Introduction to Management Accounting Systems

Management Accounting INTRODUCTION 3 TASK 14 P1 Explain management accounting and give the essential requirements of different types of management accounting systems. 9 CONCLUSION 11 11 REFERENCES 12 12 INTRODUCTION Management accounting also known as cost accounting which is a chain of activities in which inventory identification, measurement, analyse and communicate information to managers to achieve organisational goals and objectives in proper way.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems................................................................................................4
P2 Explain different methods used for management accounting reporting................................6
TASK 3............................................................................................................................................7
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control........................................................................................................................7
TASK 4............................................................................................................................................9
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems.......................................................................................................................9
CONCLUSION..............................................................................................................................11
.......................................................................................................................................................11
REFERENCES..............................................................................................................................12
.......................................................................................................................................................12

INTRODUCTION
Management accounting also known as cost accounting which is a chain of activities in
which identification, measurement, analyse and communicate information to managers to
achieve organisational goals and objectives in proper way. In managerial accounting
encompasses major fields of accounting with motive to inform management about business and
their operations. This report is based on TPS processing which is a London based manufacturing
organisation to give best products and services. This report is based on role and importance of
management accounting with requirements of management accounting systems to operate in
proper way. It also includes various kinds of methods for management accounting reporting with
advantages and disadvantages of kinds of planning tool for budgetary control. At last it includes
organisations that adapt management accounting systems to respond with financial problems.
TASK 1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
Management accounting is the presentation of knowledge and information related to
accounting with motive of formulation of rules and policies adopted by management to manage
day to day activities in proper way (Apak and et.al ., 2012.). It delivers value to manage all
functions related with planning, organising and directing with controlling. It plays crucial role in
achieving organisational goals and objectives in proper way by planning, organising and
controlling each and every activity in proper way. In context of TPG processing which is a
manufacturing unit and give their contribution in organisational development as well as
individual development by producing products as per the consumers requirement.
Principles of management accounting:
Majorly two kinds of principles states in Management accounting principles that are as
follows:
Principle of Causality:

Causality principle of management accounting states about relation in managerial
objectives to reap out quantitative output and inputs must be achieved if organisation want to
achieve outputs (Christ and Burritt, 2017.). It provides relationship in inputs and outputs
resources involved while producing products and services. In context of TPS processing they
build relationship in inputs and outputs to gain desirable outcomes.
Principle of Analogy:
Analogy principle of management accounting states about causal insights to infer past
and future activities and outcomes (Edwards, 2013. ). It governs the ability for user of
management accounting information is to apply knowledge and insights that gained after causal
relationship by availing inductive and deductive reasoning for past and future outcomes on
continuous basis.
To coordinate each and every activity organisation have to use various kinds of
management accounting systems that proved beneficial for organisation to reach at desirable
outcomes that are as follows:
Cost accounting systems:
Cost accounting system that also known as product costing system which is a framework
to analyse and evaluate cost of organisation's products to gain profitability, for valuation of
inventory with controlling cost (Farouk, Cherian and Jacob, 2012. ). It is very much important
for TPG processing to analyse cost associated with products while manufacturing it. The data
and information that used in cost accounting system should be accurate information and data
should be analysed in proper manner.
Inventory management systems:
An inventory management system is one of most important system that helps in combine
the desktop software's, barcode scanner and printers with various mobile devices to streamline by
managing the inventory in proper way. It is very much useful in tracking main functions of that
measure activities of receiving and shipping in proper way. So it records each and every activity
in proper way.
Job costing system:
Job costing system involves activities of accumulating knowledge and information
regarding the cost that associated with manufacturing of goods and services or a specific job. In
context of TPG processing they use that information to submit cost information for a consumer

