Management Accounting and Techniques for Financial Reporting

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1 Management accounting and its essential requirements...................................................................3
P2 Methods used for management accounting report............................................................................5
TASK 2..........................................................................................................................................................6
P3: Cost accounting techniques to prepare an income statement..........................................................6
Management accounting techniques and financial reporting documents............................................10
Financial report and its interpretation for business activities...............................................................11
TASK 3........................................................................................................................................................11
P4 Budgetary control and its types along with advantages and disadvantages.....................................11
Utilisation of different planning tools for forecasting budgets..............................................................13
TASK 4........................................................................................................................................................14
P5: Evaluate how organisations are adapting management accounting systems to respond to financial
problems...............................................................................................................................................14
Analysis of how in responding to financial problems management accounting can lead organisations
to sustainable success...........................................................................................................................15
Various planning tools to resolve financial problems............................................................................16
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................17

INTRODUCTION
Management accounting is defined as a managerial action or plan to bring an organisation
ahead than their rivals in competitive market by analysing financial statements prepared on
annual basis as per accounting standards (Bartlett and et.al, 2016). It facilitates internal parties to
make relevant decisions for the betterment of an organisation in the future. Management
accounting is not mandatory for an organisation as it only requires as per their requirements.
KEF Ltd. which is a medium sized organisation engaging in manufacturing sector is undertaken
for this assignment report. The report is prepared to promote the understanding between different
departments in the organisation due to which their senior management accountant is held
responsible to explain the importance of management accounting concept and its different
systems with various related concepts such as reporting systems, costing techniques, planning
tools to control budget, use of managerial accounting in resolving financial issues etc.
TASK 1
P1 Management accounting and its essential requirements
Management accounting- This is defined as the process and procedure that is used to
analysis and communicating all the essential information related with financial aspects of
organisation. So with the financial aspects it is easy for organisation to develop and make
effective strategies that increases performance of KEF limited in effective period.
Origin and evolution of management accounting- Management accounting emerges in
organisation to develop as significant activity in industrial revolution. This was originated in the
financial accounting that is used to trace the origin and its role for making different ventures
(Bromwich and Scapens, 2016).
Management accounting system- It refers to a system that is used by managers of KEF
ltd. to keep the record of different function and operational departments of organisation. There
are various types of management are also used by management to KEF ltd. to find actual status
of organisation.
Difference between financial accounting and management accounting
Financial accounting Management accounting

This provides information in the terms of
financial aspects to the external stakeholders
of organisation.
In these types of accounting information
relates with internal stakeholders. This is used
to make effective strategies for organisation.
In order to conduct financial accounting this
is used by management to conduct results as
per accounting standard and rules.
There are less specific standards and principle
that are used to manage management
accounting in effective manner.
Types of management accounting system:
Cost accounting system- With the help of this it is easy for manager to analyse all
different cost such as variable and fixed organisation. In the context of KEF Ltd., it is used by
organisation to deal with detailed information in order to make better construction and services
related with management. Further, direct and indirect cost is also included in organisation to
track all expenses in accurate manner (Chenhall and Moers, 2015).
 In context of KEF ltd. this is used to track all cost that is included to complete all
operations in effective manner and their costs.
Inventory management system- This is used by organisation such as KEF limited to
manage and order all inventory that is required for proper tools and management. The main
motive to implement inventory management system is to record and track all items to prepare
accurate finished goods. Further, LIFO and FIFO are used by organisation to make goods as per
cost basis.
 With proper inventory management system KEF ltd. leads organisation to minimize
the cost of their finished goods.
Price optimisation system- This system is used by organisation to find out the optimum
prices of all products and its manufacturing system. So the cost of products which are produced
or manufactured by KEF ltd. are sold by organisation at right price. On the other side, this tool is
also used to add value for analysing the right prices and to increase the value of organisation
(Englund and Gerdin, 2014).