Management Accounting Systems & Techniques

This report explores the role of management accounting in Hichrom Ltd, a leading producer and distributor of chromatography accessories. It analyzes various accounting systems, reporting methods, costing techniques, and planning tools used by the company to manage finances, control budgets, and overcome financial challenges. The report also includes a comparative analysis with other organizations, highlighting the importance of management accounting in achieving business success.

Management Accounting
Systems & Techniques

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Meaning of Management accounting and their essential need........................................1
P2: Different types of accounting reporting methods.............................................................3
M1: Benefits of using various management accounting system............................................5
D1: Critical evaluation of various reporting and accounting system.....................................5
TASK 2............................................................................................................................................6
P3: Different types of costing method used for the purpose of calculating net profit............6
M2: Various types of accounting techniques.........................................................................8
D2: Data interpretation...........................................................................................................8
TASK 3............................................................................................................................................9
P4: Merits and demerit of using planning tools to control budgets........................................9
M3 utilisation of type of planning tools and their application for making forecasting and
budget...................................................................................................................................10
D3 Planning tools for responding financial problems to assist budgetary control...............10
P5: Comparison with other organization that how they are using MA to overcome financial
issues.....................................................................................................................................10
M4 Planning tools for responding the financial problems to lead organisation...................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is one of the effective ways which is being used by various
types of organisation in order to arrange their financial transaction. There are various crucial
aspects that will be taken into account for analysing various operations and accounting data those
are collected by the manager during within an organisation. Accounting used to play vital role in
recording, summarising and evaluating all data of the company in effective and efficient manner
into their respective statements (Bradbard, Alvis and Morris, 2014). While, management used to
provide reliable rules and strategies for recording of data accurately into various reports. This
project model aims to provide specific information about type of accounting system and
reporting methods use by “Hichrom Ltd”. Use of various costing method to calculated net profit
they are getting during the period can be analyse effectively. Use of merit and demerit of
planning tool to control budgets of the company. comparison of various accounting method
which will be helpful for resolving financial issues those are arises in an organisation. All the
analysis is done to get better outcomes in preparing proper balance within internal and external
department.
TASK 1
P1: Meaning of Management accounting and their essential need
In every profitable business organisation, it has been observed that they are facing
various types of issue regarding recording of everyday transactions. It has been observed that
managers are always ready to deal with all kind of issues those are affecting profitability of
“Hichrom Ltd” company. It is known as one of the expanding company which is operating at the
cutting edge of separation. It was establishing in 1978 and consider as world’s largest producers
and distributors of ultra-high performance and liquid chromatography accessorises. Their goods
are utilised at the frontiers of science, forensics and medicine sectors. It comparison of two parts
such as management and accounting. Accounting is known as one of the crucial aspects which
will be taken into account for recording, summarising, communicating and analysing various
financial transactions. While, the role of management is to guide and provide reliable direction in
term of rules and policies that can provide more valuable outcomes in near future time.
Definition: Management accounting is referring as one of the effective sourcing,
analysing, communication and effective use of decision those are related with financial and non-
financial data to incurred value for the department (Van der Stede, 2011).
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According to a profession, MA used to provide appropriate knowledge of business and
their operational aspects to administration so that business risks and opportunities can be
mitigating. It is considering as one of the effective process of delivering data to administration
which is collected for attaining better outcomes in near future time. This seems to be valuable
activity that is done by managers by using financial data regarding a company in respect to
support effective decision making. In case, Hichrom Ltd is using management reports and data
those are prepared by using financial and numerical information to make short and long terms
decision.
Significant of MA:
Importance of management accounting would assist in effective control of business
organisation. It is having been found that organisation is always need to have reliable systems, if
there is any increment on overall sale of production, modification as well as use of latest
technological changes are needed to be taken into consideration. It is more effectively helpful for
the department in order to increase profitability as well as efficient of the company at the same
period of time.
Types of accounting system:
Cost accounting system: This seems to be one of the effective accounting system that
will be consider integral part of Hichrom Ltd company. It is used to analyse internal cost which
would be properly reflecting proper allocation of system to examine cost and expenditure
incurred during the time. It is one of the effective accounting measure those are based on
principle of financial aspects in everyday business decision making. This happens to be reliable
design taken into account by industry to predict cost for their products in order to evaluate stock
valuation and total cost that is going to incurred during the production time (Quinn, Strauss and
Kristandl, 2014.).
