Management Accounting: Meaning, Types, and Importance

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2............................................................................................................................................7
TASK 3 .........................................................................................................................................14
TASK 4 .........................................................................................................................................17
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Accounting, reporting and evaluation form management perspective is recognised as
management accounting. the structure of management accounting remains different to different
organisations (Bromwich and Scapens, 2016). The report is prepared to illustrate the meaning
and essential requirement of management accounting in Alpha Limited. Company manufactures
and deliver pizza to customers in the UK. The use of different type of management accounting
reports for addressing the information form accounting systems are explained in the prosed
organisational context. with the precarious use of cost management accounting techniques as
marginal and absorption costing technique profit and loss of organisation is ascertained. How
planning tools assist the budgetary control process with advantages and disadvantages elaborated
properly. At last, the concept of financial governance extracted in order to identify the financial
challenges and comparison made with practical implementation of management accounting
system in organisational context.
MAIN BODY
TASK 1
Management accounting- This is an accounting process that is related to collecting monetary and
anti monetary information from different aspects. The goal of this accounting is to produce
internal managerial report for use of managers in order to take suitable actions to achieve goals
and objectives.
Definition of MA:
According to Charted Institute of Management Accountants (CIMA), MA is the way in which
managers recognise, analyse, produce, describe the information needed to prepare and control a
corporate entity (Maas, Schaltegger and Crutzen, 2016).
Importance to integrate MAS with organisations:
This is essential for companies to align their activities and operations with various
accounting systems. It is necessary to connect the cost accounting process, for example for the

finance department, so that costs can be regulated. Inventory management system may also
direct the department of production to meet to control the total stock.
Management accounting system- The MA system can be defined as those which are linked to
each and every department of business entities. These systems play a key role for companies for
guiding in an effective manner to accomplish predetermined goals.
Difference between MA and financial accounting:.
Management accounting Financial accounting
Under this accounting both types of information
is included such as monetary and non monetary
aspects.
On the other hand, in this accounting only
financial information is included.
As an outcome, in this accounting internal
reports are prepared.
While under this, various financial statements
are produced.
This accounting does not follow any specific
accounting time period or rules.
While this is based on completely rules and
regulations which are set by IFRS.
Different types of accounting systems:
 Cost accounting system - Through regularly tracking entire financial transactions, this
accounting system is concerned with managing total spending. It is important for
companies to continue the price of each product below the standard cost. Most of the
companies face the issue of higher costing and as a result issue of lack of funds raise. In
this aspect, this accounting system plays a key role in order to track overall costs such as
direct cost, indirect cost and many more. In the aspect of Alpha limited company, they
apply this accounting system with an objective of tracking overall expenses and try to
keep these costs below the standard costs.
 Inventory management system - The quantity of various materials contained in this
accounting system is measured by methods such as LIFO, FIFO, etc. This accounting
system is necessary for departments of output to intervene on the manufacture and
purchase of new products (Messner, 2016). It is mostly used in those business entities in

which portfolio of products is too wide. As well as this accounting system contributes in
order to keep the cost of storing material in warehouses. Hence, this is essential for
companies for managing different forms of materials in an effective manner. In the above
chosen business entity Alpha limited, they apply this accounting system to track the
usage of available quantitative aspect of their raw materials.
 Job costing system- Under this accounting system, the cost of each item generated is
assessed by evaluating the cost of work involved in different practices. For those
companies producing a wide variety of products, it is important. This is used in the
companies wherein number of products are larger. Hence, this is compulsory for
companies in order to track cost of each individual produced unit. In Alpha limited
company, their accounting department makes significant use of each job cost involved in
completing tasks through this management system.
 Price optimisation system -This accounting system operates in compliance with a
purposeful method that begins with the collection of user feedback on prices. Depending
on this, firms updates their pricing and selling strategies (Hall, 2016). This is crucial for
businesses whose revenue is falling because they are revising their prices by helping
them to impact their sales. So overall, this is necessary to implement by companies in
order to set the prices at a level through which sales revenue can be increase. In the
context of above Alpha limited company, this accounting system is applied for
fluctuating prices in accordance of marketing condition.
Benefit of different types of systems:
 Importance of cost accounting system- It allows by effective governance to prevent
unnecessary expenses from services and events. The overall operating cost of the above-
mentioned Alpha limited company is controlled by this accounting system which helps
them generate higher earnings.
 Importance of inventory management system - It advantages businesses in maintaining
stock costs lower in order to reduce overall costs. This accounting is used by the above
firm to assist their suppliers produce products according to market conditions.

 Importance of job order costing system - As mentioned above, it allows to calculate the
cost of each unit. Their finance department in Alpha limited company assess the cost of
produced components by considering the cost of each job. Importance of price optimisation system -Depending on this accounting system,
consumer rates are updated and calculated by user feedback (Ax and Greve, 2017). The
above-mentioned company's growth department uses important information about the
demand for their products and then control the price.
Integration of MAS and MA reports with business process.
The integration of MAS and MA reports is too crucial for companies. It is so because
each department of companies has a link with accounting system. For instance, in Alpha limited
company their various departments such as sales department, production department etc. are
linked to accounting systems. Similar as accounting systems, MA reports are also linked to their
business process.
Presenting financial information:
Fact to which data should be secure, up-to-date and accurate- It is critical that the features
listed below are information:
 Relevant - Financial information should be meaningful in compliance with the activities
of corporations. This is because bookkeepers are unable to generate detailed reports in the
lack of it.
 Up to date - Therefore, financial data must be up-to-date as the payments are carried out
frequently by businesses.
 Accurate - Financial information is required to be bug-free so that businesses can make
the right decisions on specific aspects.
 Understandable- For all users, particularly to managers, together with budgetary data, it
should be accessible so that they can plan innovative strategies.
MA reports:
 Inventory report- The report provides data on how much inventory is being bought,
marketed and used for production during a specific time period (Christ and Burritt,
2017). Along with this information, under this report total value of stock is updated on a