under a contract that states that cost should be reimbursed. So it very much potential for an
organisation to deal in effective manner. In job costing system three kinds of information and
knowledge consist in it that are information of direct material, direct labour and various overhead
cost.
Price optimisation system:
Price optimisation system is a mathematical program that helps to calculate fluctuations
that occurs due to varies in price level after that it combines data with information on basis of
cost and level of inventory by recommending pricing. It proved helpful in improving the profits
of an organisation in effective manner (Gond and et.al , 2012. ). In context of TPG processing
with the help of price optimisation system they easily calculate fluctuations in respect of price
level of products and services.
So all are very much important for an organisation to deal in effective manner to gain important
results for organisational growth and enhancement in positive way.
P2 Explain different methods used for management accounting reporting.
For an organisation it is very much effective to use management accounting reporting to
reap out important benefits by accumulating cost and other related factors in positively. There
are some important factors of management accounting reporting that are as follows:
Cost reports:
Cost reports are very much important for an organisation and proved helpful in
determining pricing of products and services (Klychova, Faskhutdinova and Sadrieva, 2014.).
Cost reports should be completed by taking the fresh pricing of products, overhead cost and
labour and another kinds of pricing that associated with the product in proper way. In cost report
the entire cost divided into total no. of products that manufacture to give best products as per
demand. In that context whole data should be in brief manner and these reports helps to evaluate
price of product with their selling cost. In context of TPG processing they build cost reports to
give best prices as per the demand of their consumer base in positive way.
Budgets:
It is one of most effective tool of management accounting is to plan in best way about
spending plan of an organisation. Budgets in an organisation normally builds on basis by
utilizing previous years financial plans and policies with accumulating future plans in proper
way. In context of TPG processing in their spending list consist of various sources of their

income and expenditures that helps in evaluate their level of performance in pre determined
budgets amount. By searching new sellers in effective manner to provide raw materials to spare
cash.
Execution reports:
Management accounting avails spending plans by contrasting genuine uses and their
sources of income by planned in sum (Moser, 2012. ). In execution reports determining the new
budgets and reports by analysing the changes and entire data with information should be listed in
a report format. After that performance of each and every year should be calculated in proper
way and period of measurement of it depends on organisation some calculate it yearly, monthly
and quarterly basis. So in context of TPG processing they build their execution reports on
monthly basis to accumulate data and information on different basis.
Benefits of management accounting systems:
Management accounting systems proved helpful in an organisation to deal in effective
manner there are many benefits of that system that are as follows:
Planning:
Management accounting system helps to provide knowledge and information about
production of products and services in proper way. It helps in determining availability of raw
material and labour at appropriate time with cost to plan in better way. In context of TPG
processing they by various tools and techniques to coordinate in well manner by plan and
coordinate each and every thing in best way.
Integration of management accounting systems and management accounting reporting In
organisational process.
Integration of management accounting systems and management accounting reporting is
very much potential for an organisation to deal in effective way with changes that occurs in an
organisation (Ipavlatos, 2015.). By adopting various measures organisation can be able to
integrate both management accounting systems and management accounting reporting in an
organisational process to reap out important benefits out of it.
Budget report: Budget report is very much important for an organisation to integrate
with management accounting reporting in context of TPG processing they build budget that
helps in estimation of income and expenditure in an organisation to predict future in better way
to gain desirable goals and objectives in proper way.

Performance report:
In performance report organisation by evaluating tasks and responsibilities of each and
everyone that associated with the organisation to gain desirable goals and objectives. In context
of TPG processing they evaluate and measure of their employees in positive way by
accumulating knowledge and information in proper way.
TASK 3
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control.
Budgetary planning is an chain of activities for purpose of building the budget by
operating various functions of a business in positive way (Salterio, 2015.). The main objective
of planning tools I to eliminate the risk factor at maximum level to get best outcomes in an
organisation.
There are various kinds of planning tools in an organisation with their advantages and
disadvantages that are as follows:
Budgets:
Budget is the overall estimation of expenditure and revenues for a specified time period
for future estimation in proper way and evaluated for a specific time period. For an organisation
budget is very much important internal tool used by management and not reported by external
parties (Spraakman and et.al , 2015) . Budget is an significant part of planning tools that helps in
accessing risk factor and helps to eliminate financial hazards that can be occurred in future. So it
proved beneficial for an organisation to deal in effective manner to eliminates gaps in planning
for future.
Advantages:
The major advantage of Budgeting is to coordinate and manage each and every activity in
a department with it helps in transforming strategic plans into action to reap out important
outcomes. In context of TPG processing with help of budget they can record and easily
coordinate activities to reach at desirable goals and objectives.
Fixed budgets:
Fixed budget is a budget that not change or flexible enough as per increase or decrease in
volume. It is also known as static budget and work as an financial plan that not change in
budgeted period. There are some situations in which fixed budget can be changed that are cost

