Management Accounting Systems: Importance, Application & Reporting

This report provides a comprehensive analysis of management accounting systems, focusing on their integration within organizational processes, benefits, and applications, particularly in the context of Synergy Manufacturing Co. Ltd. It discusses the principles of management accounting, emphasizing their importance in integrating the system and exploring various reporting methods. The report includes an income statement reconciliation of absorption and marginal costing, highlighting the impact of different accounting methods on profit calculation. Ultimately, the report concludes that effective management accounting systems are crucial for cost management, profit maximization, and informed financial decision-making within organizations. Desklib offers a wealth of similar solved assignments and past papers to aid students in their studies.

The importance and
application of
management
accounting systems

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Integration of the management accounting systems & reporting within organizational
processing...............................................................................................................................3
Analyse the benefits of management accounting system along with their application..........4
Discuss the principles of management accounting along with their importance of integrating
this system. Also, provide different methods of reporting.....................................................5
Prepare income statement.......................................................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management Accounting is the analysis of the various facts & figures with the adequate
methodologies and fundamentals. It is the proper formulation of collecting, sorting and
examining the data through processing. These activities includes the advisable strategies and the
sustainable business growth with the collective ideas of every member in the organization. This
report is based on Synergy Manufacturing Co. Ltd. It is a UK based company which is owned
by Jonathan David. The reports provides an evaluation on the integration of various management
accounting system and reporting in addition to its benefits and applications. It also specifies its
principles and its importance to integrate this system. It also provides techniques of reporting.
MAIN BODY
Integration of the management accounting systems & reporting within organizational processing.
Management accounting refers to the practice of identifying, examining and
communicating the interpreted data of financial information to the managers so that they
can fulfil their organisational objectives. It aids the internal users of company to get
complete information about the business and taking decisions for it. Managerial
accountancy are useful for providing the interpretative data for the usage of operational
decision-making. Manufacturing companies like Synergy must have been using these
instruments for managing the costing and earnings from the complete inclination of the
data. These fundamentals depends upon the basic content such as preparation,
controllability and assessment for the accurate pricing of the products & services with the
uses of different financial statements and formative analysis (Abernethy and Wallis, 2019).
These analysation realises the managers actual material and labour contribution, reduction
in wastage and minimising the expenses incurred. Some of the integrated sessions are
included contents like eliminating duplicate activities, provides real-time data, performing
task-ordering and resulting in effective commissioning.
Management accounting reporting are formalising for the purpose of daily basis
positions, rectifications, observational directing and measuring or appraisal performing activities.
The intent of the Synergy Company is also based on these production based functions which is
realisation of the everyday events observation. The company also using day-to-day assessment of
functions for the better mobilisation of resources either material or labour or top executives

(Glushchenko, Yarkova and Kucherova,, 2017). It includes the budgeted schemes for reduction
in wastage and proper utilization of resources, account receivable reporting for the wider
assessment of demand & supply in corrective manner, Job-pricing and Inventory
establishment records for the right place delegation of workforce and efficient usage of
productive materialisation, Performance statements are being used for the effective appraisal
and evaluation in the person-to-person contribution towards the organisation and the most
important of opportunity coverage for the long-term benefit in the concern taken by the top
executives or managers to establishing and grabbing new value-creation criteria with timely
decision-making.
Analyse the benefits of management accounting system along with their application.
It is a process of controlling the expenses incurred on products and operations of
company by keeping this in mind that it makes best use of available resources without wasting
them. These tools helps the organisations in obtaining their targets in less time with lower cost.
Synergy applies it for determining the expenses which are incurring high amount of money and
assessing the price of product.
Advantages in addition to its application
 Aids in taking decision- Synergy applies it to assess the performance of organisation
and gains information about the progress of its various operations (Joshi and Li, 2016).
On the basis of this data, it takes decisions related to inventory, price and cost control.
 Examining variations - Synergy makes budgets with the help of these tools and
prepares the plan to work according to it. It then, compares the results actually driven
with that of the desired ones and examines the differences along with the reason behind
that. This helps that in taking corrective actions in right time.
 Increases revenue- By applying various tools of this system, Synergy tries to obtain the
cost absorbed in every single process of production. Through this knowledge, they detect
the areas which re consuming high cash and tries to control it. This further helps
organisation in increasing its income.

