Management Accounting Techniques and Financial Statements

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
TASK 2...................................................................................................................................................3
P3. Calculation of costs and preparation of financial statements under marginal and absorption costing
method.....................................................................................................................................................3
M2. Accounting techniques to produce financial statements...................................................................6
D2. Interpretation of prepared financial statements.................................................................................6
TASK 3...................................................................................................................................................6
P4. Limitations and benefits of planning tools of budgetary control........................................................6
M3. Use of different planning tools and their application for preparing and forecasting budgets............7
TASK 4...................................................................................................................................................8
P5. Analysis of ways in which management accounting methods help organisation to respond to
financial problems that will have sustainable success..............................................................................8
M4. MAS to solve financial issue............................................................................................................9
D3. Importance of financial plans for planning and managing monetary sources which can contribute in
overcoming problems regards to finance...............................................................................................10
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................11

INTRODUCTION
The term MA is defined as a way of making internal reports by help of financial and non
financial information. There are a wide range of techniques such as absorption, marginal in order
to make financial statements (Arroyo, 2012). The report covers detailed information related to
various accounting techniques, planning tools and use of management accounting systems in
order to solve monetary issues. The company selected for this report is Prime furniture limited.
MAIN BODY
TASK 2
P3. Calculation of costs and preparation of financial statements under marginal and absorption
costing method.
Micro economic techniques:
Cost- This can be defined as total amount of expenses that occur in order to complete different
types of operations and activities. There are different types of costs such as fixed cost, variable
cost, direct cost, indirect cost and many more.
Cost volume analysis- The cost-benefit analysis is a strategic approach to the model of
weaknesses and strengths of choices used for determining the best method to gain advantages
while maintaining costs, also termed the cost / benefit study or benefit cost analysis.
Cost variance- This can be defined as a process of calculating difference between actual cost and
estimated cost. It is presented in adverse and favorable aspects.
There are a vital number of approaches such as absorption and marginal methods in the field
of planning financial reports. They are used to preparation of financial statements for companies.
Herein, below description of these costing techniques is mentioned in such manner:
 Absorption costing method- This is a form of technique of costing that defines and
widely allocates the expense of various activities and operations. The expense of the item
is considered as fixed and non-fixed costs (Chenhall and Moers, 2015).

 Marginal costing method- It can be understood as a way of identifying the expenses
involved with different activities. The fixed costs are considered time cost and unit costs
are considered variable costs.
Product costing:
Fixed cost- It is a type of cost that cannot be changed or not affected due to change in production
volume.
Variable cost- It is a type of cost that can be changed or affected due to change in production
volume.
Standard costing- Standard costing combines the expected expense in the accounting records
with the actual cost. Thereafter, the variations between the planned and the actual costs are
reported as indicated
Activity based costing- Activity costing is a costing method, which defines operational tasks and
calculates costs for each operation according to the real use of each product and service. The
approach allocates more direct costs than traditional costs to indirect costs.
Role of costing in setting prices- Costing plays a key role for setting prices because on the basis
of it companies set prices. This is so because if cost is higher than expectation than companies
set price higher, vice versa.
Cost of inventory:
Inventory cost- Inventory costs are the expenses of acquisition, transportation and better
management of cost. There are different types of inventory cost which are as follows:
 Ordering cost
 Carrying cost
 Purchasing cost
 Hiring cost
Valuation methods: