Management Accounting Research Review

This assignment tasks you with reviewing recent articles on management accounting research. The focus is on identifying emerging themes and trends within the field. Pay particular attention to areas such as practice-based topics, the role of qualitative methods, and the impact of lean manufacturing and sustainability. The review should synthesize key insights from the selected articles and demonstrate your understanding of current developments in management accounting research.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Management accounting and essential requirements of different types of management
accounting systems.................................................................................................................3
P2Explain different methods that are used in management accounting reporting.................6
TASK 2............................................................................................................................................7
P3Calculate unit cost and also describe the difference among the marginal and absorption
costing technique....................................................................................................................7
TASK 3............................................................................................................................................9
P4) Advantages and disadvantages of different types of planning tools for budgetary control
................................................................................................................................................9
P5 Compare how organisation should adapt management accounting system to respond the
financial problems................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting plays a very significant role in the organisation as they are the
integral part within the management. Therefore, management accountant plays a great role in
providing the proper guidance and advises that assist them to run the business activities
smoothly. It also assists in enhancing the efficiency level in both management as well as staff
workers. Management accounting is totally different from the financial accounting as they are
always looking forwards rather than take historical based data. Therefore, it mainly consists of
the information regard to statistical and financial due to which managers make their day to day
decisions regard to business activities. The research project in context to the R.L. Maynard is
small size medium enterprises in that are only 50 employees are working and the annual net
turnover is less than £500,000. There is a discussion on the management accounting and
there necessary requirement of different types of management accounting system (Scapens and
Bromwich, 2010). Furthermore, there is an also study on the various methods which are mainly
use in the management accounting reporting. Thereafter, income statement has been prepared by
the company by adopting two different techniques are the marginal and absorption costing
techniques. Further, there is an also study on the budgetary control and its various types of
planning tools. Along with that, there is an also description on management accounting system
that are responding the financial problems.
TASK 1
P1) Management accounting and essential requirements of different types of management
accounting systems
Management Accounting:
Managers have to keep a track of different activities which take place in the organisation
for which they are working. R L Maynard is an organisation that has to maintain its flow of
information and accounts so that finances and resources are well managed. The term
management accounting or managerial accounting is based on the specific provisions of
accounting information for getting better perception about the financial or non-financial situation
and make effective decisions (Ward, 2012). This practise is applicable in three wide areas i.e.
strategic management, performance management and risk management. Company can get better
strategies and organisational heads will be able to make effective decisions through these

aspects. Financial statements are presented with better evaluation when management accounting
practises are incorporated. Analysis, interpretation and presentation of the data is very efficiently
done (Parker, 2012).
Often management accounting and financial accounting are confused with each other.
But these two terminologies are quite different and have a separate meaning and application
(Fullerton, Kennedy and Widener, 2013). Financial accounting is preparation of reports which
are formed on the basis of past performances. However, management accounting is totally based
on the collection of data from revenues, outstanding debt requirements which are further utilised
for managing everyday operations and business decisions (Bebbington and Thomson, 2013).
Different types of management accounting systems:
Traditional cost accounting: Company’s overhead manufacturing costs when allocated
effectively then traditional cost accounting method is said to be initiated (DRURY, 2013). Also
referred as conventional technique of cost accounting, the indirect costs associated with goods
which are to be manufactured by R L Maynardare depicted and allocated in this system. The
major attributes which were included in this system are labour hours which are directly
applicable on production, machine hours, and volumes of units produced in a particular time slot,
etc. Earlier business organisations faced a lot of issues and problems because of external
expenses depicted in the financial statements (Li and et. al., 2012). The uniformity in products
was demanded by customers but this lead to serious complications in manufacturing and
production due to lesser technologies. Hence, there is a need to gain estimates of the pricing
which is considered as overhead costs. This was performed under traditional cost accounting.
Cost accounting system: This type of management accounting system is also known as
product costing system. The entire framework is developed by businesses to get an estimate
regarding the costs associated with products and followed by their analysis of profitability. Other
functions involved in this system are cost control and inventory valuation. R L Maynard will be
able to understand the estimate and realise the products that are profitable and the ones that are
not generating any sort of profit.
Job costing system: Under the cost accounting system, job order costing or job costing is
also involved. According to this system, the cost of manufacturing on every job of the company
(R L Maynard) is estimated separately. The production of specialised services and products
which are unique in qualities is controlled through job costing system. The appropriateness of

this costing system is quite less for R L Maynard as compared to the organisations that have
continuous involvement of production of unique products and services.
Batch costing system: The accounting system which involves specific order is known as
batch costing system. There are large similarities between job costing and batch costing. The
only difference is that instead of estimating the cost involved per job, here the cost of production
of each batch is estimated and specific control measures are developed. Once, the estimation of
cost for a batch is gained, the company can then opt for finding the estimate cost of production
for every item.
Inventory management system: R L Maynard has inventory in the form of products.
According to demand proposed in the market, necessary supply is provided. If there is no
inventory management system applied in the company then a disproportionate figure is acquired
in the flow of supply and demand. The number of orders, sales and deliveries that are tackling
place are systematically arranged and tracked so that decisions regarding further production can
be made.
Price optimisation system: Often companies face trouble in gaining profits and managing
their expenses. The price optimisation system is analytical tool which helps organisations like R
L Maynard to estimate the reactions or response of customers when variable prices are defined
for products and services at several working channels. This helps in selecting the best suited
mode of operations and the attribute of maximised profits is gained through this system.
Lean accounting: Business strategies are incomplete without proper financial assistance
and functioning (ter Bogt and van Helden, 2012). The lean accounting system was developed for
assisting the business strategies and plans of lean enterprises. R L Maynard can experience
greater productivity and profitability if this principle system is applied. The purpose of this
accounting system was largely inspired by lean manufacturing which was based on total quality
management and improvements on a continuous basis (Bouten and Hoozée, 2013.). Entire
accounting, control and measurement processes which have been employed in the organisation
have to be guided by lean processes that reduce commitment of errors, defects and makes the
functioning much more fruitful and benefactor.
R L Maynard can experience reduction in wastage of resources and funds when lean
accounting system is applied. There is a significant use of this system in cost reduction and
efficiency increment. If resources are correctly utilised and less number of errors are made then it

becomes easier for reaching customer satisfaction levels (DRURY, 2013). Financial position in
the strategic markets is easily estimated and deeper understanding is created. As a result,
managers are able to take decisions which are more favourable and act as controller of financial
losses. Sales, production and improvements in organisational growth can be witnessed through
this accounting system (Li, Sawhney and Ramasamy, 2012.).
Throughput accounting system: Enterprises have managers that perform the financial
analysis and other accounting operations for providing information which will further be helpful
in improving the profitability of the company (Ward, 2012). R L Maynard can experience this
growth through Throughput accounting system which is based on principle based management
accounting. This system is also referred as TA. Organisational goals and objectives can be
achieved when TA is initialised. This system helps in identifying the limits or core competencies
which take forward the company towards goals. Once this limit is reached, simplified measures
are taken for driving entire business operations towards the same (Ward, 2012). TA doesn’t
allocate costs but it has focused cash which involved neither cost accounting nor costing. Major
aim of this system is maximise profits and opportunities of growth for organisation without
incurring much heavier costs and improvements.
Being an internal reporting tool, this management accounting system has to be helpful in
enforcing efficiency with greater effectiveness. It not only enhances shareholder wealth but
improves the profit performance of R L Maynard. This attribute automatically becomes helpful
in solving the major satisfactory issues of different stakeholders. The major advantage of this
system is its wider applicability (Parker, 2012). The entire financial management is diverted for
non-profit or voluntary organisations also.
Transfer pricing: Businesses have to deal with internal and external transactions. Internal
ones occur between different departments say suppliers and the manufacturers, etc. This kind of
transfer of money internally is considered as transfer pricing. The trade which exists between
different entities inside the large firm uses this management accounting system for measuring
and managing the finances (Fullerton, Kennedy and Widener, 2013). Every individual
department has its own share of profit when considering the entire product or service which is to
be delivered to customers. It may be possible that ineffective management can lead to significant
conflicts and clashes inter-departmentally. Henceforth, R L Maynard has to devise an efficient
management accounting system like transfer pricing for maintaining a balance and equality when