Discuss the principles of management accounting along with their importance of integrating this
system. Also, provide different methods of reporting.
It can be defined as a criteria of constructing reports with the help of which Synergy
frames its various plans and takes decisions (Pitkänen and Lukka, 2011). Below mentioned are
some accounting principles that must be adopted by firm.
 Relevance- It is very important for Synergy that, whatever information is presented in the
final statements of accounts, it must be of some use for the users of these reports. Any
material which is not required for parties and do not holds the capacity to influence the
decision-making process of viewers should not be presented in it as it can confuse the
users and can even irritate them.
 Complete disclosure- According to this, Synergy is required to disclose all the
information which is important for the users of accounts. No information should be
hidden. There should be complete transparency and they must be able to give answers to
answer each and every question coming to them satisfactorily. As this data helps parties
in taking their decisions, it must be full and relevant.
Essence of integrating this system in organisation
It is very much important to make these systems as a part of business due to following
reasons.
 Helps in taking long-term decisions- It aids in improving the efficiency of Synergy by
handling all the costs of business effectively and setting targets for all types of financial
functions of business (Smith and Langfield-Smith, 2004). On the basis of this efficiency
in work environment, managers takes long term decisions.
 Fixes optimum inventory level- This tool helps in setting up the maximum and
minimum extent of stock that Synergy must keep with itself so that there is no wastage
or shortage of hold of products. It also decreases the cost of handling and warehousing
the data which could be incurred on over stocking of products.
Various tools of management accounting reports
 Job cost report- It provides information about the cost of product at every single stage
according to which Synergy decides the price of its products. It helps in examining the
profitability that a particular job can generates. This further assists the business in
knowing that whether it should take over the project or not.

 Manufacturing report- It helps Synergy in knowing the number of units it must produce
in a single lot, considering the amount and time it consumes. It further helps the firm in
bringing efficiency in the working environment and production of goods.
Various management accounting systems
 Inventory management- This will help Synergy in maintaining an adequate amount of
stock with it. Through this, they can check out whether the firm is holding enough
level of inventory for the supporting its sales or not.
 Price optimising system – it helps Synergy in deciding the manner in which its
changes in price is affecting the demand of the product. On the basis of this, it decides
its pricing strategy.

Prepare income statement.

Reconciliation of Absorption and Marginal costing
Particulars Product A Product B
Profit under absorption costing 164800 16800
Add/ Less the over and under absorption (90000) 70000
Change in the value of stock (23200) (11400)
Profit under marginal costing 51600 75400

According to the above reports, it can be stated that there are number of systems for preparing
these reports. The main difference which resulted in the variation in profits is treatment of fixed
and variable expenses (Tan and Low, 2019). Its also changes the amount of closing and opening
stock of company. In this report, the profits generated through absorption costing is more than
marginal one.
CONCLUSION
It can be concluded from the above report that there are many systems and report in
management accounting through which companies manages their costs and maximize their
profits earning capacity. It helps in making various financial decisions like setting the price of
product. All these systems and filing up of reports works according to the principles governing
them. These systems also impacts the profits according to their implementation.

REFERENCES
Books and Journal
Abernethy, M. A. and Wallis, M. S., 2019. Critique on the “manager effects” research and
implications for management accounting research. Journal of Management Accounting
Research. 31(1). pp.3-40.
Glushchenko and et.al, 2017, December. The Role of the ecologically-oriented accounting
systems from the perspective of minimizing the strategic risks in terms of ecologizing
the production. In Perspectives on the use of New Information and Communication
Technology (ICT) in the Modern Economy. (pp. 741-747). Springer, Cham.
Joshi, S. and Li, Y., 2016. What is corporate sustainability and how do firms practice it? A
management accounting research perspective. Journal of Management Accounting
Research. 28(2). pp.1-11.
Pitkänen, H. and Lukka, K., 2011. Three dimensions of formal and informal feedback in
management accounting. Management Accounting Research. 22(2). pp.125-137.
Smith, D. and Langfield-Smith, K., 2004. Structural equation modeling in management
accounting research: critical analysis and opportunities. Journal of accounting
Literature. 23. p.49.
Tan, B. S. and Low, K. Y., 2019. Blockchain as the database engine in the accounting system.
Australian Accounting Review. 29(2). pp.312-318.