Management Accounting Systems: PDF

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Justification of management accounting with effective needs of various form of
management accounting systems................................................................................................1
P2 Various methods for management accounting reporting.......................................................2
TASK 2............................................................................................................................................3
P3 Particular cost techniques for prepare the income statement by using absorption and
marginal cost...............................................................................................................................3
TASK 3............................................................................................................................................8
P4 Advantages and disadvantages of various kinds of planning tools which is used by the
budgetary control........................................................................................................................8
TASK 4..........................................................................................................................................10
P5 Show the contrast of organisations by adapting management accounting systems to
overcome financial issues.........................................................................................................10
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is also known as managerial accounting by which managers can
use the different kind of accounting information from various sources in order to provide better
information to their employees within the company. Along with this, it is one of the best
provision of finance and decision making information to the managers within the non financial
terms. It also involves in the decision making in regards with management decision and
financing report in order to control the performance management system as well as implement on
effective and innovative strategies in a proper way. In this present report Marsh organisation has
been taken which is based on small size organisation and having some employees, it is
headquartered in New York City and provide financial services as well as risk management
(Adler, 2013). Contentious discussion will be made on management accounting systems and few
techniques of cost analysis for preparing the income statement as well as absorption cost. At last,
planning tools and differentiate the system of accounting in regards with financial problems will
get covered.
TASK 1
P1 Justification of management accounting with effective needs of various form of management
accounting systems.
Management Accounting: It is an very effective and essential aspect and sum total of all
accounting concept in relation with internal activities of business in a proper way. In reference
with Marsh they have effective tools and techniques so that they always able to adopt current
activities in order to collect several kind of accounting systems, which are given below:
Cost accounting system: On the basis of this, respective company is able to explain the
effective variable cost as well as product and their fixed prices. Apart from this, cost accounting
is mainly helpful for collecting appropriate information in regards with particular goods and
services. In order to achieve more benefits it makes unique financial services.
Price optimisation system: According to this accounting system present company is
able to identifying their unique products and than also able to identifying their pricing strategies
within the marketplace.
Inventory management system: According to this system organisation can easily track
goods by the whole supply chain system as it is operated by business entity in an effective
1

manner. With the help of this company can cover their goods from any kind of issues like
changes in climate and so on. On the other side it also covers each and everything from
warehouse to shipping, production to retail as well as changes in stock and parts between.
Therefore it is easy for Marsh to offer better services to their customers.
P2 Various methods for management accounting reporting.
As per the above analysation this can be said that business is a very important aspect for
each and every organisation wherein, management accounting also plays a very important role as
it helps companies by giving them proper data in a right manner. With the help of management
accounting system business entity can develop proper tools and techniques and strategies as well.
By which they can influence people and able to get higher profit in an appropriate way (Bennett
and James, 2017). There are different types of monetary and non monetary funds by which
Marsh is responsible to follow few concept, those are given below:
Performance report:
It totally depends upon the different kind of performance which is given by the
organizations within the working place. Therefore, it is much beneficial for the companies by
which they can get ideas about their basics and able to reduce errors from their business
functions. In reference with Marsh, now they are able to give effective banking insurance
services and retail management services to people as per the current situation.
Cost managerial accounting report:
It is also based on the company’s performance and budget as well. By which Marsh can
give affordable services to their employees so that they can get higher satisfaction from the
financial small sized companies. Basically cost always depends upon the financial condition of
an organisation which is done after the calculation of overall expenses in a proper way. Along
with this, sometime it can be possible that selling ratio is low rather than the expenses so that it
influence company in a negative way so they faces lot of difficulties in to the working place.
Accounts receivable ageing report:
According to this report, company is able to gain overall information in relation with the
transactions of credit. On the basis of this company can transact their money on the behalf of
credit so that it is easy for them. In regards with Marsh they always shows the transparency in to
the working place so that they can easily achieve their goals.
2

Budget report:
It is one of the best report towards the organisation in which Marsh can effectively
differentiate their actual and estimated performance in an effective way. With the help of this
respective company can get proper framework and able to formulate unique strategies for
gaining business objectives and goals for giving better performance to their customers.
Moreover, by developing proper strategies company is available to take advantages and earn
profit at higher level (Chenhall and Moers, 2015).
TASK 2
P3 Particular cost techniques for prepare the income statement by using absorption and marginal
cost.
Absorption costing: It refers to those techniques which is used to calculate overall cost
of an organisation that involves in fixed cost, variable cost and so on. Along with this it is also
known as costing method.
Marginal costing: It is expensive method which determine the variable cost as fixed
cost.
3

Income statement by marginal costing method:
4

Interpretation:
Interpretation: According to the above mentioned solving method, it has been examined
that organisation and cost-based method both are having the same income statement. As at the
time of marginal and absorption income is also same that is 50000.
Income statement by absorption costing method (when 5000 units sold)
5

