Management Accounting Research and Its Trends

This assignment delves into current research trends within the field of management accounting. It examines various aspects such as the application of the balanced scorecard, the impact of lean manufacturing practices on firm performance, the role of management accounting in family businesses, and the evolving landscape of management accounting research. The provided bibliography consists of scholarly articles that contribute to these discussions.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Management accounting and need of different types of management accounting system. . .1
Different methods used for management accounting reporting ............................................2
Benefits of management accounting system and its application in Jupiter PLC....................3
Integration of management accounting system and management accounting reporting with
organisational process............................................................................................................5
TASK 2............................................................................................................................................5
Income statement as per absorption costing...........................................................................6
Income statement on basis of marginal costing......................................................................7
TASK 3............................................................................................................................................8
Advantages and disadvantages of different types of planning tools in budgetary control.....8
Use of different planning tools for preparing and forecasting budget....................................9
TASK 4..........................................................................................................................................10
Use of management accounting system for solving financial problems..............................10
Management accounting assist in sustainable success by responding to financial problems11
Evaluation of planning tools for solving financial problem.................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
This study is based on management accounting. Management accounting is related to
presentation of various accounting information in the form of report in order to provide
information to managers which will assist them in making various decisions. This assignment
will include Jupiter PLC to perform different task of the study. Jupiter PLC is a medium sized
manufacturing company. This assignment will include different types of management
accounting systems. This study will provide different methods used for management accounting
reporting. Furthermore, it will provide advantages and disadvantages of different types of
planning tools used in budgetary control. Also, It will include management accounting system
that assist in solving financial problems of firm.
TASK 1
Management accounting and need of different types of management accounting system
Management accounting is related to providing various information of different financial
data that assist is performing various activities of the organisation. Management accounting
refers to that accounting method adopted by organisation for various decision- making in order to
maximise the profitability of the firm. This accounting method assist management in performing
their various task relating to planning, organising, directing and controlling.
Management accounting system include various internal system which are used by
management of the firm in order to measure the various activities of the enterprise. Management
accounting system consist of the following :
 Cost – accounting system : Cost – accounting system of management accounting is
used for determining the cost of products which assist in increasing the profitability of
firm. Cost of the product is determined on the basis of process costing and job order
costing. Job order costing is related to breakdown of the process in each job and then
allocating the cost for the particular job. Process costing involves breakdown of cost
into each process this involves cost allocated for different department that are involved
in different process of manufacturing a product.
 Inventory -management system: This management accounting system is related to
management of inventory by supervising the flow of inventory from manufacturers to
warehouses. Inventory management system helps in reducing over utilisation of
inventory in order to derive effective results by utilising the raw material in the best way
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to achieve higher results. Inventory management include two methods of calculating
inventory that consist of FIFO and LIFO method. FIFO method of inventory control is
related to those cost of inventory which is the oldest among the other will be sold first.
LIFO method of inventory management is related to last in first out that means those
items of inventory which is latest is used first and then the other products are sold.
 Job costing system : This system of management accounting is related to determining
the cost of relating to particular job. This system provide information of different cost
associated with particular job. This information include direct material , overhead cost
etc. This system assist the management in identifying the cost of each job that helps in
performing different operation of business.
Jupiter PLC follow this management accounting system in order to manage different
operation of organisation. Jupiter PLC adopted this management accounting system in order to
determine the cost of its manufacturing processes.
Different methods used for management accounting reporting
Management accounting reporting are those statements which are used for providing
information to management relating to various operation of the company. This report assist
management in improving their various functional areas and providing appraisals to the high
performing employees to motivate them towards work. Management accounting reporting
consist of following reports :
 Budget report : Budget report assist in providing information about various operations
and also assist in analysing the business -performance. Budget report assist mangers in
identifying department wise performance in order to provide incentive to employees for
their higher performance. Budget report also provide information regarding the future
financial wants of the firm in order to achieve the desire profitability in the future. Budget
report are made by the management in order to identify their financial sources which will
be required to perform various activities of the organisation.