are majorly fixed in nature so expenses not be change as revenue changes. In context of TPG
processing they build both kind of budgets that are fixed and flexible budget by recording each
and every attribute in proper way. Fixed budget helps in forecasting budget that are very much
important function of fixed budget. It helps to reduce uncertainties and prepare in better way for
future by eliminating lack in resources problem.
Advantages:
One of the advantage of fixed budget that it is very much easy to implement and follow
and it is not needed to update time to time. It has strong insight for a organisations cost and
profits while variance should be analysed. It helps to evaluate overestimating or underestimating
their income and revenues to bring changes as per market demand. In context of TPS processing
they by build fixed budget get estimation of income and expenditures that occurs in future time
easily.
Disadvantages:
The greater disadvantage of fixed budget that it in lack of flexibility presents that restrict
an organisation to build effective changes in positive way. When some changes occurs on basis
on which budget should be formulated in proper manner.
Flexible budgets:
Flexible budget is a kind of budget that can be easily changes and flexes as per the
volume or the activities (Stergiou, Ashraf and Uddin, 2013. ). It is more useful in comparison
to static kind of budget and in it cost vary as per the volume or activities. It is very much
potential for an organisation to deal in effective manner when changes occurs in organisational
internal structure and various activities. In context of TPS processing by using flexible budget
they can mould activities as per the market demands in effective manner. It proved helpful in
building budget in effective manner and eliminates various kinds of financial problems in
positive way.
Advantages:
Flexible budgets helps to predict in effective way the performance and level of income at
a determined level of sales and activities. It gives accurate assessment of sales and income
regarding it so that proper results should be occurred from it.
Disadvantages:

It depends on various kinds of assumptions to continue while cost acts as an discontinue
manner. The determining factor of both fixed and variable and often arbitrary in manner which
hinders self interest of an organisation.
TASK 4
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems.
To solve financial problems organisation have to adopt various kinds of management
accounting system that are as follows:
Ratio analysis:
Ratio analysis is one of most important quantitative method to gain insight of
organisational liquidity, efficiency level and profitability in comparing information contained in
financial statements (Strauss, Kristandl and Quinn, 2015. ). With help of ratio analysis
organisation can be able to evaluate in proper way to eradicate financial problems while
producing products and services in effective manner.
Key performance indicator:
Key performance indicator is measurable value that define effectively achieving tools to
attain key business objectives in better way. It is one of important factor to reach at desirable
outcome by producing products as per the consumer needs and demands. In context of TPS
processing they by setting standards of their products in better way gain objectives in better way.
Benchmarking:
Benchmarking is very important for an organisation to deal in effective manner by setting
standards in proper manner (Wouters and Kirchberger, 2015.). It helps in build superior image
in front of consumers and helps in getting higher prices for their products and services in positive
way. Benchmarking is very much important in detecting financial problems by setting some sort
of standards by calculating risk factor associated with product and services.
Basis Airdri TPS Processing
Cost control Cost control is an practice by
identify and to reduce expenses
to enhance ratio of profit. In
context of Airdri they use
On other hand in context of TPS processing
they deal with cost control by negotiating
annual contracts with various parties that
helps in cutting cost in effective manner.

