Management Accounting: Theory & Practice

This comprehensive assignment on management accounting delves into various aspects of the discipline, including production cost accounting in horse breeding, strategic practices in Croatia, and changes in Malaysian practices. Students will analyze case studies involving South-East Asian companies and examine shared services as a new organizational form. Additionally, environmental management accounting is explored through case studies. The assignment also covers formal and informal feedback mechanisms and the societal relevance of management accounting.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P.1. Explain management accounting and give the essential requirements of different types of
management accounting system..................................................................................................1
P.2. Explain different method used for management accounting reporting................................3
TASK 2 ...........................................................................................................................................5
P.3. Income statements using marginal and absorption costing approaches ..............................5
P.4.Explain the advantage and disadvantage of different types of planning tools used for
budgetary control .......................................................................................................................8
TASK 4..........................................................................................................................................10
P.5. Evaluate how organisation are adopting management accounting systems to response to
financial problems ....................................................................................................................10
REFERENCES..............................................................................................................................13

INTRODUCTION
In this documentation, this assignment describe about explanation of management
accounting and furnish essential requirements of varied of management accounting system in the
organisation effectively. Moreover, this study review about to the varied of method which could
be utilised by the enterprise manager in order to preparation of proper reporting in the
corporation in efficient form. Apart from it, the organisational manager need analyse marginal
and absorption costing approach in order to identify the areas which is giving negative impact to
the business effectively. Some management accounting system can be adopted by Nero Ltd.
Corporation in order to proper response of their financial issues in the organisation effectively.
TASK 1
P.1. Explain management accounting and give the essential requirements of different types of
management accounting system
This is also called managerial accounting or cost accounting in the organisation. This is
the method of assessment of cost in the company and make internal analysis of costing by which
the manager of Bentley Motor Limited Company will be able to prepare a financial report
properly at the workplace. Management accounting is totally a decision making methodology by
which the enterprise would be able to accomplish their desired goals and objectives at easy
manner (Abdel-Kader, ed., 2011). Moreover, management accounting is a process by which the
manager of the company could prepare an appropriate management reports and accounting
reports as well that furnish proper statically information and data analytical reports by which
manager of the firm will make appropriate decision towards reducing costing within the business
effectively. This will also assist the business to accomplishment of their organisational goals and
objectives with efficient way. This is a part of financial reports majorly towards the stakeholders
which make monthly reports at the workplace by internal main employees such as manager of
the company and some other assistant manager as well. Management accounting reports is
basically review about availability of cash amount in the company, revenue generation from the
sales of the organisation and statements towards account payable and account receivable and
debts and raw material showing in its figure in the reports.
Cost accounting system: This is most appropriate system for Bentley organisation in
order to assessment of their cost of production in the company as well as reducing the cost of
manufacturing process and material. This is referred to reduction of costing in the company
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which is occurred while completion of business activities in the company at effective rate. This
kind of accounting system used by Bentley business manager in respect to effectively identify
the differences between the fixed accounting and variable accounting within the company
effectively (Zainun Tuanmat and Smith, 2011). Moreover, fixed costs are in the firm such as
maintenance cost of the production, tooling of the manufacturing method, production managing
and purchasing raw material and quality control expenses and engineering expenses etc. for
instance, the variable cost for the company such as wages of employees etc. which is depends on
the production level of the company.
The benefits of the cost accounting is that, it helps the organisational manager to make
decision towards the company which might lead profitability of the firm in the industry
effectively. It helps the firm to reduce their overall manufacturing expenses within the industry
efficiently.
Job costing system: Job costing approach is an effective system by which Bentley
automotive business entity would be able to make assessment of their manufacturing costs and
individual cost of production and effectively reduce them as well. Job costing approach is most
used when in the company manufacturing process of each product different from each other at
the workplace (Håkansson, Kraus and Lind, eds., 2010). It is the system which refer to the
method by which each portion of manufacturing process might get different from each other in
the company and manager of the company give specific costing to each products line according
to their product section in manufacturing plant. This system refer to computing the cost in the
report which is directly concerned to direct material cost and direct labour cost which is allotted
in order to complete each job in manufacturing process of the company effectively. It includes
some essential costing of each product line in manufacturing method which is direct materials
costs, direct labour costs and overheads costs as well.
The major benefit of job costing is that, it assists the company manager to allot cost of
specific individual manufacturing activities and compute the profitability of the company by
differentiating margin to each company in the organisation effectively. By this process, you
could examine the operational activities at the workplace and according to them find out the
section by which the company can generate more profitability for the organisation effectively.