it comes to sharing of profits and losses. The rules and regulations which have been devised
under this system have to be followed by each and every department while making a transaction
from one entity to another (Bebbington and Thomson, 2013).
P2. Explain different methods that are used in management accounting reporting
There various different types of methods that are used by R.L. Maynard in the management
accounting reporting which are describe as follows-
 Job cost reports- It is the most important for the firm in which it mainly consist of crucial
information that are provided within the organisation. It is mainly regard to the recent job
status which assists the firm to determining the how job is to be completed in respective of
revenues and cost (Pitkänen and Lukka, 2011). The main advantage of job costing is that it
assist the management accountant under they can effectively allocating the cost that are
directly relating to the job. It also helps the Company to effectively control cost before it
starts under control by the management accountant.
 Budgeting reports- R.L.Maynard used the budgeting reports in which the management
accountant used the budgeted reports. It assist the firm to evaluate the financial performance
by make comparison among the budgeted projection and actual number in an accounting
period. Therefore, these budgeted reports are majorly includes in which there is a detailed
information that are regard to budget and accounting information. It is majorly based upon
on the accrual basis that are used in accounting. Main purpose of budgetary report is that to
show the compliance with the laws and also provide an extra information regard to revenues
and expenses which are not presenting in the CAFR.
 Sales reports- It is that type of report under which there is a detailed information regard to
sales activities that are carried out by the sales team and it assist the sales manager to
measure the performance of these team members (Englund and Gerdin, 2011). Apart from
this, it also shows the selling of company’s products or services to the customers at specific
time period. Thus, it also assists the management of R.L. Maynard to finding out the sales
profits that are made under the particular time bound. Therefore, the main benefits from the
sales reports is that the Company can estimated their financial position by make comparison
among sales figure of current year with the previous year figures.

TASK 2
P3. Calculate unit cost and also describe the difference among the marginal and absorption
costing technique
Table 1: Marginal costing
Table 2: Absorption costing

INTERPRETATION- R.L. Maynard Company preparing the income statement for the
financial year by adopting management costing technique that are marginal and absorption
costing. Thus, in the table 1 the net profit is determined by adopting marginal costing method in
which it takes all only variable expenses and ignore fixed expenses at the time of calculating the
cost of goods sold that is £ 6600 Thereafter, sales revenue is deducting from the COGS to
determine the GP that is £14,400. For this, net profit is determined by deducting the all the
variable and fixed expense from the gross profit that is. Beside this, the cited Company also
adopts the absorption costing method in which it takes all type of cost that are fixed and variable
expenses the sum is £ 5100 .Thus, it add the direct material, labour and all the total expenses that
are deduct from the sales revenue that is GP £14400. Thereafter the net profit is calculated by
adopting the absorption costing method as there is a little different among both the net profit
table 1 &2. Thus, the net profit under the marginal technique is more than the absorption costing
techniques £ 12600 as it only consider the fixed expenses and ignore the variable expenses. Most

of the scholar said that the absorption costing techniques are the most appropriate techniques.
The main reason behind this is that it will considering all type of cost that measure the
Company’s financial position in effective manner.
Difference among the marginal costing and absorption costing techniques
Marginal costing Absorption costing
Under this management costing method there
is a net profit is determined by adopting
marginal costing method in which it takes all
only variable expenses and ignore fixed
expenses at the time of calculating the cost of
goods sold (Setthasakko, 2010).
Under this management costing method there is
a net profit is determined by adopting marginal
costing method in which it takes both variable
expenses and fixed expenses at the time of
calculating the cost of goods sold.
The formula of calculating the cost of goods
sold under the marginal costing are the sum of
direct cost, direct labour and variable expenses.
The formula of calculating the cost of goods
sold under the absorption costing are the sum
of direct cost, direct labour, fixed expenses and
variable expenses (Scapens and Bromwich,
2010).
Under this method there is not any kind of
impact if there is any fluctuation in the opening
stock and closing stock.
Under this method there is an impact if there is
any fluctuation in the opening stock and
closing stock.
TASK 3
P4) Advantages and disadvantages of different types of planning tools for budgetary control
The finance department of R L Maynard has to deploy strategies which are effective
enough in bringing controlled output of finances. Budgets are helpful in describing a detailed
layout about operations which are considered in a management policy limited for a specific
period of time. Any sort of expenses and savings which are to be performed in the organisation
are depicted in this budget (DRURY, 2013). Goals and objectives that are defined by R L
Maynard’s leaders have to be accomplished for being successful and establish a string image in

the market. Preparing a budget without proper planning and analysis doesn’t support
organisational goals and objectives.
Budget reports are prepared and implemented in such a way that performance evaluation
is acquired simultaneously. All the responsibilities and duties which have to be fulfilled by
respective individuals are also defined in these reports. Following are the advantages and
disadvantages of budgetary control:
Advantages:
 Clear declaration of responsibilities is produced in budgetary control reports. When this
attribute is achieved by organizational heads then aims and objectives are more
effectively met (DRURY, 2013).
 Performance evaluation helps in analyzing the defects and flaws which hinder or block
effective working. A comparison is made between past performances and present
functioning and related deviations are gathered. This further helps in efficient budgeting
and making remedial measures.
 Organizational goals and objectives can be improvised and defined with better efficiency
through these reports. Precision and accuracy is obtained and overall business reaches a
new height and competition is better handled (Fullerton, Kennedy and Widener, 2013).
 Coordination is promoted and improved because centralization of company activities is
achieved. Management helps in reducing confusion and increasing responsibility of
respective authorities. If different functional activities are defined clearly then employees are guided by a
dignified path. This helps in encouraging them or boosts their morale for working more
effectively and achieving the goals without exceeding budgets (Bebbington and
Thomson, 2013). Despite of being a challenging task, there is more scope of innovation
and greater support for preparation of the best competencies.
Disadvantages:
 A great drawback which has been experienced by R L Maynard with budgetary control is
major dependency on future estimates. There are situations in which large amount of
risks and losses can be faced by the company. If specific allocations are not made for
these kind of instances then budgetary control turns out to be ineffective and goals and
objectives are not met (Ward, 2012).

