Management Accounting and Reporting: A Comprehensive Guide

This report provides a comprehensive guide to management accounting and reporting. It defines management accounting and discusses its important requirements for various types of accounting systems. It also describes various techniques used for reporting of management accounting. Additionally, it compares the applications of management accounting systems by organizations, such as Agmet and Drennan International, in dealing with financial problems. The report covers topics like budget reports, account receivable reports, cost managerial accounting reports, and performance reports.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
P1 Define management accounting and provide important requirements for various types of
accounting systems.................................................................................................................1
P2 Describe various techniques used for reporting of management accounting....................3
TASK4.............................................................................................................................................5
P5 Compare applications of management accounting systems by organisations to deal with
financial problems..................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting is application of knowledge and skills for preparing accounting
information so that it helps management in policies and plans. For this project Agmet has been
selected which involved in the manufacturing aspects of chemical products. This report will
provide deeper insight about elements and reporting associated with management accounting.
Further, it also depicts how management accounting systems can be used for responding
monetary issues.
TASK1
P1 Define management accounting and provide important requirements for various types of
accounting systems
Management accounting: It can be state as process of giving information related to
finance and resources which are used in making decisions. This type of accounting provides data
to internal team of business so that accurate decisions are taken to plan, organise and control
activities and operations of organisation. The main objectives of management accounting is to
explore internal information and provide results to management of Agmet to make important
decisions (Abosede, Obasan and Alese, 2016). Some of essentials requirements before applying
management accounting systems are as follows:
Management Accounting Systems: It can be explained as system of various aspects of
business that are included in management accounting so that it provides information to make
decisions, analyse costs, costing techniques, pricing policies and inventory management. Here
are some of systems with their benefits and applications in Agmet:
Cost Accounting Systems: This costing system is kind of framework use in finding out
cost of products by businesses. This information is use in valuation of inventory, profit analysis
and controlling cost. It measures and record estimated outcomes with actual results to provide
base for evaluation of financial performance and thus applied to measures efficiency. Benefits of
this accounting is that it gives analytical tools to Agmet such as marginal, standard and operating
costing, inventory and budgetary control (Andersén and Samuelsson, 2016).
Inventory Management: It refers to systems in which control in storing stock is done, this
includes raw materials, work-in-progress and finished products. It ensures that there is no
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overstock or under storage of products to meet delivery standards. Organisation applies this type
of management accounting systems to effectively track quantity of inventory and make efficient
decisions regarding stock. Advantage of this to Agmet is that it improves managing inventory,
enhance efficiency in storing capacity and organise workflow of goods.
Job Costing Systems: This allocates production cost to each item or batch of produced
products. This is useful when goods are different from one another, so cost related to particular
job is accumulated for respective item only. This is important to calculate under consumer
contract to provide data related to cost. It is applied to distribute cost of inventory to finished
products and use to determine accuracy of estimated plans of Agmet to be effective in making
budgets (Ahmad, 2017). Benefit is that it assist company in framing pricing policies and decide
profits margins.
Price Optimisation Systems: This systems uses mathematical analysis to determine
consumer behaviour on pricing policy adopted by organisation. It also helps in setting prices of
products which includes cost and profits. This is applied to achieve high performance or to be
cost effective in delivering products at desired price level (Armitage, Webb and Glynn, 2016).
Advantage is that it provides basis for calculating appropriate profits margins with mindset of
consumer's willingness to pay certain price for Agmet services.
P2 Describe various techniques used for reporting of management accounting
Management Accounting Reports: These are those reports which includes information
recorded through management accounting and its systems. This helps in planning, making
decisions and measuring performance of overall organisation. These are prepared carefully
because many important decisions are made on basis for this reports. Some of management
accounting reports used by Agmet to formulate decisions are as follows:
Budget Reports: Budget is estimation of expenditure by management on basis of previous
data available. Companies formulates budget to achieve objectives while operating in its
financial capabilities. This type of reports contains budgets for overall firm to guide managers,
serves as base for performance evaluations and controlling techniques. This is very crucial
reports as it measures performance of business, department wise and for each unit of its
operations. For Agmet, it offers comparison process as performance are measures on basis of
financial aspects of department and then incentives are provided.
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Account Receivable Reports: If company deals in credit sales and allow buyers some time
span to pay their debts to firm. This report of management accounting will help managers to
remind about balances of creditors, time allotted and identify defaulters in payment. This also
allows Agmet to tighten its credit policy if numbers of creditors are doing defaults. Delays in
revenues affects cash flow of organisation which restrict activities of daily operations. This assist
companies in finding defaulters, decisions regarding credit strategies and manage cash flow
statements.
Cost Managerial Accounting Reports: Cost reports provides summary of material
employed to product each item and related expenditure. This reports allows managers to
calculate selling prices keeping cost reports as base. This reports also helps managers to calculate
profits margins as information related to cost is available for each item. This in context of
organisation is necessary to produce because it contains data related to resources, labour and
wastage which helps firm to better distribute and utilise its resources (Types of managerial
accounting reports, 2019). With better utilisation of resources available to Agmet helps to
increase efficiency and reduce cost for each commodity produced.