Process costing system: Process costing method is used in most of the manufacturing
companies. In case of Bentley automotive firm, they used process costing system when they
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produce large quantity of production at the workplace (Modell, 2014). This could be most useful
for the company when they go for large number of production in their production plant and
assigned the costing of each unit process of production within the organisation efficiently. Under
this type of costing approach, the cost of cost is given to the over a fixed period within the
company and all according to them costing is that each unit is produced by the company in a set
up time frame at production house. The premise is that cost of each unit is as same as the other
unit production cost in the company. This costing process is mostly used for the manufacturing
organisation in order to reduce their cost of manufacturing at mass production level.
Management accountant in Bentley organisation require assuming the production level of each
unit also formulate collective process of the units of production of each product lines at the
workplace so that the company’s manager would be able to generate more efficient services
towards the company at effective rate. Bentley business entity requires to completer their all
works according to process costing system in order to reduce overall process costing at the
workplace.
With the assistance of tools and techniques of this company, the company’s manager will
be able to examine the exact values of process costing and reduce them effectively so accounting
manager of the company could easily make decision to reduce the process costing of each unit at
manufacturing plant efficiently.
P.2. Explain different method used for management accounting reporting
This is used by numbers of manufacturing companies in the country effectively. In terms
of Bentley Company, they also used management accounting reporting tools and approach in
order to creation of appropriate strategy towards proper reporting in the company which will help
the business entity in phases of conformity management of their accounting section at the
workplace at parallel rate (Talha, Raja and Seetharaman, 2010). Moreover, management
accounting reporting assist Bentley operation in phase of proper preparation of accounting
reporting at the workplace so that the company’s financial presentation could be enhanced in
efficient procedure.
Following methods might be appropriate for Bentley organisation in duration of
formation of management accounting reporting which is as below:
Budget reporting: Varied of operational activities are being functioned at the
manufacturing plant in the company. In case of Bentley Company, accounting manager of the
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organisation need to make an appropriate reporting within the business entity in order to proper
planning their business in the future which will give positive outcomes to the company at
effective rate. With the assistance of budget reporting in the enterprise, manager of the company
would easily assess the performance of the company parallel manner. Moreover, accounting
manager of the company will be able to generate more efficient reporting of each department’s
performance and reduce the cost of business entity effectively (Bennett, Schaltegger and
Zvezdov, 2013). This budgeting approach is totally made on the approximation method which is
based on the company’s previous financial performance in particular time period. The budgeting
report many be increased in the future so that manager of the organisation require formulating it
in more exact level so that future occurrence issues could be solved easily. This budgeting might
also be utilised by business manager in ground of furnishing incentives and the best pay scale to
their employees within the business at efficient form. This method can be beneficial for their
employees and company as well, because of their employees will get motivated and work hard
for accomplishment of business goals and objectives at efficient manner. In formation of this
reporting, the organization’s manager could add generate incomes of the business entity, sales
information, fixed collection of financial data in common portion of budget reporting which will
assist the business entity to generate more effective services for the company at efficient form.
Job Cost reporting: This is also could be one of the essential budget preparation of
budget reporting in the company so that each job which is being done at manufacturing plant in
the company could be examined in proper form so that the company’s owner would be able to
reduce the costing of job costing within the business entity effectively. Moreover, Job costing is
specially formulated for the specific project in the company. So it shows the expenses which
made on particular project at the workplace in business. This is made on totally estimation within
the operation so that accounting manager of the organisation can examine revenue generation
from the market (Klychova, Zakirova, Zakirov and Valieva, 2015). So on the basis of it, the
company’s manager could evaluate the profitability of the corporation efficiently during a
financial year. This budget reporting could be helpful for the business in context of recognise
those areas in which company’s is earning high revenue and so that the organisational
professionals and manager could focus on those areas which is the most beneficial for the
business instead of focusing on those section which has low level return for the business
effectively. Apart from it, job costing could be assist full for Bentley fellowship in order to
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proper development of their project which is in progress in the company and assess the
disbursals of the projection which is running in the company, so that business manager could
manage those areas effectively which is increasing waste for the business and which making cost
escalating for the business entity.
Account receivable: This is a reporting system which could be also most useful for
Bentley organisation in order to proper resolution of their financial issues within the business in
effective rate. Manager of the organisation can easily evaluate the cash flows of the business and
effective manager them that increase credit for their consumers in the market efficiently. This job
reporting method can be decreased the customer balances which they have owned during
financial business period. Manager of Bentley organisation could easily find out the issues which
comes in the company’s collection process efficiently. This is also assisted the company to look
out at the old bets of the company which is needed to be covered in particular business time
period effectively.
