Management Accounting System Features - Doc

Management Accounting

Contents
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
LO 1...........................................................................................................................................3
P1 Management accounting system and essential features of different management
accounting systems.................................................................................................................3
P2 different methods used for management accounting.........................................................5
Benefits of management accounting system...........................................................................6
LO 2...........................................................................................................................................7
P3 Calculation.........................................................................................................................7
LO 3..........................................................................................................................................12
P4 Different planning tools of budgetary control system with their advantages and
disadvantages........................................................................................................................12
LO4...........................................................................................................................................15
P5 organization adopting management accounting system to respond financial problems. 15
CONCLUSION........................................................................................................................18
REFERENCES.........................................................................................................................19

INTRODUCTION
Management accounting is technique that helps managers in formulation of different
strategies and plans for the company so that the overall financial position and financial
performance of the company could be improved. This system provides appropriate
information to managers regarding financial position and performance of the company
through which they formulated their plans for the company Gartner is UK based medium
sized financial consultancy firm. It was founded in the year 1979. In the present study, there
is report of trainee of the country that shows meaning of management accounting and their
essential features for the company along with different methods of management accounting
reporting. Further it shows, different budgetary control tools that helps managers in their
planning function. It also has a practical part that shows preparation of income statement on
the basis of different techniques of management accounting and statement showing inventory
held by company by using different methods. At the end of report, it explains different
management accounting systems that can be used by different organisations in order to
improve its efficiency of responding to different financial uncertainties of the company.
MAIN BODY
LO 1
P1 Management accounting system and essential features of different management
accounting systems
Management accounting
Management accounting term refers to the advice and financial data of the company
which has been using development of the organization. It has been using the provisions for all
the accounting information for identifying the better information. It is basically a profession
which has been involved the partnering the management decisions making process, system of
performance management and also the devising planning process (Kaplan and
Atkinson, 2015). It generally provides the experts for making the financial reporting & also
controlling for assisting the management for the implementation and formulation of the
Gartner strategy.
Essential requirements of different management accounting
Management accounting system

It is generally a process that includes the partnering in with all the situations of the
organization. It is a procedure of identifying, analysing, communicating and interpreting all
the financial information which is helpful in achieving the goals and objectives.
Cost-accounting system
The term cost accounting refers to the framework which has been applied by all the
corporation to identify the approximate cost to producing the profitability analysis, cost
control, valuation of inventory. This system has been performed the allocation of the cost
based on performance and also on activities (Otley, 2016).
Job costing system
The term job costing relates to the allocation of the manufacturing cost where the
individual items and batches. It generally applied on the processed goods which is different
from another. It includes all the practices which has been accumulating the data of the cost
that is related to the specific services and production of the job in Gartner. This job costing
system has been applied when management has to track the different types of direct expenses.
It assesses all the amount and cost which has been included in the construction of the job.
Price-optimisation system
The system of the price optimization is generally an application where all the
mathematical analysis for the corporation has been determined the consumers react on the
various price process for its products and services. Basically, it has been applied for analysing
the pricing strategy that the Gartner determine the best way to full fill the goals for
maximizing all the operating profits (Schaltegger and Burritt, 2017).
Inventory management system
Inventory management system refers to the method of overseeing and controlling the use,
storage of all components where the corporation has been applied for the manufacturing of
the goods which is on sale. It oversees the practice of all the quality of the finished goods.
Inventory management system is a key element of the business where it is tied of producing
the sales of goods and services.
Difference between Management Accounting and Financial Accounting
Basis Management Accounting Financial Accounting
Meaning It is a term which is related with the
process of providing important as
well as crucial information of
managerial needs to the management
of the company in making decision
Is associated with recording,
summarizing, analysing and
preparation of financial reports
on the basis of financial
transactions for assisting its end

