Management Accounting: Systems, Methods, and Tools

Management Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and essential requirements of its systems......................................3
P2 Different methods used for management accounting reporting.............................................5
TASK 2............................................................................................................................................6
P3 Calculation of cost using different costing techniques...........................................................6
TASK 3............................................................................................................................................8
P4 Advantages and disadvantages of different planning tool used for budgetary control..........8
TASK 4..........................................................................................................................................11
P5 Comparison of the way in which organisations are adapting management accounting
systems.......................................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is defined as an activity of framing an effective plans and policies
on the basis of final accounts of an organisation which are prepared on annual basis. These
includes profit and loss account, balance sheet, cash flow statement etc. It provides valuable
information both monetary and non-monetary to internal as well as external parties to an
organisation thus plays an important role in the long term sustainability of business. The present
assignment is based on KEF Ltd. which is engaged in manufacturing sector. The report discusses
the concept of managerial accounting along with its systems with benefits to an organisation.
Along with this, reporting systems, costing methods, planning tools to control budget and role of
management accounting systems in resolving financial issues are also discussed under this
report.
TASK 1
P1 Management accounting and essential requirements of its systems
Management accounting: It is a process of decision making on the basis of information
provided by the finance manager after analysing final accounts of an organisation. It makes easy
for managers to formulate an effective plans and strategies for future growth and development of
an organisation (Bryson, Crosby and Bloomberg, 2014).
Origin and evolution of management accounting: Managerial accounting was introduced
at the period of industrial revolution. It came into existence after financial accounting with an
objective of providing valuable financial information to the shareholders of an organisation.
Management accounting systems: It includes various types which every organisation
adopts according to their nature and mission such as price optimisation system, cost accounting
system etc. In the context of KEF Ltd., the managers need to analyse the systems properly and
implement accordingly so as to gain profitable outcome in future (Christ and Burritt, 2013).
Difference between management and financial accounting:
Managerial accounting Financial accounting
 It facilitates both internal as well as
external parties by providing useful
financial stability of an organisation
 It facilitates only external parties by
providing actual financial status of
company.
 Conduction of management accounting  Final account are prepared on annual

is based on the requirements of an
organisation as there is no specific
standards and principles.
basis as per the accounting standards
and principles.
Explanation of management accounting systems with benefits to KEF Ltd.
Price optimisation system; It is a system facilitates an organisation by providing
information related with actual perception of targeted customers towards their existing pricing
policy. Thus, it becomes more beneficial for KEP Ltd. to adopt this system to acknowledge the
needs and requirements of customers in respect of their pricing policy and update them
accordingly in order to maintain a good customer strength.
Cost accounting system: It is a system providing information related with the amount
invested in different business activities which makes easy for manager to make an effect budget.
Using of this system by KEF Ltd. help in analysing cost by making comparison of actual
incurred cost with standard. This will save business cost and increase profitability of an
organisation (Honggowati and et.al., 2017).
Inventory management system: It is a system facilitates company to keep stock in
warehouses in such amount that can make easy for them to meet customers’ requirements.
Adoption of this system by KEF Ltd. help in reducing business cost in terms of minimising
storage cost of inventory by facilitating management to order stock whenever required.
Benefits of management accounting systems:
Management accounting system Benefits
Cost accounting system It helps KEF Ltd. to maintain record of cost
invested in different business activities which
minimises the chances of errors in final
accounts.
Price optimisation system It helps KEF Ltd. to make relevant changes in
their existing pricing policy after identifying
the actual thinking of customers towards their
policy. This will increase retention of their
loyal clients.
Inventory management system This will reduce storage cost of KEF Ltd. by