Performance Reports: These reports are generated at the end of year to record overall and
department wise performance of organisations. This also includes employee appraisal reports
which examine productivity of every personnel to make decisions of incentives, promotions and
training. Mangers use such reports to ensure that set standards are achieved by giving
information about insight working. This also helps organisation in finding out reasons for gap
present in estimated and actual productivity of resources. This helps Agmet to keep an eye on
strategies and performance, alignment with company's mission (Aureli and Del Baldo, 2016).
Thus this characteristics makes it important for businesses to generate this report to accurately
measure performance for every element of processes.
TASK4
P5 Compare applications of management accounting systems by organisations to deal with
financial problems
Financial problems of businesses are related not only to finance department but working
of every department in terms of funds. This affects overall operations and productivity of
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organisation and creates hurdles for sustainability. So there is need of accounting systems that
solve financial problems of organisation. Some of issues in medium size firms are as follows:
Poor Cash Flow Management Many businesses face this financial problem which leads
to failure of operations and affects sustainability (Kato and Charoenrat, 2018).
Insufficient Working Capital: Medium businesses lacks in sourcing sufficient wokring
capital for start-up or to meet daily needs. This limits its growth and expansion opportunities as
there is no enough finance available with firm to grab environmental opportunity to turn it into
profit.
Major tools of management accounting systems that are use in addressing these issue are as
follows:
Benchmarking: It is method by which performance is improved in systematic and logical
way by comparing it with leader in industry. These finds out planning and controlling techniques
of best company and adopting it to solve financial issues.
KPI (Key Performance Indicators): It lays down some indicators to measure performance
of important activities of businesses (Lutfi, Idris and Mohamad, 2016). In this method of
management accounting systems organisation, teams, department, employee's performance is
compared to objectives set by firm.
Agmet and Drennan International are involved in manufacturing practices and
operations in UK. They both face financial issues in its operations and adapt different
management accounting systems to solve it.
Issues Agmet Drennan International
Poor Cash Flow Management Company is facing issues
related to poor planning and
management in organising
cash flow. In order to address
this issue company will use
benchmarking as tool of
management accounting
systems to set standard to that
firm which is effectively able
This organisation will manage
this financial issue with KPI
method of management
accounting systems. In this
technique, each aspects of
business is evaluated on basis
of set standards to find out root
cause of situations. This will
help company to analyse basic
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to manage in and out process
of cash. This will find out
ways to manage cash flow that
will solve present problem of
finance and this will lead to
sustainability.
factor which is leading to poor
cash flow management.
Planning properly and
checking process on regular
basis will have firm to enjoy
sustainability as success.
Insufficient Working Capital This problem may arise during
smooth functioning of
processes and can hinder its
success to sustainable run
business. In this company KPI
will be use to find out weak
process to give complete
picture about issue. Actions
are taken, either shut down or
corrective actions are
employed so that it lead to
sustainability.
Organisation will use
benchmarking by setting
standard of efficient firm
which is capable to manage
working capital effectively.
This will lead to opportunities
for growth and carrying out
daily operations. If company is
able to bring smoothness in
regular activities it will sustain
for long in industry (Muneer,
Ahmad and Ali, 2017).
CONCLUSION
By summing up this report, it can be concluded that Agmet can develop competent strategic
and policy framework by undertaking management accounting systems and reporting. It can be
seen in the report that by employing MA systesm Agmet can resolve financial issues effectually.
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REFERENCES
Books and journals
Abosede, A. J., Obasan, K. A. and Alese, O. J., 2016. Strategic management and Small and
Medium Enterprises (SMEs) development: A review of literature. International Review
of Management and Business Research. 5(1). p.315.
Ahmad, K., 2017. The implementation of management accounting practices and its relationship
with performance in small and medium enterprises. International Review of
Management and Marketing. 7(1). pp.342-353.
Andersén, J. and Samuelsson, J., 2016. Resource organization and firm performance: How
entrepreneurial orientation and management accounting influence the profitability of
growing and non-growing SMEs. International Journal of Entrepreneurial Behavior &
Research. 22(4). pp.466-484.
Armitage, H. M., Webb, A. and Glynn, J., 2016. The use of management accounting techniques
by small and medium‐sized enterprises: a field study of Canadian and Australian
practice. Accounting Perspectives. 15(1). pp.31-69.
Aureli, S. and Del Baldo, M., 2016. Peformance Appraisal of Business Networks. How Small
and Medium Enterprises Define and Monitor Network Objectives. Management
Control.
Kato, M. and Charoenrat, T., 2018. Business continuity management of small and medium sized
enterprises: Evidence from Thailand. International journal of disaster risk
reduction. 27. pp.577-587.
Lutfi, A. A., Idris, K. M. and Mohamad, R., 2016. The influence of technological, organizational
and environmental factors on accounting information system usage among Jordanian
small and medium-sized enterprises. International Journal of Economics and Financial
Issues. 6(7S). pp.240-248.
Muneer, S., Ahmad, R. A. and Ali, A., 2017. Impact of financial management practices on SMEs
profitability with moderating role of agency cost. Information Management and
Business Review. 9(1). pp.23-30.
Online
Types of managerial accounting reports. 2019. Online. Available through: <
https://smallbusiness.chron.com/types-managerial-accounting-reports-58384.html>.
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