Management Accounting Systems and Techniques

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Management
Accounting Systems
and Techniques

INTRODUCTION
Management accounting is a procedure which guides internal stakeholders to examine
existent position of the organisation and assess that it is performing well or not. While
formulating strategic decisions top level executives use it as an essential element as it guides
them to find the areas of organisation where improvement is required. In order to execute all the
business activities in proper way it is crucial for the managers to make sure that they focus on
management accounting as it is required for betterment of enterprise (Arena and Arnaboldi,
2014). The organisation which is selected for present report is Oshodi Plc. It is a commercial
enterprise which is involved in the production of JOJO fruit juice.
This assignment aims at various topics such as understanding of management accounting
systems and methods of its reporting, calculation of cost using different techniques, formulation
of income statements using marginal and absorption costing. Along with this, different planning
tools used in budgetary control and comparison of the ways in which organisations are adapting
management accounting to respond financial problems are also covered under this project.
TASK 1
P1 Different management accounting systems and essential requirements of them for an
organisation
Management accounting: It can be characterized as a technique that is implemented by
top level executives of an organisation to assess that all the operational activities are executed by
staff members in a proper manner or not. In Oshodi Plc it is utilised by management to observe
existent position and condition of the company. With the help of it strategic decision are
formulated by managers for future developments. Management accounting is the technique
which is utilised by companies such as Oshodi Plc to determine actual position of the business.
With the help of it internal stakeholders analyse that the organisation is performing well in the
market or not.
Difference between management and financial accounting:
Basis Management accounting Financial accounting
Objective Main objective of management
accounting is to help managers to form
Objective of financial accounting is to
check financial accuracy of business
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strategic decisions for betterment of
organisation.
and determine that it is generating
profit or not.
Dependenc
y
While forming management reports
managers take help of financial reports as
it is dependent on financial accounting.
It is not dependent on management
accounting.
Management accounting system: It is a tool that is utilised by management of business
entities to keep statistical information so that decisions for carrying out day to day activities
could be taken. In Oshodi Plc managers are using it to form strategies for future so that growth
could be attain by the company (Armstrong, 2014).
Types of management accounting systems: Managers of Oshodi Plc are using various
management accounting systems to assess actual position of the company. All of them are
discussed below in detail:
Cost accounting system: It is the part of major management accounting systems which
are used by commercial enterprises in order to keep detailed information regarding cost of
production and other activities. Managers in Oshodi Plc are using it to analyse actual cost of each
and every unit of juice bottles which are manufactured by it. With the help of it, they try to
reduce the expenses which are not required and resulting in enhancement of cost. Cost
accounting system essentially required for Oshodi Plc as it guides managers to take effective
decisions to reduce unnecessary expenditures which may result in unforeseen costs in future
(Azudin and Mansor, 2018). Reason for its high requirement in the organisation is that it will
help management to make sure that the costs which are recorded have actually taken place
previously or they have been recorded mistakenly or to forge the records.
Price optimisation system: For large as well as small organisations it is very important
to decide right cost for the products which are offered to the clients by the company. For this
purpose, this system is used by managers so that expectations of client could be matched. In
Oshodi Plc it is implemented by management to set right price for juices that are manufactured
by it. With the help of it reaction of clients on different rates is analysed by the managers. It is
essentially required for Oshodi Plc because it facilitates the process of meeting the long term
business objectives such as profit maximisation by attracting large number of customers. It is
very important for company because it can help management to set the right price for all the
products which are being manufactured in a specific time period.
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