6

Income statement by marginal costing method( When 5000 units sold)
7

Interpretation: According to the above numerical data it has been identified that in the
current period of time organisation faces lots of challenges from both marginal and cost
absorption method. At the time of absorption method overall amount of proper loss is 75000
while conducting the marginal cost than net loss is also same 75000.
Financial reporting document with labour and material variances:
8

9

TASK 3
P4 Advantages and disadvantages of various kinds of planning tools which is used by the
budgetary control.
Budgetary control always depends upon the different kind of manager's activities such as
how manager utilises their budget and how he can make effective budgetary control techniques
within the limited time of period. In the other words, it refers to the processes for manager of an
organisation in order to make effective goals of finance as well as budgetary process for getting
better results. Therefore, it is much necessary and effective for all of the companies by which
they can make proper tools and techniques. In reference with Marsh, this is much important for
them to show their performance within the business entity (DRURY, 2013). In order to increase
their skills as well as for budgetary control this respective organisation is using various
advantages and disadvantages of several factors, those are listed below:
Contingency Planning:
It is very important for using several kind of risk which is generally related with the
unexpected issues within the organisation which can come at any time. So that company requires
to make their system effective for attaining their goals. Along with this it is very effective tools
by which organisation able to make proper plan for formulating effective strategies. In regards
with Marsh, they always work different by developing proper tools and techniques and strategies
so that they can easily give better performance to company and make people satisfactory by their
services.
Advantages:
 It helps to reducing the risk and generate specific plan for better position in the market.
 On the basis of this, Marsh is able to take appropriate action against any issues.
Disadvantages:
 During the time of formulating alternative plans than contingency plan creates issues in
relation with different ideas of manager at some conditions.
 It can be much costly for developing unique changes in the company (Gibassier and
Schaltegger, 2015).
10

Flexible budget:
This is an effective tool for controlling budget which also helps in developing the
changes within the organisation. This sort of budget directly used by budgetary control in order
to make plan and examine the estimation of cost or revenue for gaining the effective variable in
the marketplace. According to this Marsh, they mainly develop the good budget so that they can
bring changes easily in their programming functions. All this is because changes are important to
keep good image and activity with full perfection.
Advantages:
 This type of budget mainly creates the coordination in between the present company and
employees as well. This sort of budget always provides better output in order to keep fine different activities
towards the firm.
Disadvantages:
 Sometimes it can develop lots of toughness during the developing of flexible budget.
 It can seem more difficult in Marsh manager's so that they cannot easily understand the
proper budget in given time (Hartmann, Perego and Young, 2013).
Forecasting tools:
It is considered as the future predictable aspect like past and present situation for any
kind of firm. But somewhere there are few important tools which is very useful to make proper
results in a positive way for better opportunities into the market. This type of tools is beneficial
for removing any kind of errors from every situation of the business. In reference with the
Marsh, they generally make proper guidance for fulfilling their customer's desires and demand
by calculating the overall confirmation of an organisation within the marketplace.
Advantages:
 It is good for Marsh as their managers always make best plan in order to provide effective
services to their customers as well as they examine overall assumption which is based on
the budgetary reports. It is totally benefited for the managers of an organisation because they can make proper
valuable information of financial study in a proper manner (Kokubu and Kitada, 2015).
Disadvantages:
11

 It can be difficult process for the managers of present company because they cannot
predict future plan according to this factor.
 These kind of tools also gathered by the managers from separate department of finance
which is not suitable for the better marketing plan and their strategies.
TASK 4
P5 Show the contrast of organisations by adapting management accounting systems to overcome
financial issues.
Financial crisis are the very huge pressure on the different organisations by which
company is responsible to fulfil their needs in a particular times. In the present context there are
different kind of issues which can directly impact on the sales and profit of an organisation. In
regards with Marsh, they are required to make proper tools and techniques in order to reduce
these kind of problems.
Issues of cash flow: According to this issue, sometime organisation does not have proper
funds so they faces lots of issues like pay, liabilities and low profit and higher profit. In relation
with Marsh, they can face any issues just because of money problems. In this present
environment there are lot of pay in which company is needed to pay like government taxes,
policies and so on.
Risk Management: It is very essential and good factor which is used make long stability
of company within the marketplace so that companies can easily follow their present activities
for giving proper satisfaction to customer's in an appropriate manner. According to the Marsh,
they develop good strategies and techniques in order to make their business processes in a proper
way (Lambert and Sponem, 2012).
Working capital: According to this manager can get awareness about the fund in order
to manage their money issues in an appropriate manner. During the short period of time company
again available to face money issues because sometimes they do not have sufficient fund so they
cannot fulfil people requirement in a proper way. In regards with Marsh, as they face so many
fund related issues so that they are requires to follow proper rules.
Financial governance: It identifies the various ways for gathering and collecting proper
and accurate information for running financial services in a better way. So that in this financial
12