 Often organizational stability is lost due to lack of coordination and improper motivation.
Individuals may or may not be satisfied with budgets and estimations. Their satisfaction
level reflects in motivation which further affects coordination in executing different
business operations.
 The planning, analysis and interpretation process is quite expensive and large amount of
costs are involved. Entire system requires proper supervision and monitoring which
makes it ineffective in terms of costs during introduction and application (Parker, 2012).
When outcomes of the budget have to be implemented and applied in the dynamics of
company then budgetary control measures are adapted. Following tools are largely used for
planning budgetary controls:
1. Responsibility accounting
2. Variance analysis
3. Zero base budgeting
4. Fund adjustments
Variance Analysis: The process of analysing and interpreting the difference which is
obtained within actual results and those which had been planned, expected or aimed by the
company is considered as variance analysis. It is one of the most convenient options in planning
budgetary controls because it deals with present and past performances of the organisation.
Merits and Demerits:
 When overall values are achieved by the company in terms of variance then effective
remedies or precautionary measures are quickly taken for reducing the impact of losses.
 Any sort of negligence or inefficiency portrayed by any function of the organization is
accurately determined through this tool (Fullerton, Kennedy and Widener, 2013).
 Despite of such great advantages, this tool requires large amount of investments in terms
of time and resources because lot of analysis has to be performed.
 Managers have to perform planning but there is strict requirement of experts which again
calls for increased costs and more time for training or adhering these experts with
organizational functioning.
Responsibility Accounting: A reporting system which collates the revenues, costs and
profits with help of managers who are themselves directly accountable for the same is

responsibility accounting. When duties are allocated in a hierarchy then this kind of accounting
system is implied.
Merits and Demerits:
 The purpose is quite strong and clear definition of roles and responsibilities is provided.
 Delegation of duty is important for organization in managing the different accounts of
separate entities based on their respective duties and roles. Hence, it becomes quite
complex for managing at senior or wider scale (Bouten and Hoozée, 2013).
 Budgets formed through this planning tool are more helpful in comparing different
effective achievements.
 Organization’s efficiency and effectiveness in terms of goal achievement and
accomplishment of new targets is improved through this tool.
Zero base budgeting: The technique of budgetary control where different expenditures
are justified for every new period is considered as zero-base budgeting. R L Maynard has to
evaluate the basic requirements in terms of needs and costs separately when considering this tool
of budgeting (ter Bogt and van Helden, 2012). Upcoming time period or financial year or any
sort of situation is planned accordingly through this tool irrespective of the previous budgets
devised. There cannot be blind decision making in this situation because detailed specification
and justification for every allocation has to be provided with regards to the particular functional
department.
Merits and Demerits:
 Flexible and focused budgets are acquired through this tool which helps in reducing
excessive costs and unnecessary expenditures.
 This budgetary control tool helps in bringing the best implementation without inviting
mistakes and errors which could lead to future complications. Since, no involvement of
previous attributes is allowed, the base is always kept zero and every transaction is
cleared before time (Bebbington and Thomson, 2013).
 Resource intensiveness is the major drawback which is addressed by companies when
this tool is used. This denotes that short-term planning is not possible in such cases.
 Manipulation by greedy individuals and managers is possible which means that this tool
can lead to unethical practices inside the organization for getting more profits from the
operational expenses.