for the betterment of business as a
whole.
users in decision making process.
Objectives Provides management with relevant
and appropriate information from
the perspective of making better
business decision.
Its main aim is to provides end
users with full and true financial
picture of the company as on a
specified date.
Formats No specific format is required to be
followed by management of the
company for disclosing information.
For presenting information of
financial nature, company is
required to adopt proper
measures as specified in form of
formats.
Data or
Information
Deals with both types of quantitative
as well as qualitative information.
Is related only with quantitative
information of the company.
Characteristics of good management accounting system
1. It ensures on defining suitable and appropriate information of both the financial as
well as managerial nature to the management of the company.
2. Also, it assists company in making best decision with the help of formulation of
effective business policies and plans in line with the company’s aims and objectives.
3. It further makes use of best and relevant management techniques such as Budgetary
control measures, ratio analysis etc. for making interpretation of data more accurate
and reliable.
4. It helps company in making forecast and estimates about future business operations
with the help of present information available.
P2 different methods used for management accounting
Management accounting report is basically an effective report system which generally
helps in understanding all the strategic operations of the Gartner with most effective and
accurate manner. It also helps in making effective decision in critical situations. There are so
many methods used in the management accounting system which has been described below;
Budget report
It is an important method of management accounting report where it has been
critically measured the performance of the Gartner and also it has been generated as the
whole business and department wise according to large organizations. Budget report has been
estimated and generally based on the earlier experiences and it is important to create a budget

according to the cost and amount of the company (Maas, Schaltegger and Crutzen, 2016). For
finding the marginal accounting reports it is related to the budget which can guide the top-
level management of the company for offering the better incentives to the employees in terms
with the suppliers and vendors.
Cash managerial accounting
Management accounting reports also refers to the cash flow statements where it
computes about the cost of all the articles which has been manufactured. In this all the
overhead, raw material cost and any other added cost has been deliberations. The sum of total
has been divided to the amount and cost of the products which has been produced. Cost
report is generally a summary of all the information. All the profits margins & revenues has
been monitored & estimated through the reports and having a clear picture of all the cost
which went in the procurement and production of the articles.
Account receivable report
This account receivable reports playing a vital role in the management accounting
reports where all the breakdown structure and remaining balance of the customers into
particular time allowing the managers for identifying the defaulters for finding the problems
in Gartner for the collection process (Quattrone, 2016).
Performance report
It is one of the most important method of the management accounting report where the
review of the performance has been credited of the Gartner. Performance report has been
generated in the Gartner where the managers can use the performance reports to making the
strategic decisions for the future of the company. From making the performance reports
awards has been given to the employees for their better performing. Performance report
management accounting refers to the insight into working of the organization. The main
purpose of the performance reports is to measure the accurate strategies towards the mission
of the Gartner.
Benefits of management accounting system
Management accounting is generally a process for managing all the accounting system
of the organization. There are so many benefits from management accounting system such as
the effective control on management, there are so much useful coordination, it easily
increases the profitability and productivity, it makes the proper planning of all the activities
that has been runs on the organization, it evaluates the performance of the employees and get
the final reports (Weetman, 2019).

LO 2
P3 Calculation
Marginal costing
Marginal costing refers to the technique of costing where in marginal cost is
ascertained and the effect of profit in changes in the volume. In this technique, the cost of
production is differentiated between variable cost and fixed cost. As per the principal of the
marginal costing the variable cost is charged to unit cost and the fixed cost related to the
relevant period is written off against the contribution of that period (Jain, Kashiramka and
Tripathi, 2018).
Referring to the economical definition of marginal costing, it is the change in the total
cost due to the incremental produce of one unit i.e. cost of producing one more unit of
product. Thus, in simple words marginal cost can be explained as the increase and decrease in
the cost of production for making one additional unit of item.
Absorption costing
Absorption costing refers to the technique or method of valuation of inventory in
which all cost relating to the manufacturing unit are included or absorbed against the cost of
unit. As per the principal of absorption costing, it doesn't make any separation between fixed
or variable cost. It includes cost like direct labour, material cost is allotted to the cost unit and
total overhead charged as per the activity use. Thus, it can be said that the absorption costing
is the technique which provide comprehensive and accurate view about the cost of production
in producing the inventory then the marginal costing.

LIFO
LIFO referred to as the Last In, First out, this is the method of accounting of
inventory. In this the cost of sale of product purchased or produced in the last, should be sold
first. The use of LIFO method is totally depending upon owner, typically it is used when their
high inflation in the market.
Weighted average
This method is the accounting method of valuation of inventory on the basis of
weighted average. In this method the cost of goods sold available for sale is divided by the
number of unit available for sale. This method is globally accepted under IFRS accounting
and GAAP. This is easiest way by which valuation of inventory can be done.