Price optimisation system: This is taken into account as effective use of numerical
evaluation done by “Hichrom Ltd company” to analyse how clients would react to various prices
for its good and services. This seems to be effective prices those are considered by the company
in order to examine best out of them can be able to meet out their objective like increasing
operating profits. This would be based on valuable ability to stimulate and make visualisation of
prices downfalls. The role of manager must allow an organisation to use pricing strategies as
effective profit level that will often considered in underdeveloped nations.
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Inventory management system: It is known as one of the crucial as well as continuous
process of understanding all moving parts and goods those are coming in and out of the business.
It has been found that stock would be managed by the company on regular basis. In order to
maintain and overlook about total inventory position of the company they need to track all
supply chain or appropriate portion under which business used to operate. This seems to be
consider by production company to prepare bill of orders as well as other manufacturing
associated papers. There are various types of method that are taken into account by the
managers while recording of stock. Such as LIFO, FIFO and AVCO methods.
Job costing system: It is considered as one of the effective system for allocating
production related costs to any single good and group of products. The managers use these types
of system in case, the product produced by “Hichrom Ltd company” is sufficiently dissimilar
from one another. By the help of this, accountant and finance manager can have used to keep
systematic detail information about cost of every job and maintain reliable information about the
businesses. There are various types of costing systems which would be taken into use by the
manager such as process costing, standard, contract and batch costing (Parker, 2012).
P2: Different types of accounting reporting methods
In accordance with getting better and reliable revenue from the use of various resources
of the company, it is necessary to make proper utilisation of those information which are
essential for the getting company aims and objectives. Positive management accounting consists
of wide set of role and responsibility to manager of critical utilisation of data by using effective
reporting methods. It will be effectively helpful for the investors as well as other stakeholder to
make reliable decision in coming period of time. Every level of management individual is
operating for the effective evaluation of organisation as well as their own position. Thus, each of
the wants data associated with efficiency of employee for associated department so that reliable
modification can be done in proper manner (Accounting Report, 2018).
In other words, the manager used to divide all system and reporting into various sub-parts
on the basis of different functions, product and other aspects. Reports are taken into account for
proper planning, regulation, decision making as well as future measurement of individual as well
as company’s performances. It consists of financial document such as balance sheet, profit and
loss and cash flow statements. These reports used to deliver specific information about owners
and managers with the motive required to cut down cost as well as direct capital to upper
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performing goods (Tucker and Lowe, 2014). This seems to be utmost crucial aspects for
Hichrom Ltd company. reports would be incurred for certain period of time mainly as regular,
weekly and monthly basis. These concern report are formed to get statistical information about
the financial as well as stability of the company during the period of time. There are various
types of sources from which a managers used to gather certain amount of information. Such as
marketing, financing and human resources and so on. Accounting reports are associated with the
financial data those are based on accounting records of the business which will be prepared by
collected valuable information through analysing different types of statements. There are various
types of accounting reporting methods which will be taken into account for making valuable
decision regarding future growth and sustainability of the company. The main aim of financial
reporting is to deliver valuable data for effective decision making in near future time. The
significant aspects to various economy with essential capital market as participant can be crucial
to deal with all kind of information. These data those are collected by the managers would be
summaries positively in order to make future decision about gaining maximum return in near
future period of time. There are various types of reporting methods those are helpful for the
managers in order to make valuable decision in terms of capital investments. Some of them are
mentioned underneath:
 Performance report: This seems to be effective report which is being prepared by the
manages by taken all specific data from past. These are prepared routinely by the concern
managers which will be financed through public income that shows overall incomes those are
spend effectively by the company. A report can help management to assess the growth of a
project or goods and how strongly budget related matters are adhered to them. It is one of the
vital activity which will be done for the project communication department in order to get
more reliable outcomes in near future time (Otley, 2016).
 Account receivable report: According to this particular report which will be prepared by the
finance managers to determine total lists of unpaid customer’s invoices and various unused
credit detail as per the mentioned date. These reports are considered as one of the primary
tools which will be taken into account for collection of personnel to analyse invoices which
are remain overdue for the payment.
 Inventory management report: This seems to be one of the effective report that is based on
detail information about company opening and closing stock that are keep by them. All the
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data regarding the stock can be maintained by the managers by using various techniques.
Hichrom Ltd company can positively use to considered various tools and techniques such as
ABC costing, EOQ and inventory system (Chapman, Kern and Laguecir, 2014). It is really
more helpful report that can assist the small company’s owners in making better decision in
relation to generate maximum profit.