TASK 2
P.3. Income statements using marginal and absorption costing approaches
1. Absorption costing approach
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2. Marginal costing approach
From the assessment of above, it could be said that both costing examination approached
beneficial for Bentley organisation in order to proper resolution of their financial issues within
the business effectively. So the marginal costing approach could be cost of an item which is sum
of the direct expenses cost of the organisation. In case of Nero Ltd. Company, the company’s
manager require to utilised in proper manner at the workplace in respect to help in making
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decision towards the organisation to reducing cost of manufacturing activities in the business
effectively (Ramljak and Rogošić, 2012). From the analysis, it could be said that marginal and
absorption both costing approach beneficial for Nero Ltd. Organisation in terms of find out the
best costing way by which organisation could get more benefits.
Nero Ltd. Organisation require making choice of one of the option in order to effectively
examine their costing approaches at the workplace and identify those areas by which the
company is getting losses. Moreover, in case of marginal costing approach, refer to the process
of setting up the cost of product at slight up level to variable costing of the firm in order to
manufacture products of the company. This approach could be concerned about short-term
pricing settlement of the company according to situation in the business effectively. In the
company, the variable cost on each unit remains constant in case of increment and decreasing of
production in the business at effective rate. Marginal costing approach inclusion of variable
production overhead costing in their calculation process in order to overall computing of their
costing in the business in effective rate. Apart from it, variable overhead disbursal associated
essential expenses which is made in the business such as insurance, wages to workers lease
payments on some equipment’s in the business and some other disbursal as well. The main
advantage of marginal costing is that, it involves variable costs in the costing analysis of the
company so that it helps the company to ascertain profitability towards the organisation
efficiently (Vosselman, E., 2014). Apart from this, absorption costing approach also might be
beneficial for the organisation in order to appropriate analysis of their costing at the workplace at
effective manner. Nero Ltd. Company manager need to proper evaluation of accounting standard
to make an inventory assessment that is existed in organisational balance sheet efficiently.
Production of the company might be absorbed a wide range of fixed and variable costing within
the firm and these kinds of costing in the organisation does not consider as the expenses of the
firm while business entity plays for it in efficient form. For instance, the keep on in inventory as
assets in that time in which the inventory is to be sold effectively. Absorption costing is
consisted of some components which is direct materials, these are those material which is
involves in the production of the final good of the company effectively (Van Helden and
Northcott, 2010). Moreover, direct labour also may be included which is concerned to the labour
which is used for construction of products at the manufacturing plant effectively. In this costing
approach, fixed manufacturing overhead costs also included which is operates a manufacturing
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facilities at the manufacturing plant such as insurance and rent of the company effectively. This
costing is assigned to identify the valuation of purpose of absorption costing method in the
business at effective manner which will be beneficial for the organisation at effective rate.
Hence, it could be said that both costing approach could be used by the business account
manager in order to analyse of their fixed and variable overheads costing in manufacturing plan
and effective control them in given financial period so that profitability of the business could be
increased and relevant financial targets could be accomplished effectively.
P.4.Explain the advantage and disadvantage of different types of planning tools used for
budgetary control
Assorted of budgeting approach is being used by Nero Ltd. Company in order to
effectively control of their budgeting for the business in the industry in more efficient form so
that appropriate outcomes could be gained more effective within the business in more effectively
(Burritt and et.al., 2011). Most of the manufacturing business is utilizing varied of budgeting
preparation approach by which they will be able to gain their predetermined financial goals and
objectives at efficient manner. Nero. Ltd company could utilise of these approach of budgeting in
respect to effective controlling of their budgeting in within the business time duration.
Followings are some advantage and disadvantages of budgeting approaches are as below:
Cash budgeting: Cash budgeting is also one of the vital method by which the business will be
able to generate more relevant method by which accounting manager of Nero Ltd. Company
require assuming appropriate cash inflow and outflows of the operation in specific financial time
duration. This budgeting approach assist the business entity in respect to assess the volume of
money which is remained in the enterprise in order to sufficient running of the business in the
industry in proper form (Herbert and Seal, 2012). In this cash budgeting approach, the
accounting manager of the entity require making estimation about to future production and sales
of the company’s product and services in effective manner. According to the future estimation in
the business, they need to formulate cash budgeting in the business properly.
Advantage of cash budgeting:
 Advantage of cash budgeting is that, the business accounting manager can recognise
those areas of entity which is not functioning towards the profitability of the business.
With the help of cash budgeting tools and techniques the company’s manager will be able
to make decision to control those section effectively (DRURY, 2013).