 Accounts receivable Aging : This report is presented in order to mange cash flows
relating to extended credit provided by organisation to its customers. This report is used
to identify the firm collecting process in order to know about its creditability. These
report include the invoice columns that include the time period of credit provided by the
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company such as 30 days late, 60 days late etc. This report provide managers in changing
their credit policies if the firm is having problem in collecting balances from customers.
 Job cost report : This report assist in identifying the expenses relating to specific project
financed by the organisation. Job cost report helps in estimating the profitability by
comparing the actual cost with the estimated cost. This report helps in reducing unwanted
expenses relating to specific project. This report provide assistance to the organisation in
identifying higher earning areas of the firm.
Jupiter PLC in order to perform various activities and determine the cost allocated to each
operation maintain this management accounting reporting. This management accounting report
are prepared by managers in order to know about profitability of the firm, identifying various bad
debts occurring because of non- payment by customers. This reports also assist in estimating the
budget for the future activities of the organisation.
Benefits of management accounting system and its application in Jupiter PLC
Management accounting system include cost accounting system, inventory management
system and job costing system. There are various benefits and disadvantages of this management
accounting systems that consist of following :
Cost – accounting system benefits :
 This management accounting system provided benefit to the organisation by reducing the
cost of the product by using improved method of production to derive better results .
 This system provide management with various information relating to cost that assist in
various performing various functions such as planning , implementing and controlling.
 This system of management accounting assist the organisation in controlling the cost to
production by preparing budgets to control the cost by comparing the actual cost with the
standard.
 This system assist in price fixation by preparing various costing recording.
Cost- accounting system disadvantages :
 This system provide information on the basis of past performance which are not effective
for the future decisions as it is a disadvantage of this management accounting system.
 This system does not include any financial character due to which the cost of the product
can be incorrect.
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 Cost is determined by using full capacity and if the capacity is not fully utilised, the cost
derive must be incorrect that hampers the profitability of the organisation.
Benefits of inventory – management system:
 This system of management accounting assist the firm in increasing their efficiency by
controlling the inventory and reducing overutilisation of resources.
 Inventory management system helps organisation in reducing cost of the product by
maintaining stock according to demand and reducing overstocking of inventory provide
assistance in reduction cost.
 This system assist in reducing fraud by proper maintaining the record of inventory
present in the warehouse.
 This system provide organisation with adequate stock in order to meet the demands of the
customers and thus reducing overstocking of inventory that increases cost of product.
Disadvantages of inventory- management system :
 This management accounting system is expensive due to which not many organisations
prefer this system.
 Inventory management system is complex to understand and operate as this system
requires high professional knowledge.
 This system of management accounting lays emphasis on inventory management due to
which other operations are not properly managed which provide various risk to the
organisation.
Advantages of job costing system :
 This system of management accounting assist in allocating the profit separately to each
job.
 Management is able to determine the cost of job on the basis of past records.
 This system of management accounting assist in fixing the price of each job.
 On completion of each job the cost is compared in order to control cost.
Disadvantages of job costing system :
 This system of management accounting require more clerical work for maintaining
detailed information of job costing.
 This system of management accounting is expensive thus it is not preferred by small
scale companies.
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 Comparison of cost become irrelevant in the situation of inflations.
Jupiter PLC in order to control cost and operate different activities use this system in
order to improve profitability of the organisation and also to improve its productivity. These
systems of management accounting provide assistance to Jupiter PLC in determining cost of
each job by implementing job costing system. Jupiter PLC is also benefited by implementing
this system as it helps in fixing cost of the product. The disadvantage of this management
accounting system that are faced by Jupiter PLC consist of complexity in understanding these
systems.
Integration of management accounting system and management accounting reporting with
organisational process.
Management accounting system and management accounting reporting are integrated
with the organisation processes as management accounting system assist in providing various
information relating to cost and also provide information relating to utilisation of the inputs in
the best way to derive profits. Management accounting reports provide data relating to various
activities of Jupiter PLC. Management accounting reporting consist of budget reports and job
cost report.
Budget report assist in identifying the deviation by comparing the actual cost with the
standard which benefits the organisation in changing the method to increase probability.
Sometimes, the organisation can set the standards too high due to which the organisation process
is negatively affected by the huge deviations in the comparison.