 Job cost report: This seems to be more reliable process which will be taken into account
during the time when manager used to produce large number of products. A considerable
amount of costing decision is needed as especially at the time of dealing with various costing
pricing methods. Basically, the job order costing is mainly considered for production of
products which are produces sufficiently other from one another.
M1: Benefits of using various management accounting system
It has been found that all those above mentioned types of accounting system, it has been
found that manager can easily be able to record all their financial transactions in effective
manner. They all are equally responsible or beneficial for “Hichrom Ltd company”. some of
crucial advantage are mentioned underneath:
Types of accounting
system
Benefits
Cost accounting system It is used for the purpose of cost object evaluation. All revenues
and expenses would be based on clustered by cost aspects such as
product line and distribution channel.
Inventory management
system
It assist businesses to become more successful by making proper
balance among the stock, accurate planning methods.
Price optimisation
system
The main motive of doing business and customers are taken as free
to purchase any product and services company is selecting.
Job costing system Effective accessibility of using job cost techniques that is used to
access the expenditure which is incurred on every job while
production of products.
D1: Critical evaluation of various reporting and accounting system
Reporting system is one of the reliable system which will be effectively responsible for
evaluating productivity of the company (Bruynseels and Cardinaels, 2013). The role of managers
is to make proper analysis of all specific data those are gather from various sources such as
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finance, marketing and other departments. There are various types of reporting methods such as
performance report that will be taken into account for the purpose of analysing past outcomes to
that with present one. While account receivable reports are another vital aspect for the company
to make analysing of total outstanding payment which will be taken into account by an
organisation. Inventory management accounting deal with proper records of opening and closing
records which will be effectively useful for attain more reliable outcomes in near future time.
Both accounting system and reporting would be more effectively helpful for the purpose of
attaining more profitable growth and sustainability for the company.
TASK 2
P3: Different types of costing method used for the purpose of calculating net profit
In any manufacturing business, it is more crucial to deal with all kind of costs and
expenses that can assist managers for the process of product planning. Cost is playing more
specific role in proper functioning of everyday operations. It is the amount of value which will
be paid by the company to get something. Henceforth, it is not present for the use of any more
once utilised by the company. In business, the cost can be considered as the acquisition under
which the amount of money will be expanding to attain more reliable results. There are various
types of costing methods that can be taken into account. Some of them are mentioned
underneath:
Marginal costing: It seems to be considered as one of the effective costing method
which will take into account while production of one additional unit of products. In consists of
only variable cost in respect to total sales computed and fixed cost are charged in between
overall calculation of net income of the company. It has been found that variable cost are
consists of essential part of marginal cost which consists of direct material, labour and overhead
costs. It is considered as one of the best method that can attain in future decision making.
Calculation of net profit by using marginal costing method:
Particulars Amount
Sales revenue = (selling price * no. of goods sold = 55 * 600) 33000
Marginal Cost of goods sold: 9600
Production = (units produced * marginal cost per unit = 800 * 16) 12800
closing stock = (closing stock units * marginal cost per unit = 200 * 16) 3200
Contribution 23400
Fixed cost ( 3200+1200+1500 ) 5900
Net profit 17500
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Absorption costing: It refers as one of the proper method which is being considered
during production of various products and services. It used to deal with both variable and fixed
costs method (Zirkler, 2013). As compare to marginal cost, this particular costing approach used
to absorb every cost either related with variable and fixed. It is being considered as one of the
effective aspects for an organisation to determine net income and ensure all cost applicable to
absorption costing methods.
Computation of net income by using absorption costing method:
Particulars Amount
Sales = (selling price * no. of units sold = 55 * 600) 33000
Cost of goods sold = (total expenses per unit * actual sales = 23.375 * 600) 14025
Gross profit 18975
Selling & Administrative expenses = (variable sales overhead * actual sales + selling
and administrative cost = 1 * 600 + 2700) 3300
Net profit/ operating income 15675
Break-Even: It is known as the point at which all cost and income are happening to be
equal and the company neither goes into loss nor get profit. An effective analysis is being done at
which earning can received equally as the cost related with receiving the total revenues.
a. Total number of product sold
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
BEP in units 500
b. Calculation of breakeven point in accordance to sales revenue
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
Profit volume ratio PVR = Contribution / sales * 100 30.00%
BEP in sales 20000
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c. Calculation for getting desire profit of 10,000
Profit 10000
Fixed costs 6000
Contribution 16000
Contribution per unit 12
Sales 1333.33
Margin of Safety: It is said to be reliable aspects in between the intrinsic amount of
inventory and their market costs. It is considered as effective ways an output or sales level would
lies before a business ranges to their break-even fact.
d. The margin of safety, if 800 products are sold
Actual sales in units 800
Break even sales in units 500
Margin of safety 37.5
M2: Various types of accounting techniques
There are various types of accounting tools and techniques which will be taken into
account while calculating net profit for the company. some of them are mentioned underneath:
 Standard costing; It is said to be reliable process of predicting future profitability that
used to examine cost those are charged in respect to future sales planning.