governance is able to help firms to find them proper ideas to achieve goals. As per the Marsh,
managers are responsible to manage their unwanted expenses and make proper effective
company (Lukka and Vinnari, 2014).
Money management: This sort of techniques focuses on some activities within the
organisation like budget, savings, monolatry cost and track the supply of goods. By which
company is able to take proper helps from several tools. In reference to the Marsh, they create
effective strategies for better situation in the marketplace.
Management accounting approach:
This approach defines that how to use attractive and good techniques in order to
minimising errors from an organisation. These sort of approach mainly offers different kind of
information to managers of Marsh so that they can easily develop proper strategies in order to
overcome such kind of issues in the company. As per this there are various approaches, those are
mentioned below:
Benchmarking: It is an effective and good technique which mainly makes to examine
the performance of each and every employees from the organisation. On the other side it also
defines that it has good opportunities in order to make their organisation effective on the basis of
competition. This approach totally focuses on the identifying, defining and interpreting
organisation's performance in a proper way (Kotas, 2014).
KPI: It refers to the Key Performance Indicator which is also used in identifying the
overall performance of an organisation in order to compare with other organisation. KPI is a very
effective and attractive system which guide people within the company so that they can work
easily and able to manage business functions. On the behalf of this manager of Marsh is always
available to fix their goals for developing good strategies in a perfect way.
There is relation in between Marsh financing company and Britcon engineering organization.
Basis of Difference Britcon Marsh
Problem It faces so many issues like money
power and poor management. That's
why it is important for company to
make proper effective strategies so
that they can overcome these issues
As per the current problems
this organization faces 2 sort of
issues such as risk
management and cash flow as
well as strategies issues in
13

and able to give better solution to
people in a proper way.
order to overcome the risk
factor.
Approach In order to improve their situation
in a proper way than it is required
to have problem solving approach
by which they can make better
strategies for removing negative
challengers from the company. By
which they can achieve their goals
(Modell, 2014).
According to the Marsh, they
are using benchmarking and
risk management approach for
improving their qualities and
will able to give more better
financial services to their
customer's in an appropriate
way.
CONCLUSION
According to the above representative report it has been analysed that management
accounting always considered as a good concept within the organisation who always helps
14

business in order to achieve their objectives and goals in an appropriate manner. It is also
involving in several kind of activities like price, promotion, optimisation and lots of strategies
which is very much beneficial for every business in the current scenario. In context with Marsh,
as this company providing lots of financial services and retail services by which people can
manage their expenses in a proper way. Therefore, there are lots of system like marginal cost
method and absorption which is followed by this company to know their estimation cost. Along
with this, there are various pricing based method like cost system of accounting, inventory
management flexibility in budget and so on. At last the main approach that is KPI (Key
Performance Indicator) which helps to this selected organisation in order to resolve their issues
in a perfect way.
15

REFERENCES
Books and Journals
Adler, R., 2013. Management Accounting. Routledge.
Arroyo, P., 2012. Management accounting change and sustainability: an institutional approach.
Journal of Accounting & Organizational Change. 8(3). pp.286-309.
Bennett, M. and James, P., 2017. The Green bottom line: environmental accounting for
management: current practice and future trends. Routledge.
Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management
accounting and its integration into management control. Accounting, organizations and
society. 47. pp.1-13.
DRURY, C. M., 2013. Management and cost accounting. Springer.
Gibassier, D. and Schaltegger, S., 2015. Carbon management accounting and reporting in
practice: a case study on converging emergent approaches. Sustainability Accounting,
Management and Policy Journal. 6(3). pp.340-365.
Hartmann, F., Perego, P. and Young, A., 2013. Carbon accounting: Challenges for research in
management control and performance measurement. Abacus. 49(4). pp.539-563.
Kokubu, K. and Kitada, H., 2015. Material flow cost accounting and existing management
perspectives. Journal of Cleaner Production. 108. pp.1279-1288.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Lambert, C. and Sponem, S., 2012. Roles, authority and involvement of the management
accounting function: a multiple case-study perspective. European Accounting Review.
21(3). pp.565-589.
Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting
research. Accounting, Auditing & Accountability Journal. 27(8). pp.1308-1338.
Modell, S., 2014. The societal relevance of management accounting: an introduction to the
special issue., Accounting and Business Research. 44(2). pp.83-103.
Nitzl, C., 2016. The use of partial least squares structural equation modelling (PLS-SEM) in
management accounting research: Directions for future theory development. Journal of
Accounting Literature. 37. pp.19-35.
16