Management Accounting: Benefits, Methods, and Applications

MANAGEMENT ACCOUNTING

Executive summary
This report is based on the implementation of management accounting in the conduction of
business for Ryder Architecture. The various aspects of management accounting and the
importance of management accounting will be discussed in this report in detail. Furthermore,
two tables have been created for the purpose of calculations which are used to identify the
differences between marginal and absorption costing techniques of management accounting.
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Table of contents
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................4
Introduction......................................................................................................................................4
Description of management accounting and highlighting the necessary requirements of various
types of management accounting systems to the chosen scenario..................................................5
Lean accounting...........................................................................................................................6
Throughput accounting................................................................................................................6
Traditional accounting.................................................................................................................7
Transfer pricing............................................................................................................................7
Inventory management system.....................................................................................................7
Benefits of Management Accounting..............................................................................................7
Plan for the future........................................................................................................................8
Decision making for the future....................................................................................................8
Predict cash flow..........................................................................................................................8
Reducing cost of production and increasing rate of return..........................................................8
Description of the various methods used for management accounting that can also be beneficial
for the chosen scenario....................................................................................................................9
Financial Planning........................................................................................................................9
Evaluation of the financial statements.........................................................................................9
Controlling budget.......................................................................................................................9
Marginal costing..........................................................................................................................9
Making decision.........................................................................................................................10
Statements of cash flow.............................................................................................................10
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Representation of graphs and statistics......................................................................................10
Conclusion.....................................................................................................................................10
Task 2.............................................................................................................................................11
Introduction....................................................................................................................................11
Computation of the net profit percentage using Absorption Costing method...............................11
Computation of the net profit percentage using Marginal method................................................13
Differences between the Marginal and Absorption management accounting techniques.............15
Conclusion.....................................................................................................................................16
Task 3.............................................................................................................................................17
Introduction....................................................................................................................................17
Evaluation of the application of planning tools of budgetary control and understanding their
advantages and disadvantages.......................................................................................................17
Budget........................................................................................................................................17
Master budget.............................................................................................................................17
Operating budget........................................................................................................................18
Cash flow budget.......................................................................................................................18
Financial budget.........................................................................................................................18
Behavioural implications of budgeting..........................................................................................18
Pricing strategy..........................................................................................................................19
Supply and demand....................................................................................................................19
Applications of the various methods of Management accounting that can be used by
organisations to tackle financial issues..........................................................................................19
Benchmark.................................................................................................................................20
Key Performance Indicator (KPI)..............................................................................................20
Budgetary targets.......................................................................................................................20
Financial governance.................................................................................................................20
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Management accounting skills and their usefulness..................................................................20
Conclusion.....................................................................................................................................21
Conclusion.....................................................................................................................................21
Reference List................................................................................................................................22
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Introduction
Management accounting is a technique used by the organisations to retrieve the correct data
regarding the amount of sales in a financial year, stock in hand or left in the inventory, raw
materials bought by the company, salary and wages of the staffs and so on. Therefore, it can be
said that applications and contributions of management accounting is huge in a business
organisation. In this report, the benefits of the applications of management accounting will be
discussed along with the advantages and disadvantages of the various tools of management
accounting.
The report is conducted as the General Manager of a company and the discussion on
management accounting of the company will be identified and evaluated in details. For better
understanding of the project the company that has been chosen is Ryder Architecture, which is a
small-scaled enterprise of the United Kingdom and the impact of the applications of management
accounting on the business conduction process and managing other records will be discussed.
Ryder Architecture is a company which is aiming at improving the internal and the external
architectural designs of properties of their clients and currently they are focusing on enhancing
their skills to serve their clients better.
Task 1
Introduction
This portion of the report will focus on the management accounting system of Ryder
Architecture and will also emphasise on the various types of management accounting that can be
incorporated by the company to be more effective in maintaining their books of accounts and
also planning on monitoring their allocated budget. Furthermore, the benefits of management
accounting used by Ryder Architecture that can help the company grow in the market will also
be discussed in this portion.
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