Management Accounting System: Types, Methods and Reporting

This report focuses on the critical discussion on the management tool its methods and tools to evaluate the performance of company. The different types of management accounting system and its essential requirements have been analyzed.

Management accounting system
MAS
MAS
Name of the Author- University Name

Introduction
Management accounting information is used by the managers to formulate the
strategies and identifying whether the financial performance of company is good or not. This
report focuses on the critical discussion on the management tool its methods and tools to
evaluate the performance of company. The different types of management accounting system
and its essential requirements have been analyzed. The application of the management
accounting is also done.
P1: Explain management accounting and give the essential requirements of different
types of management accounting systems
The management accounting information is used to evaluate whether company has
adequate resources to implement proper business decision. There is management accounting
information system that has been used to evaluate the busienss financial system of
organization (Chiarini, & Vagnoni, 2015).
Cost accounting system
This system is used to evaluate the cost of the process and valuation of the particular
products and services in busienss. The main purpose of this system is to identify the costing
of the each process and strengthen the overall quality of the busienss (Chiarini, & Vagnoni,
2015).
Inventory management
It is the system or method to control the flow of the inventory in the busienss process.
It helps in accurately identifying the inventory level, minimum and maximum stocks and
economic order quantity to place order. The benefit of this system is to strengthen the bottom
line and accuracy of the inventory management (Nishimura, 2013).
Job costing system
It is the system of allocating the cost to the individual items or batches of the
products. It is used to assign the individual cost of the products based on the process cost.
The job costing system is used to identify the costing of the process based on the identified
cost incurred for the particular products and services. This method also uses the activity

based costing method to absorb the cost of the products in different process of the
Organizaiton.
Price optimization systems
It is the system to determine the price of the products and how the client will react
with the changes in the price of the offered products. It discovers the best optimum price for
the offered goods in market. If company could use this system effectively then it will not
only assist in determining the right price for the products but also helps in strengthen the
overall business outputs in effective manner. This will allow in determining the costing and
pricing of the products which company would have from its sold goods and services in
market.
There are several principle of the management accounting system which needs to be
followed by the organization if it wants to prepare the proper accounting sheets and
statements in its books of accounts. An explanation of the principle of the management
accounting could be given for evaluating the management accounting information. The
management accounting provides all the information that is needed for making decisions in
the organization. The principle also identifies all the information that are related to present,
past and future including the data that deal with financial and non- financial. The main
reason for developing the management accounting principle was because the internal
department in the company needs all the information for making the better decision, forming
the customer base and utilization of the resources that are present in the company. The
management accounting has two principles that are: (a) principle of causality (b) principle of
analogy (Nishimura, 2013).
P2: Explain different methods applied for management accounting reporting
The management accounting analysis the internal information received via financial
accounting and used for the controlling, planning and comprising the balance sheet, income
statement and other cash flow report of company (Drury, 2015). The different types of
management accounting systems and essential requirements have been analyzed to showcase
the financial information of company.
There are several methods for the management accounting reporting

Cost reporting
It is the reporting of the cost of the items calculated in the busienss. It is based on the cost of
the labour, raw material and other process costing. It is used by the manager in evaluating the
cost and benefit analysis of the products (Chiarini, & Vagnoni, 2015).
Budget
It is the statement which reveals the estimation of the expense and income of the
products and services offered in market. The mangers use this budget to formulate the
strategies and busienss strategic plans (Otley., 2016).
Performance reports
This performance report is prepared to evaluate the estimated budget performance of
company with the actual performance. It is used by the managers to make the effective
strategic plans based on the identified budgets (Appelbaum, and Kogan, 2017).
Financial report
This are the report which are prepared to records all the financial records and data which
company will book with a view to showcase the financial performance of company. It is
accompanied with the balance sheet, profit and loss account, cash flow statement of company
(Edmonds, and Olds, 2013).
Cash flow report
This is the report which is prepared to identify the cash inflow and outflow from the
busienss. However, in order to identify the present value of the cash inflow and outflow, we
could use the discounting factors which will assist in evaluating the financial performance of
company in long run.
P3: Calculating costs using suitable techniques of cost analysis to prepare the income
statement using absorption and marginal costs.
The computation of the cost is done by using the marginal costing technique (Klychova,
Faskhutdinova, & Sadrieva, 2014).
 Computation of the cost using the cost analysis marginal costing method

 Contribution could be defined as differences between the sales and variable expense
 The cost of each unit of cake under marginal costing method
Cost of the 10000 units Calculated
amount
Costing of the process per
unit
Cost of the direct material =£50000 50000/10000 £50
Costing of the direct labour = £30000 30000/10000 £30
Variable overhead =£20000 20000/10000 £20
Marginal cost per unit Burger £100
The above given table reflects the marginal cost per unit of the burger which is computed on
the basis of the burger sold in market and variable cost associated with the same (Maskell, H.,
Baggaley, & Grasso, 2016).
Use of absorption costing for the computing of the cost per unit
Cost of the 10000 units Calculated
amount
Costing of the process per
unit
Cost of the direct material =£50000 50000/10000 £50
Costing of the direct labour = £30000 30000/10000 £30
Variable overhead =£20000 20000/10000 £20
Fixed cost =£40000 40000/10000 £40

Per unit cost of production £140
These are the financial information which could be used to identify the cost and profit of the
company. The above given table has helped in identifying the cost and benefits, contribution,
and net profit of the company after selling the particular level of units (Maskell, Baggaley, &
Grasso, 2016).

Computation of the income statement of Xyz Company
For the period ended 30, June 2017
Particulars Units selling price £ per
unit
value in £
Sales 10000 25 250000
Less: marginal cost of goods
Material costing 10000*50 =50000
Labour Costing 10000*30 =
30000
Variable expense costing 10000*20 =20000
Total marginal costing £100000 100000
Contribution gross 150000
Reduced with the other
expenses
30000
Net contribution per unit 120000
Reduced with the fixed cost
Fixed overhead expenses 40000

Fixed expenses. 30000 70000
Net profit 50000
The formulation of the income statement of the XYZ Company has been done on the
basis of the assumption made and hypothetical of the data collected. This shows the net
profit, contribution per unit and breakeven point of the business (Nishimura, 2013). This has
allowed company to determine the break-even point and the point at which company will
have profit from its business (Stafford, & Karszes, 2017).
Conclusion
After analysing the all the management accounting information and other details it
could be inferred that company should focus on using the proper costing method and
reporting to lower down the complexity in determining the cost of the process of the
organization. The cost and benefit analysis is the best method to determine the contribution
per unit, fixed cost expenses and net profit earned by company throughout the time. It is
analyzed that if company could use proper methods then it will not only strengthen the
overall busienss functioning but also help in lower down the business complexity in effective
manner. The management accounting information shown in the busienss report should be
accurate and tested with the proper graphs, charts and tables. This management accounting
information is the best method to identify how company has been performing and where
company needs to work in order to strengthen its busienss process.

References
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