Job costing system and job costing reporting are integrated with organisation process as
this system provide various information about each job allocated to each product on the basis of
this information job costing report are prepared which assist in identifying cost of each job to
improve the organisation process.
TASK 2
Absorption costing : Absorption costing refers to the costing technique in which all cost
relating to manufacturing is absorbed by the units produced. This cost will include direct labour,
and will include both variable and fixes cost as a product cost. The profit generated in
absorption costing is less because fixed cost is considered in product cost.
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Income statement as per absorption costing
Particulars Figures (in
£)
Figures (in
£)
Sales revenue (16000 * 50) 800000
Production cost (19000 * 37.6) 714400
Less: inventory at the end of period (3000*37.6) 112800 601600
Gross profit (Sales – COGS) 198400
Less: Under absorption
Net gross margin
Absorption costing
Computation of manufacturing cost per unit
Particulars Figures (in £)
Direct labour 20
Direct material 10
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Variable production overhead 2
Fixed production overhead 5.6
Total manufacturing cost per unit 37.6
Marginal costing : Marginal coasting refers to the costing technique in which variable cost is
charges to units cost and fixed cost is assumed to be cost of the period. Marginal costing assist in
calculating the profit by use of profit volume ratio. Marginal costing is used to determine the cost
of next unit.
Income statement on basis of marginal costing
1. Marginal costing
Particulars Figures (in
£) Figures (in £)
Sales revenue (16000*50) 800000
Less: Variable expenses
Direct labour (19000 * 20) 380000
Material cost (19000 * 10) 190000
Variable production overhead (19000 * 5) 95000
Less: closing inventory (3000 * 35) 105000 560000
Contribution (sales – variable cost) 240000
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Less fixed production overhead cost 100000
2. Net profit 140000
3. Computation of variable cost per unit
4.Variable cost per unit: 10 + 20 + 5
5. = £35
TASK 3
Advantages and disadvantages of different types of planning tools in budgetary control
There are different tools used in budgetary control for the planning process which consist
of cash budget, operating budget and zero -based budgeting.
Cash budget: Cash budget refers to the budgetary tools which is prepared in order to
have understanding of the estimated inflow and outflow of cash. This tools are used in order to
have understanding of the sufficient cash available with firm or not.
Advantages
 This budgeting tool assist in planning for cash according to its availability in the firm.
 This planning tool assist in coordinating various activities of the department of the
organisation. This budgetary tools provide assistance to the firm by minimising the cost and
maximising the profitability of organisation.
Disadvantages
 The success of these tools depends on the cooperation of the staff.
 It involves various information to prepare a budget due there is lack of flexibility.
 This tools required longer time for preparation of budget.
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Operating Budget: Operating budget is related to the operating expenses and incomes of the
organisation. This budget include estimate of the activities perform by the organisation.
Advantages
 This budgeting tools helps the organisation in managing the expenses of the organisation
by comparing the actual expenses with the estimated.
 The operating budget assist the organisation in increasing the profitability of the firm by
effectively performing operating activities of the company. Operating budget helps in estimating the financial obligation of the organisation.
Disadvantages
 This budgeting tools required more time preparing the budget.
 This budget may sometime show huge deviation between expenses due to which other
activities of the firm get affected.
Zero- based budgeting : This is a tool of budgeting in which all expenses start from the zero
base for each new period.
Advantages
 This budgeting tool lays emphasis on profits over expenses to generate more profits for
the organisation.
 This budgeting tools does not encourage following any rule or regulation. This budgeting tools assist the organisation in making strategic planning for the future to
increase profitability
Disadvantages
 This budgeting tool does not focus on cost centres has it does not help in generating
profits.
 This budgeting tools require more attention and analysis due to which this budgeting tool
is too complex.
Use of different planning tools for preparing and forecasting budget
Jupiter PLC by using Cash budget can assist in forecasting by comparing the actual cash
flows with that of standards and thus identifying deviations to control the over cash outflows of
the organisation. Cash budget assist in forecasting of future cash flows on the basis of budget
organisation can control its cash outflows and increase its cash inflows.
