Management Accounting System and Its Applications

Management Accounting
System and its applications

Table of Contents
INTRODUCTION...........................................................................................................................1
Section A..........................................................................................................................................1
P1 Explain management accounting and essential requirement of various accounting system..1
P2 Use of various methods in management accounting reporting..............................................3
P3 Calculation of cost by formulating income statement...........................................................4
Section B..........................................................................................................................................8
P4 Advantages and disadvantages of different type of planning tools in a business..................8
P5 Adapting management accounting system while responding to various financial problems
.....................................................................................................................................................9
CONCLUSION..............................................................................................................................11

INTRODUCTION
Management accounting is a provision of financial data and it provides advice to an
organisation for using it for further development and growth (Burritt, Schaltegger and Zvezdov,
2011). This document is prepared on basis of short term and regular activities of a business
through which proper modification according to time get done. This assignment is based on
Morrison which is a grocery store and they require to implement this system in business for
making their operations effective and appropriate. Along with this, Nero limited is another small
business entity which used to evaluate this report more properly. This report will be covering
essential requirement for implementing management accounting system with diverse methods
which are used in management accounting reporting. Moreover, on the basis of cost an income
statement will get prepared for marginal and absorption costing. There are various budgetary
planning tools are identify with several advantages and disadvantage which also get evaluated.
There are several financial problems are also identify for the business on which management
have to actively respond.
Section A
P1 Explain management accounting and essential requirement of various accounting system
Management accounting is a process which enable an entity to prepare their reports on
the basis of regular and day to day operations of a business (Dillard, 2014). Thus, every firm
have to prepare their financial statement in such a manner through which all things get ascertain
properly. This concept is usually used by many small sized organisation as they are operating at
low level. Hence, they can easily maintain their reports and reduce uncertainty and risk from
business organisation.
Management accounting system is completely different from the financial accounting
system in which reports frame on the basis of long period of time. Financial accounting provides
strength to such business operations which are taking place in long term context where as on the
other hand management accounting is distinct from this purpose. This support in reformulating
business strategies according to deviations which are taking place in short time duration.
Financial accounting must be filled on annual basis where as managerial accounting is not.
Managerial accounting process does not rely on past performance of business but based
on current and future trends. Management accounting relies heavily on taking decision for
1

fluctuating environment of business and work on market trends according to present scenario of
time. These are for the internal stakeholders of a business which are related to regular operation
of a business. Morrison is one of a grocery store in UK, whose major aim is just to provide high
quality products at standard price to target users. Thus, they can use this concept in business for
making operations more effective and appropriate in nature. By applying this technique in an
organisation, Morrison become able to remove deviations from their business and work in an
adequate manner.
Diverse number of management accounting system are identify by managers of a
company whom have to utilise at grocery store in making their task more effective and
appropriate in nature (DRURY, 2013). They all are helpful in providing strength to a business
which is an essential factor. Various managerial accounting system for Morrison are describe as
below: Cost accounting: Product value plays an effective role at the time of selling it at market.
Cost accounting support an entity to control the cost of production as well as purchasing
through which product get deliver at minimum cost level. Managers have to cut down
unnecessary value from the product. This will aid in delivering of product at more
effective and efficient manner. Morrison have to use this process in business through
which organisation can easily deal out with many problems and adopt such technique
which easily minimise the cost of waste material (Elbashir, Collier and Sutton, 2011). Inventory management: One of a major aspect for business is about stock and inventory.
It is a duty of managers to regularly check all details of their stock and purchase
according to that. Inventory management is essential thing in grocery store which support
to Morrison in increasing satisfaction level of their customers. Job order costing: This system is used when range of products are identically differ from
each other. It is used for the projects which are taking place in an organisation. Hence,
when goods get vary according to time then job order costing method will apply on
business. Morrison is dealing in wide number of products and they can adapt this
technique into business.
 Price optimising: One of a essential factor which have to take in account by every
business firm is analysis. Through analysis proper identification about an individual
perspective get determine. Price optimising is a process which support in measuring
2