Management Accounting: Systems, Reporting, and Cost Analysis

Management Accounting

INTRODUCTION
Management accounting is termed as an activity of framing an efficient plans and policies
on the basis of final accounts of an organisation which are produced annually. These includes
cash flow statement, balance sheet, P&L a/c etc. It makes easy for manager to collect and
analyse valuable data both monetary and non-monetary to parties interested to the operations of
an organisation (Bekkers, Dijkstra and Fenger, 2016). KEF Ltd., a UK-based company dealing in
manufacturing sector is taken for the purpose of preparing the present report. The report
discusses the concept of managerial accounting along with its systems with benefits to an
organisation. The report also discusses about reporting systems, costing methods, planning
techniques to monitor and control budget and role of MA systems in tackling fund related issues.
TASK 1
P1
Management accounting: It is an activity of analysing financial stability of company by
examining the figures recorded under financial records. It is the part of decision making process
to take further action to strong financial performance of an organisation (Danoshana and
Ravivathani, 2019).
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.
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
is based on the requirements of an
organisation as there is no specific
standards and principles.
 Final account are prepared on annual
basis as per the accounting standards
and principles.

Description of management accounting systems with relevance 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 (Kustiyo and et. al., 2015).
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 strategy after examining
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
directing managers to order stock whenever
required. This will impact positively on their
net profitability.
P2
Management accounting reporting: It is a documentation process which is necessary to
be done by an organisation to maintain important information and data that are useful for
managers to formulate a suitable plans and strategies for the development of an organisation.