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Also, by using planning tools such as Zero- based budgeting that helps the organisation
in controlling the expenses by comparing various activities with the standards. Zero -based
budgeting starts from the zero base on the basis of which forecasting is made regarding future
activities in order to reduce expenses abnd increase generating incomes to increase the
profitability of the Jupiter PLC.
TASK 4
Use of management accounting system for solving financial problems
Tools Nisa company Unicorn company
Benchmarking
Benchmarking assist in
reducing the financial problem
by making comparison of the
different practices and
performance standard of the
organisation with that of the
other firm operating in the
same industry.
Benchmarking has assisted
Nisa in reducing financial
problem by setting benchmark
for the performance.
This tool assist in solving
financial problem of unicorn
and assist in increasing its
profitability.
Financial governance: This is
a method through which
organisation collect, manage,
monitor and control financial
information. Poor financial
governance leads to fraud ,
poor decision- making etc.
Financial governance are the
policies and procedure
companies use to manage
business data in order to make
the data authentic. Financial
Financial governance assisted
Nisa in managing its financial
information to reduce fraud.
Unicorn is benefited by
implementing financial
governance which has
provided organisation with
effectively utilising its
financial resources.
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governance includes internal
controls, financial control,
internal and external audit and
data security.
Key performance indicator
(KPI): This is related to
measuring the organisation
performance inn achieving
their objectives. Performance
indicator evaluate the
performance of organisation
and employees towards
achieving the organisational
objectives.
Key performance indicator
assistandard performance
measures, for each of the foust
in measuring the performance
of Nisa to improve its
performance to gain high
productivity.
Key performance indicator has
assisted Unicorn in reducing
financial problem by
increasing their performance
with the helps of key
performance indicator.
Balance scorecard : Balance
scorecard is used to measure
the performance to identify
and improve various internal
functions to achieve the
objectives of organisation.
This provide quantitative
results. Balance scorecard
monitor the performance to
achieve higher results and
reduce the financial problem
of the business.
Balance scorecard assist in
measuring the performance of
organisation in order to
improve its performance and
reduce financial problem of
the organisation.
Balance scorecard assist in
reducing financial problem of
Unicorn by implementing
balance score card.
Management accounting assist in sustainable success by responding to financial problems
Management accounting assist in providing information to the organisation about various
activities of the organisation on the basis of which firm can formulate strategies and plan
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accordingly to improve the performance of the Jupiter Plc and thus assist in sustainable business
performance.
Management accounting by solving financial problem helps in generating more profits
and also assist the organisation in growing its business. Management accounting helps in
improving the productivity of Jupiter PLC by solving its various financial problems by using
tools such as financial governance, benchmarking etc.
Management accounting assist in improving communication between department to
achieve higher performance for gaining high profits.
Evaluation of planning tools for solving financial problem
Benchmarking: This assist organisation in improving its performance by setting
benchmarks for the performance. It also helps in changing the method and set the standard to
increase profitability of firm. Benchmarking assist in understanding the organisation activities to
set proper benchmarks. In the contrary, this tools provide some disadvantages such as its does
not measure the effectiveness and also provide insufficient information.
Financial governance: This tool assist in controlling financial resources and also helps in
allocating the resources in the best way. This system assists in increasing the managerial
efficiency by providing accurate information of the financial resource which assist management
in various decision- making. In the contrary, It provides limitation of setting standards to control
the financial resources it requires setting standards to compare the actual performance with the
standard performance.
Balance scorecard: This tools assist in controlling the performance of the organisation and
also helps in communicating various business goals and objectives. In the contrary, it provides
various disadvantages such as this tool does not provide standards for measuring the
performance due to which its shows incorrect result. Bit shows about organisational performance
rather than methods to improve the performance.
CONCLUSION
From the above study it has been concluded about management accounting and different
types of accounting systems that has included inventory management system, cost – accounting
system and job costing system. This assignment has also included about different management
accounting reporting that has included Budget report, Job costing report and account receivable
aging . Furthermore, it has also explained about marginal costing and absorption costing. It has
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also included different planning tools used in budgetary control such as cash budget , operating
budget and zero- based budgeting. It has also provided with management accounting system used
to solve financial problem that has included benchmarking. Financial governance and key
performance indicators.
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