LO 3
P4 Different planning tools of budgetary control system with their advantages and
disadvantages
Budgetary control system
A system of management accounting that concern with estimation of a range of
expenses and incomes to be generated by a business organisation within a specific time
period. It leads in preparation of estimated financial reports in order to determine the need of
financial and other resources of the company.
Planning tools
As the name describe those tools and techniques that helps managers in their planning
procedure. Management accounting system provides different planning tools of budgetary
control system. These planning tools help the managers in performing their managerial
functions in more effective way. Different planning tools can be stated as under:
Different types of budgets
In the context of budget, considering it as an analytical tool for business, it is divided into various
types. The prominent types of budget are as follows: -
1) Sales budget

This budget refers to budget based on the company' s sale relating activities. It determines
the future sales of company, targeted gross sales per annum, sales of specified products and
many more. This budget can be prepared or can be break down into units. Further it
determines the sale goal of the company.
Contribution of sales budget towards management in planning: -
 Helps management in deciding the sales goal by considering the several factors like
capacity, human resource, investment, technology etc. This sale goal plays vital role
in the planning.
 Also analyse the variances found in comparison between actual and standards as
mention in the sales budget, this helps management in planning accordingly (Shil and
Das, 2018).
 This budget provides units information or several other major information about profit
margin in sales, past records or trends in sales of the company and many more. By
using this, management formulate its planning to achieve goals of the company.
Advantages:-
 It focuses on the improving selling efficiency and reducing the selling cost of the
company.
 It allocates the resources to the different products and areas related to sales, so that
predetermined goal can be achieved.
 Provide assistance framing the sale programs and plan to achieve the goals of the
business.
Disadvantage:-
 Framing of such type budget requires too managerial skill and time to make it
effective and as per need of business.
 Such budget is accepted by all in the business, this means universal acceptance of this
budget is harder.
 The expense over sales budget preparation are heavy and further it can't depict the
future trend of sales of the company.
2) Capital budget

This budget depicts the real picture of company's assets and the capital expenditure. This
budget use to getting assurance about whether the company's long term investment in the
assets, new plant, research and development project are worthy enough or not (Booth, 2018).
Contribution of capital budget towards management in planning
 This budget analyses all factors and suggest the business about the investment in long
run or not. It helps management accordingly in planning.
 This provide information about the future benefit in long run related to the business,
so that management plans future projects accordingly.
Advantages:-
 Helps the business while choosing the investment decisions wisely by considering all
the major affecting factors.
 Provide vital information about the investment which will provide adequate return or
not in future.
 Helps the business in understanding the investment opportunities and risk related
associated with it. Also abstain management from over investing and under investing.
Disadvantage:-
 This budget can't depict the future of investment i.e. the estimation regarding
investment may be wrong (Budgetary Controlling Techniques. 2018).
 It requires major time and the decision related to investment in long run can't be easily
revoked.
3) Production budget
This budget is directly linked with the production of business to achieve the sale goal of the
business. In this budget estimation of manufacturing unit is determined and cost relating to
such manufacturing is also analysed including material cost and labour cost. Main aim of this
budget to provide manufacturing unit which can meet the sales goal.
Contribution of production budget towards management in planning
 It helps management in deciding the cost of production including labour and material,
so that sale goal can be achieved effectively.

 This budget provides wide range of analysis of factors related to production which
ultimate strengthen the planning.
Advantages:-
 Due to this budget labour can be utilised to the greater extent with lower material cost
related to production.
 By this budget business can achieve its predetermined selling goal.
Disadvantage:-
 To prepare such type budget requires adequate knowledge of production and
managerial skill.
 Preparation of this budget requires long time as it considers all factors of production.
LO4
P5 organization adopting management accounting system to respond financial problems
There are so many things which has been adopted by the organization for responding to
the financial problems which has been defined below;
Benchmarking
Benchmarking is generally a procedure where it measures the performance of both the
Gartner company products, services and procedure against the Everest group and also
consider to be one of the best companies. The main purpose of benchmarking is to find out
the internal opportunities for improving the activities of the organization. Gartner company is
a tough competition of the Everest group that has been applies this method for the dealing
with the problems of the business. It also provides aids about the extracting the problems
from the roots which affect the profitability & financial stability of the organization.
This activity generally helps the organization for helping in measuring the
performance of the company. Benchmarking is not enough for measuring the overall
efficiency and effectiveness of the business. The main issue with this technique is gives the
standard and base of the business for comparing the real performance with the best industry
results but it never lay down the structure and revival of the company (Smith, 2017).
Variance analysis
Variance analysis term refers to the quantitative investigations of all the differences
between planned & actual behaviour. This variance analysis is used for maintaining and
controlling over the Gartner. It attempts for explaining and defining the reasons for so many
differences between the actual and budgeted amount. From adopting this technique, it is very

