Management Accounting: Types of Systems, Methods, and Techniques

Management
Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
P1 Explain management accounting and requirements of various types of management
accounting systems......................................................................................................................3
P2 Explain different methods used for management accounting reporting................................5
M1 Benefits and application of management accounting system...............................................6
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs...........................................................................7
Absorption costing ..........................................................................................................................7
M2 Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents.....................................................................................................8
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control. ......................................................................................................................9
M3 Analyse the use and applicability of planning tools for preparing and forecasting budgets.
.....................................................................................................................................................9
P5 Compare the manner in which the organisation is adapting management accounting system
to tackle financial problems........................................................................................................9
M4 Analyse the manner management accounting helps in attaining sustainable success for
business.....................................................................................................................................10
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Managerial accounting can be defined as the practice of identifying, measuring,
analysing, interpreting and communicating about the financial information for attaining the
objective of the business organisation. The management accounting is used by the internal team
of the business enterprise. The process consists of sharing the financial information and reports
such as invoice, financial statements, balance sheets to the management team of the business
organisation. The main function of the management accounting is to help the management in
making the necessary decisions related to business activities where there is no fixed structure or
format for it. The company which is taken into consideration in this report is the eBay which is
an American multinational e commerce corporation which facilitates consumer to consumer and
business to consumer sales through its website. The company was founded by Pierre Omidyar in
the year 1995(Khosiev and et,al., 2019). This report will include the various topic such as
definition of the management accounting with various types of management accounting system,
methods of using management accounting, calculation of the cost, advantages and disadvantages
of different types of tools, the financial problems in the organisation.
TASK
P1 Explain management accounting and requirements of various types of management
accounting systems.
The management accounting is referred to the practise of identifying, analysing,
interpreting and communicating of the financial information to the managers of the business
organisation which can help the managers to attain the goals of the business enterprise. Its main
aim is to guide directors of eBay about the internal scenario of organisation so that decisions
could be made with full knowledge. There are various principles of management accounting
which are discussed below(Mariina and Tjahjadi, 2020).
Principles of management accounting
There are some of the principles which are been followed by the eBay in order to
maintain its accounts;
 Relevance- The information which is provided in the accounting-book should be relevant
enough so that it can be used by the internal and external users. The company can take

care that the right decision can be only taken when the information provided by the
accounting department it is up-to-mark and there is no irrelevant content in the financial
statements.
 Principal of causality- This states that the company should only record those events
which are occurred in reality. This rule suggests that there is a relation between the cause
and the effect of any circumstances of the event. It is very important for the organisation
to record only those transactions which have been occurred and there is a proof of it.
Management accounting system along with its role
It is the system where there is involvement of recording, identifying, analysing and interpreting
the various financial information which can be beneficial in the decision making of the business
organisation. The system is responsible for providing the useful information to the external users
along with assisting in tracking cost linked with manufacturing of products and services. For the
eBay, the system help the company in analysing the cost of the different processing which is
conducted in the organisation and they can be controlled by the different departments and the
managers of the company(Aouni, McGillis and Abdulkarim, 2017).
The various types of systems in the management accounting are explained below :
 Cost accounting system- It is a method of recording inflow and outflow of cash in a
particular accounting period. In other words, all income and expenses which are realised
in cash, presently or lately are recorded in this. It helps the producers of the company in
tracking the flow of money at every single stage. Through this an optimal cost of product
can be ascertained to generate profits.
 Inventory management system- This system consists of organising all the elements of
stock by tracking its supply chain from one end of purchasing to the other end of the
sales. The company uses various techniques to manage its inventory in order to have the
benefit of not waste its products(Jarwal, 2018).
 Job costing system- It is a process of collecting information about the cost of
product(job) at every single stage, for instance, customised sofa. It ensures that firm is
able to ascertain the value of material which has been used for production and what part
has been scrapped. With the help of this technique, Prime furniture can communicate the
expense incurred on every specific unit manufactured on its demand and can also
determine its profit margin capacity in that project.