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 This approach assists the organisational manager to focus on some of the essential areas
in which financial performance of the entity could be improved efficiently.
Disadvantage of cash budgeting:
 This is an approach which describe about to the based on estimation method and many
times it has been seen that estimation values could not be gained by the business entity
because of some critical situation in business environment. It makes negative impact on
the business effectively. Cash budgeting cannot prepare easily by accounting manager of the company, they need
to high effort and high level of professionals to prepare this budgeting approach in the
company efficiently.
Fixed budgeting: Fixed budgeting could be useful for Nero Ltd. Organisation in order to
control cost of the company and preparation of proper budgeting in the organisation effectively.
Fixed budgeting is an approach in which its values remain constraints and never get changes in
its particular time period (Pitkänen and Lukka, 2011). Large numbers of manufacturing
companies are utilising this forms of budgeting approach in terms of proper development of their
issue in more effective form.
Advantage of fixed budgeting:
 This is a method, which assist the business manager in order to keep up production cost
of the company at minimize level so that each of their customer could get afford those
prices.
 Other major advantage of fixed budgeting is that, this is easy to make by accounting
manager in the company. There is no needed for keep regular update this kind of
budgeting in the firm efficiently (Angelakis, Theriou and Floropoulos, 2010). It also helps the enterprise in order to make evaluation of the budgeting at sort terms and
long term so that effective decision could be made in order to reduce those areas in which
cost of production is overwhelming at the workplace.
Disadvantage of fixed budgeting:
 This major disadvantage of fixed budgeting is that, it never get changes in the business
and its values always remain same. Many times, it has been seen that business manage
need to change in their budgeting strategy according to the situation in organisation so
that it makes negative impact on business in such situation.
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 The business manager could easily find out under forming section in which manager of
the company could not take action towards the extra resources of the business.
Zero base budgeting: This budgeting approach also could be helpful for the organisational
accounting manager in terms of every new time period of the company effectively. This
budgeting approach start from the Zero base in the company as its name showing the value of
budgeting in it. Moreover, each of their purpose is assessed with the assistance of needs and
prices in the entity efficiently
Advantage of cash budgeting:
 Zero base budgeting approach could assist accounting manager of the company in respect
to costing reduction of manufacturing process and other method in the company. Which
furnish accurate value for the business in efficient form properly (Cadez and Guilding,
2012). In order to utilization of resources in the company in appropriate manner by this
approach, manager of the venture could determine those areas by which the organisation
could get effective manner of the firm effectively.
Disadvantage of zero base budgeting:
 In case of the largest manufacturing organisation, varied forms of parallel decision are
designed in this budgeting process which increase the disbursals of the company
effectively.
 It generates risk in the business when accounting manager of the company create zero
base budgeting within the organisation effectively.
TASK 4
P.5. Evaluate how organisations are adopting management accounting systems to response to
financial problems
In case of manufacturing organisations, varied of companies are facing numbers of
financial issues in the firm effectively and they are utilising management accounting tools and
techniques at effective manner in case of resolving their financial issues and barriers in within
entity efficiently (van der Steen, 2011). In case of Nero Ltd. Company, it is also facing various
kinds of financial issues and problems in the industry and they need to use of several kinds of
management accounting tools and techniques in order to better response of their issues in
effective form.
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Key performance indicator: Key performance indicators could be beneficial for the
business in order to proper response of their financial issues in the industry at effective rate in the
business environment. Moreover, in case of Nero Ltd. Company they need to utilization of key
performance indicator in the business in respect to identify their financial performance in the
business at effective rate and make development of those areas by which the organisation could
get the performance indicator of the company efficiently (Bouten and Hoozée, 2013). In terms of
identification of financial issues of the company, Nero Ltd. Corporation manager could use of
key performance indicator at the business in order to examine those areas in enterprise in which
the business is performing their weak performance and manager of the company can take action
to reduce the negative impact of those areas on productivity and profitability of the business
efficiently. Apart from it. With the help of key performance indicator, the manger could
recognise essential areas in which the business in not performing according to planning of the
enterprise.
Balanced score card: This is a management accounting approach by which provide the
form by which the organisational manager make focus on those areas in which financial issues
are occurring at the workplace and with the assistance of management accounting tools and
techniques, the manager of the company can better response the financial issues in the business
at efficient form (Kotas, 2014). It provides the right ways of the company by which the business
could identify the areas and follow the path by which financial issues could be resolved
efficiently. Apart from it, financial measurement is most vital section of each business and in
case of Nero Ltd. Company, it furnishes some vales by which the business manager could
determine the overview of the business and according to the information, accounting manager
could set up the long terms and short term goals and objectives for the business effectively.
