Understanding of Management Accounting Systems

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Section (A) Understanding of management accounting systems..........................................1
Section(B) Methods used for management accounting reporting..........................................4
TASK 2............................................................................................................................................6
Calculation of income statement by absorption and marginal costing method......................6
TASK 3............................................................................................................................................7
Advantages and disadvantages of different planning tools....................................................7
TASK 4............................................................................................................................................9
Comparison of organisations to respond the financial issues by management accounting
systems...................................................................................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is related with the providing financial as well as non-financial
information to the management to make easy for them to frame an effective plans and decisions
in order to achieve its company's desired goals and objectives. For this, the accounting manager
plays an important role in maintaining financial statements which includes profit and loss a/c,
Balance sheet, Cash flow statement etc. which further help in interpreting data to prepare an
effective plans. The present assignment report is based on Excite Entertainment Limited which is
engaged in promoting concerts, festivals at different at different locations of UK. The project
includes different management accounting and reporting systems, different costing methods,
budgetary planning tool, financial problem resolving tools etc. which assist company in
maintaining strong financial position in competitive market.
TASK 1
Section (A) Understanding of management accounting systems.
Difference between management accounting and financial accounting system.
Management accounting system: It is defined as the process through which
organisations analyse, classify, and review the financial and non financial data or information
for managing the organisational processes and functions.
Financial accounting system: It is a type of accounting system which is used by the
organisations for tracking and monitoring their financial information in order to develop proper
and appropriate financial statements for both of the internal and external parties.
Comparison between management accounting and financial accounting system
Basis Management accounting system Financial accounting system
Legal
requirement
This accounting system is not essential
for the companies to prepare as there
are not any legal requirement for such
type of accounting system.
This is the legal requirement for the
organisations due to which it is highly
essential for the firms to prepare their
financial reports.
Format of
presentation
The format of the presentation of the
reports is not consistent.
Whereas this type of accounting
system has a structure which should
be followed by the firms in order to
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present their financial information.
Types of data
used
This type of accounting system uses
both financial and non financial
information.
Whereas such type of accounting
system uses only the financial data for
preparing their various financial
statements.
Area of
coverage
within the
organisation
It covers the area of internal
management of the companies.
Whereas this type of accounting
system covers both external and
internal management of the
organisations.
(b) Cost accounting system: It is a type of accounting system in which the organisations
determine the estimated cost which can occur in the development of products and services
provided by the company (Bobryshev and et. al., 2015). It includes various type of cost such as
direct cost, standard cost, process cost etc. Such type of system is beneficial for the Excite
entertainment limited company in determining the amount of funds which can be used for
promotions of different type of events organised by the company. Some of these cost
accountingFolder system are discussed below:
Direct cost: These type of costs occurs directly in the various processes of the
organisation such as product, process, department etc.
Standard costing: It is the type of costing system in which the organisations analyses the
variation between the obtained and estimated costs. BY using this kind of cost system,
organisations can evaluate the variation between the obtained and standard cost so that the
difference can be determined. However organisations get more benefits when the actual cost is
less then the standard cost.
(c) Inventory management system: Inventory management system is a kind of accounting
system which is used by the organisations for determining their current level of inventory levels,
sales, orders, deliveries etc. The Excite entertainment limited company can use such type of
accounting system for managing their various type of assets in order to determine the needs for
purchasing new inventory and machinery (Bromwich and Scapens, 2016). For understanding this
concept, organisations can use the LIFO and FIFO methods. LIFO(last in first out) method states
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