various kinds of cost control
measures to deal in effective
manner by eliminating expenses
with motive of enhance
profitability level of an
organisation.
Contracts work as a long term control
measures by coordinating various activities
in proper way. So it very much important
tool to find out spheres from which
organisation can easily can reduce their cost
factor (Spraakman and et.al , 2015) ..
Inventory
management
Management of inventory is
very much crucial in context of
Airdri that uses fine tune
forecasting in which projected
sales should be calculated on
historical sales figures that helps
in estimation of inventory in
proper way.
On other hand TPS processing use auditing
the stock by using various kinds of software's
that helps in periodically evaluate inventory
and its related factors in proper way. By
using various techniques in which annual
year end physical inventory proved
beneficial to get right kinds of results.
Price
optimization
In context of Airdri they set
pricing to earn profit by
understanding the value of their
consumer base in proper manner
.
On other hand in context of TPS processing
by using data proliferation that is possible
after know clearly about consumer
perception and values for them, competitive
pricing and internal cost of the organisation
are important factors that helps in setting
pricing in proper way.
These all factors are very much potential to eradicate financial problems in proper way by
setting cost and by managing cost in proper way (Strauss, Kristandl and Quinn, 2015. ). To
achieve these objectives organisation have to use various kinds of planning tools such as cost
control, inventory management system and price optimisation with many more to reap out
important results out of it.
CONCLUSION
From the above report it has been summarised that management accounting is very much
important for an organisation to deal in effective manner. It is very much important for an

organisation to use various kinds of tools and techniques that helps in eliminating risk factor to
gain proper results in organisational growth and enhancement. For getting desirable outcomes
organisation have to set some sort of standards that enhance viability of the project in positive
way. Planning tools are crucial for organisational growth and enhancement by adopting to build
effective kind of budget for forecasting future in effective manner in an organisation.

REFERENCES
Books and journals:
Apak, S., and et.al ., 2012. The use of contemporary developments in cost accounting in strategic
cost management. Procedia-Social and Behavioral Sciences. 41. pp.528-534.
Christ, K.L. and Burritt, R.L., 2017. Water management accounting: A framework for corporate
practice. Journal of cleaner production. 152. pp.379-386.
Edwards, J.R., 2013. A History of Financial Accounting (RLE Accounting). Routledge.
Farouk, S., Cherian, J. and Jacob, J., 2012. Green accounting and management for sustainable
manufacturing in developing countries.
Gond, J.P., Grubnic, S., Herzig, C. and Moon, J., 2012. Configuring management control
systems: Theorizing the integration of strategy and sustainability. Management
Accounting Research. 23(3). pp.205-223.
Klychova, G.S., Faskhutdinova, М.S. and Sadrieva, E.R., 2014. Budget efficiency for cost
control purposes in management accounting system. Mediterranean journal of social
sciences. 5(24). p.79.
Moser, D.V., 2012. Is accounting research stagnant?. Accounting Horizons. 26(4). pp.845-850.
Pavlatos, O., 2015. An empirical investigation of strategic management accounting in
hotels. International Journal of Contemporary Hospitality Management. 27(5).
pp.756-767.
Salterio, S.E., 2015. Barriers to knowledge creation in management accounting research. Journal
of Management Accounting Research,. 27(1). pp.151-170.
Spraakman, G., O'Grady, W., Askarany, D. and Akroyd, C., 2015. Employers’ perceptions of
information technology competency requirements for management accounting
graduates. Accounting Education. 24(5). pp.403-422.
Stergiou, K., Ashraf, J. and Uddin, S., 2013. The role of structure and agency in management
accounting control change of a family owned firm: A Greek case study. Critical
Perspectives on Accounting. 24(1). pp.62-73.
Strauss, E., Kristandl, G. and Quinn, M., 2015. The effects of cloud technology on management
accounting and decision-making. Management and Financial Accounting Report. 10(6).
Wouters, M. and Kirchberger, M.A., 2015. Customer value propositions as interorganizational
management accounting to support customer collaboration. Industrial Marketing
Management. 46. pp.54-67.