify the
weaknesses in production process.
Activity based costing: It is another method that helps
the Lion Hudson Plc in identifying the different
activities which are responsible for incurring the costs..

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Inventory cost: This cost is associated with the
inventory of the company such as purchase cost
inventory storage cost etc.
Overhead cost: It is a cost which is incurred
indirectly in production process i.e. can not be
identified in a specific product.

Marginal and Absorption costing

Inventory valuation

Weighted average inventory method

Conclusion
It is concluded that management accounting helps in
consolidating the valuable information to management and
departments in terms of making strategic plans and
strategies for better management and control.

References
Abbasi, S., Zamani, M. and Valmohammadi, C., 2014. The
effects of ERP systems implementation on management
accounting in Iranian organizations. Education, Business
and Society: Contemporary Middle Eastern Issues. 7(4).
pp.245-256.
Cassell, C. A., Myers, L. A. and Seidel, T. A., 2015.
Disclosure transparency about activity in valuation
allowance and reserve accounts and accruals-based earnings
management. Accounting, Organizations and Society. 46.
pp.23-38.

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