P5 Compare how organisation should adapt management accounting system to respond the
financial problems
The R.L. Maynard adopts the management accounting system that assists the Company to
respond the financial problems which are described as follows-
 Key performance indicator: It is a tool that are adopted by R.L Maynard to monitoring,
measuring and tracking their financial performance towards organisation's goals. It can be
based upon the customer satisfaction level, sales revenue and growth of business size etc.
for this, they can easily track the financial problems arise within the firm effectively.
 Budgetary control: The company adopts the budgetary control helps them to determine
the favourable or unfavourable variance. It can be possible through variance analysis,
responsibility accounting and zero base costing etc. it helps to make comparison among
actual sales and expected sales figures.
 Benchmarking: Company can compare financial performance through ratio analysis
from year to year that helps them to finding out the financial risk involve within the
organisation.
Lean accounting- It is that type of accounting that is used by most of the manufacturing
company for the purpose of changing that are essential within the organisation. It is majorly
concern with the management process, control, measurement, accounting etc to support the lean
manufacturing (Ahadiat, 2013). The main advantages from the lean accounting is that to
enhance sales as it offer the better quality of information which assist them in making the
effective decision regard to business activities. It is that type of accounting in that plays a vital
role which helps the management to manage the manufacturing activities. Therefore, in that the
management are mainly focused on the cost factors such as direct cost and indirect cost. Thus, it
helps the management to determining those cost that are majorly incurred within the
organisation. However the management accountants are mainly focused on minimizing the cost,
respond the problems regard to financial and enhancing the productivity. Furthermore, another
benefits of lean accounting is that it solve issues that are taken place within the organisation and
enhance the revenues by managing the inventory.
Transfer pricing- It is one of the most important management accounting system that
are used by the Company to effectively understand the financial problems. It is another types of
management accounting system is transfer pricing in which there is a division of an organisation

that are transacting with each other (Kotas, 2014). For instance, there is a transaction of labor
among departments and also in the management accounting terms there are various regulations
on transfer pricing. It can be only those prices when the any company such as R.L. Maynard
transacting among across borders. Thus, it provides the fair financial information as there are
strict rules and regulation on the transfer pricing (Pitkänen and Lukka, 2011). Therefore, there
are various tangible and intangible products that are transfer across the boarders such as loans,
service, gifts and also bonds etc. This type of transfer pricing are used in which there is a
division of an organisation that are transacting with each other.
Traditional cost accounting- It can be define as the allocation of the manufacturing
expenses regard to those products which are under production process. They are mainly
assigning the indirect expenses to those items that are manufactured which are based upon the
volume. It majorly include in it are the direct labour hours or manufactured machine hours and
number of units produced. The main benefits of traditional cost accounting to the R.L. Maynard
is that it helps in allocating with the (GAAP) generally accepted accounting principles. It can be
define as the allocation of the manufacturing expenses regard to those products which are under
production process (Ahadiat, 2013). They are mainly assigning the indirect expenses to those
items that are manufactured which are based upon the volume (Setthasakko, 2010). It majorly
include in it are the direct labour hours or manufactured machine hours and number of units
produced. The main benefits of traditional cost accounting to the R.L. Maynard is that it helps in
allocating with the (GAAP) generally accepted accounting principles.
Throughput accounting- It is that type of throughput accounting system in which the
Company can finding out the financial problems by finding out the firm’s financial performance.
Therefore, it is totally different from the cost accounting system in that it effectively measuring
the company’s overall financial performance. Apart from this, it effectively finding out the
financial issues that are occur within the organisation and it also finding out the alternative
solution to resolve these issues in effective way. This system is also referred as TA.
Organisational goals and objectives can be achieved when TA is initialised. This system helps in
identifying the limits or core competencies which take forward the company towards goals. Once
this limit is reached, simplified measures are taken for driving entire business operations towards
the same (Ward, 2012). TA doesn’t allocate costs but it has focused cash which involved neither

cost accounting nor costing. Major aim of this system is maximise profits and opportunities of
growth for organisation without incurring much heavier costs and improvements.
CONCLUSION
Summarizing the whole report it has been concluded that Management accounting plays a
very significant role in the organisation as they are the integral part within the management.
Therefore, management accountant plays a great role in providing the proper guidance and
advises that assist them to run the business activities smoothly. Furthermore, it has been also
analysed that management accounting is totally different from the financial accounting as they
are always looking forwards rather than take historical based data. Therefore, it mainly consists
of the information regard to statistical and financial due to which managers make their day to day
decisions regard to business activities. There are various different ways in the management
accounting system that are needed by the R.L. Maynard. Apart from this, lean accounting that is
used by most of the manufacturing company for the purpose of changing that are essential within
the organisation. It is majorly concern with the management process, control, measurement,
accounting, etc. to support the lean manufacturing. The main advantages from the lean
accounting is that to enhance sales as it offer the better quality of information which assist them
in making the effective decision regard to business activities. It has been also analysed Most of
the scholar said that the absorption costing techniques are the most appropriate techniques. The
main reason behind this is that it will considering all type of cost that measure company’s
financial position in an effective manner.

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