Management Accounting: Essential Requirements, Methods, and Techniques

Management
Accounting

Table of Contents
Introduction ................................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1) Explain management accounting and also provide the essential requirements of different
management accoutring system..............................................................................................................3
P2) Methods of management accounting reporting................................................................................5
M1) Discuss advantage of management accounting system and also their application in organization
context.....................................................................................................................................................6
TASK 2..........................................................................................................................................................7
P3) Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.......................................................................................................7
Cost Card Using Absorption Costing........................................................................................................7
Cost Card Using Marginal Costing............................................................................................................8
Profit statements using Absorption costing (10000 units).......................................................................8
Profit statements using Marginal costing (10000 units)..........................................................................8
Difference between the marginal and absorption costing is explained below:.......................................9
Prepare a flexed budget for the actual activity for the year....................................................................9
M2) Apply different techniques of management accounting & also formulate suitable financial
documents ............................................................................................................................................10
TASK 3........................................................................................................................................................10
P4) Discuss benefits and drawbacks of different planning tools that are used for budgetary control..10
M3) Analyse different planning tools with their application in preparation of budgets........................11
TASK 4 .......................................................................................................................................................12
P5) Discuss comparison how organisations are applying management accounting system in order to
respond financial complexities..............................................................................................................12
M4) critically analyse how responding towards the financial problems and management accounting
can lead organisations towards sustainable success.............................................................................15
Conclusion................................................................................................................................................16
References.................................................................................................................................................17
Books & Journals....................................................................................................................................17

Introduction
Management accounting is an important function of business that assists each and every
organization in order to analyze their financial conditions in an efficient manner. It is process of
identifying, classifying, measuring as well as communicating the financial outcomes to
stakeholders. The information is further circulated to the relevant parties of business so that they
can take suitable business related decisions in an efficient manner (Nsor-Ambala, 2020). In the
given scenario, a website called Girlboss has been started by Amoruso, The business is growing
tremendously hence the company is likely to evaluate the financial conditions for ensuring future
growth. The main aim of the report is to analyze different aspects of management accounting.
Here, the financial position of the business entity will analyze through different financial tools.
The report will cover the general concept of management accounting with the requirement of
different types of management accounting system. Further, it will cover methods used for
reporting of management accounting. Additionally, appropriate cost techniques to prepare
income statement will also include in the report. Here, the advantages and disadvantages of
different planning tools will also discuss in the study efficiently. Lastly, it will include a
comparison of how the organizations are adopting management accounting system to respond the
financial problems effectively.
TASK 1
P1) Explain management accounting and also provide the essential requirements of different
management accoutring system
Concept of management accounting
Management accounting refers to a process to establish the objective of the entity by
identification, measurement, interpretation, analysis and evaluation of the financial data. It is a
technique that assists the managers to take suitable financial decisions for the betterment of
business entity (Wei and Yao, 2020). Here, the major activity is to keep a track on cost and other
such elements in order to ensure adequate amount of profit in future period of time. In this, data
and information is presented in financial statements so that the managers can easily analyse the

existing financial position of the entity. It also allows to maintain liquidity within the firm in
order to pay direct expenses in timely manner.
Management accounting system:
Management accounting is related with preparing, analysing as well as controlling the
financial performance of an organization. In this context, the major accounting systems are
elaborated below.
Inventory administration system: This system is related with maintenance of adequate
amount of inventory in the business so that the manufacturing process can be continued
efficiently. The main focus of this approach is to maintain sufficient level of inventory in the
business in order to meet with the level of demand in the market. Under this approach, the
managers are likely to keep a check on the current level of inventory in the organization and
determining a reorder level to avoid the situation of deficiency and surplus in future period of
time (Mahmud, Manan and Hashim, 2019). Effective inventory management helps an entity to
maintain consistency in the production. Deficiency of inventory hampers the brand image of an
organization whereas surplus of the inventory can cause enhancement in the overall prediction
expands. Hence, it is imperative to follow the inventory administration system in order to meet
with the demand of the buyers efficiently. Here, approaches of inventory management are
elaborated below:
LIFO: This approach is based on last in and first out. In this, the units which are added in
the inventory in last are used on priority basis during prediction
FIFO: This is based on first in and first out wherein the units that are firstly included the
inventory are used on priority basis during the prediction.
Cost accounting system: The main aim of this accounting system is to keep a control
over the cost of prediction in order to manufacture the product or service within minimum
expenses. There are two crucial cost of production which are direct and indirect. Direct cost has a
direct link with the production (Agrawal, 2018). The major direct costs are the cost of raw
material, labour and more. However, indirect cost is not directly link with the production but also
plays a crucial role in the estimation of the overall cost of a printed. To earn potential amount of