helpful for the organization because it is one of the easiest ways for the mangers to identify
the difference between actual & planned amount. It fixed for the correction of this variance. It
also provides facility to the managers for formulating the new activities & strategies to easily
deal with the financial problems that has been arises in the business.
Here, the major problems with the variance analysis is it consume lots of time and
cost as well which is not good for the service of the organizations. There is a major problem
with the variance analysis that is not effectively used in all the service of the organization.
The large part of the Gartner where the cost has been comprises for the overheads rather than
the expenses of the production. The main decision which is effective for the organization to
deal with all the financial conflicts and crisis (van Helden and Uddin, 2016).
Key performance indicators
The performance indicators are the main indicators for measuring the performance
and it also evaluates the growth and success of the Gartner for the specific activities that has
been engages. Due to the high and great level of the KPI its emphasis for evaluating and
measuring the overall performance of the organization for getting success in the market.
This process is generally applied for the managing the accounting process that has
been maintained for confronting the financial crisis. These techniques facilitate the platform
of the strategies for the future operations of business. It is generally leading for aligning the
various aspects of the Gartner towards achieving the common goals and objectives. It also
helps in improving the decision-making process & straightforward behaviours of the person
in right and positive directions (Hopper and Bui, 2016).
Gartner company has been making use of key performance indicators for mitigating
its issues related to the low performance and efficiency. The company has been facing
problem of low profitability which has affected its overall business growth and success. By
making use of key performance indicator tool, Gartner will be able to determine measures
and strategies which other rivalry companies are making use of for capturing market share
and increasing customer base as well. It further can assist company in assessing its
weaknesses and strengths for making changes as required.
On the other hand, A.T. Kearney is making use of benchmarking tool as it is
considered as one of the most effective means in case of making comparison of own business
standards with the best performing business enterprises in the same sector. With the help of
Benchmarking tool, A.T. company can determine standards and norms set down and
followed by its competitor companies which is providing benefits to it in long run time
period. Also, by setting down such benchmark in terms of quality, performance A.T.
company can make improvement in its business performance as well.

Responding to the financial problems, management accounting lead to the sustainable success
of organization.
There are so many methods for solving the financial problems which has been adopted
by the organization for managing the management accounting process. From solving the
crisis, it easily helps in sustainability of the organization and also gives growth and
development to the Gartner. It runs the organization in systematic manner and also helps in
evaluating the performance for achieving the goals and objectives of Gartner (Christ and
Burritt, 2017).

CONCLUSION
From the study of above report, it can be said that management accounting is one of
the most essential part of business organisation. It helps the managers in providing
appropriate information to the managers so that they could develop their effective plans for
the company in context to improvement of financial position of the firm. With the help of
different methods of management accounting reporting, the company can maintain the
records in the most efficient manner. In addition, it can also be concluded that there are
different methods of computing several values in the management accounting. Managers
should choose the most appropriate method in order to compute a range of values relating to
financial performance of the company. Moreover, management accounting system provides
different techniques that help managers in improving the efficiency of the company in
responding to various financial problems of the firm.

REFERENCES
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Hopper, T. and Bui, B., 2016. Has management accounting research been
critical?. Management Accounting Research, 31, pp.10-30.
Jain, P.K., Kashiramka, S. and Tripathi, M., 2018. Significance and Relevance of Salient
Management Accounting Parameters in the Context of Global Financial Crisis: Focus on
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Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability
assessment, management accounting, control, and reporting. Journal of Cleaner
Production. 136. pp.237-248.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
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Quattrone, P., 2016. Management accounting goes digital: Will the move make it
wiser?. Management Accounting Research. 31. pp.118-122.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues,
concepts and practice. Routledge.
Shil, N.C. and Das, B., 2018. Application of Management Accounting Techniques in
Manufacturing Firms in Bangladesh.
Smith, M., 2017. Research methods in accounting. Sage.
van Helden, J. and Uddin, S., 2016. Public sector management accounting in emerging
economies: A literature review. Critical Perspectives on Accounting.41. pp.34-62.
Weetman, P., 2019. Financial and management accounting. Pearson UK.
Online

Budgetary Controlling Techniques. 2018. [Online]. Available through:
<https://iedunote.com/budgetary-controlling-techniques>.