Balance score card furnish the information by which the corporation manager assess the
performance of the business to their targeting performance of the entity so that those areas could
be recognised by the manager in which the organisation is giving waste performance. With the
help of management accounting tools and techniques, accounting manager can make
improvement in some of the areas in which the corporation can accomplish their set targets and
objectives at efficient form.
Financial governance: This is mostly used by manufactured companies in their business
in order to resolving their financial issues and problems at effective rate. Numbers of financial
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issues is facing by Nero Ltd. Company and accounting manager of the company need to make
decision in the company in order to proper development of some of the areas by which
organisational performance could be improved efficiently (Herzig, Viere, Schaltegger and
Burritt, 2012). In case of the company’s bade performance, there could be several reasons behind
the business, in the company if a person making wrong decision and done wrong exercises which
make cause of financial falls within the business efficiently. Then the particular person who
make wrong decision is specifically responsible for all financial losses in the business
effectively.
CONCLUSION
From the above research, it is concluded that, management accounting is one of the
essential tools and techniques by which each of manufacturing organisation can resolve their
financial issues in the company effectively. Moreover, Nero Ltd., company need to make use of
some costing system and budgeting approach of management accounting system so that their
financial issue and problems could be resolved effectively within the corporation efficiently.
Nero Ltd. Company can utilise of marginal and absorption costing method in terms of reducing
those costing areas which is making negative impact on the business effectively.
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REFERENCES
Books and Journals
Abdel-Kader, M. G. ed., 2011. Review of management accounting research. Springer.
Angelakis, G., Theriou, N. and Floropoulos, I., 2010. Adoption and benefits of management
accounting practices: Evidence from Greece and Finland. Advances in accounting. 26. 1.
pp.87-96.
Bennett, M. D., Schaltegger, S. and Zvezdov, D., 2013. Exploring corporate practices in
management accounting for sustainability (pp. 1-56). London: ICAEW.
Bouten, L. and Hoozée, S., 2013. On the interplay between environmental reporting and
management accounting change. Management Accounting Research. 24. 4. pp. 333-348.
Burritt, R. L., Schaltegger, S., Bennett, M., Pohjola, T. and Csutora, M. eds., 2011.
Environmental management accounting and supply chain management (Vol. 27). Springer
Science & Business Media.
Cadez, S. and Guilding, C., 2012. Strategy, strategic management accounting and performance: a
configurational analysis. Industrial Management & Data Systems. 112. 3. pp. 484-501.
DRURY, C. M., 2013. Management and cost accounting. Springer.
Håkansson, H., Kraus, K. and Lind, J. eds., 2010. Accounting in networks. Routledge.
Herbert, I. P. and Seal, W. B., 2012. Shared services as a new organisational form: Some
implications for management accounting. The British Accounting Review. 44. 2. pp. 83-97.
Herzig, C., Viere, T., Schaltegger, S. and Burritt, R. L., 2012. Environmental management
accounting: case studies of South-East Asian companies. Routledge.
Klychova, G. S., Zakirova, A. R., Zakirov, Z. R. and Valieva, G. R., 2015. Management aspects
of production cost accounting in horse breeding. Asian Social Science. 11. 11. p. 308.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Modell, S., 2014. The societal relevance of management accounting: an introduction to the
special issue. Accounting and Business Research. 44. 2. pp. 83-103.
Pitkänen, H. and Lukka, K., 2011. Three dimensions of formal and informal feedback in
management accounting. Management Accounting Research, 22. 2. pp. 125-137.
Ramljak, B. and Rogošić, A., 2012. Strategic management accounting practices in Croatia.
Journal of international management studies. 7. 2. pp. 93-100.
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Talha, M., Raja, J. B. and Seetharaman, A., 2010. A new look at management accounting.
Journal of Applied Business Research. 26. 4. p. 83.
van der Steen, M., 2011. The emergence and change of management accounting routines.
Accounting, Auditing & Accountability Journal. 24. 4. pp. 502-547.
Van Helden, G. J. and Northcott, D., 2010. Examining the practical relevance of public sector
management accounting research. Financial Accountability & Management. 26. 2. pp.
213-240.
Vosselman, E., 2014. The ‘performativity thesis’ and its critics: Towards a relational ontology of
management accounting. Accounting and Business Research. 44. 2. pp. 181-203.
Zainun Tuanmat, T. and Smith, M., 2011. Changes in management accounting practices in
Malaysia. Asian Review of Accounting. 19. 3. pp. 221-242.
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