 Marginal costing: It is effective accounting tool that can assist an organisation to
examine net earnings of the company through charging every cost those are of variable in
nature. It is more beneficial for future decision making (Myers, 2013).
D2: Data interpretation
In order to get more reliable outcomes in near future time, it is essential for the
accountant to make use of reliable data which would provide more benefits to the company. in
this process, manager can use two methods such as marginal as well as absorption costing. In
case of marginal costing, a total of 17500 of revenue is calculated. While 15675 of total profit is
computed by using absorption costing. The major variations are observed by using fixed cost
treatment. The continuation of amount in profit is more from the use of marginal cost so it is
more effective in terms of future planning (Guthrie and Parker, 2014).
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TASK 3
P4: Merits and demerit of using planning tools to control budgets
Budgetary control process
Budgetary control is a process used to analyse the income and expenditure for upcoming
years and events. Budget provides a forecasted information and aspects which remain associated
with future events and incidents. In this process budgeted and actual aspects are measured and
differences are tried to find out. There are some responsible centres covered in this process to
cover up overall budget requirement. There are four major responsibilities centres as Revenue
centres, Expenses centres and Profit centres (Renz and Herman, 2016).
Contingency tool
Possibility is an organizing gadget which engages a relationship to be set up for future
vulnerabilities and emergencies, plausibility masterminding fuses drive fundamental initiative
about the cash related resources and stock organization. Plausibility organizing consolidates
taking note of the request concerning what will happen, how organization will oversee it and
what steps should be taken to oversee such emergencies.
Advantages and disadvantages: This tools helps to summarise and sort out the
contingent situations and circumstance which remain related to future events. Main drawback of
this tool is lack of accurate information and details. Managers and accountants would not be able
to get accurate information with this tool.
Forecasting tool
Anticipating is an organizing instrument that endeavours future events and conditions. It
urges organization to discover the vulnerabilities without limits by considering past experiences
and example examination.
Advantages and disadvantages: Forecasting is a process to analyse the future events
and aspects subject to determine the advantages and disadvantages. This mainly helps to
consolidate the possible aspects and terms of assisting the planning process. This forecasting tool
also remain ineffective in contingent situations (Shah, Malik and Malik, 2011).
Situational tool
Situation is an organizing instrument where chief develops each possible circumstance
which may can occur in not all that far off future, this game plan gets every potential result by
recognizing designs and possible vulnerabilities.
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Advantages and disadvantages: it is very difficult to analyse the situation. A prediction
based analysis and overview is the only option to assist the structure of organisation in straight
line. There is lack of reasonable occasions are found to derive the examination in effective
manner.
M3 utilisation of type of planning tools and their application for making forecasting and budget
With the assistance of budgetary control arranging process turn out to be more familiar
and simple and the way toward setting up the monetary articulations additionally turn out to be
more helpful to outline the strategies for success (Goodman and et. Al., 2013.). There are kind of
arranging apparatuses are examined above as far as helping the budgetary procedure. Income
articulation and planning are the principle part of determining and breaking down the money
related issues in successful way.
D3 Planning tools for responding financial problems to assist budgetary control
Masterminding gadgets like foreseeing orchestrating and circumstance organizing urges a
relationship to assess each and every possible circumstance for future which can lead an
association to build a fruitful evasion prepare for all the future vulnerabilities and emergencies.
These organizing gadgets are base for status of spending designs and pay decrees which are
considered as generally exact examinations for future costs and earnings (Storey, 2014).
P5: Comparison with other organization that how they are using MA to overcome financial
issues
In every business organization, it has been found that managers are having various tools
and techniques to overcome all financial problems which will be arises in an organization. These
are helpful for the purpose of making accounting report that would effectively base on proper
utilization of resources that are considered by managers in future decision making. Most of the
company’s like “Hichrom Ltd”. They are using various systems such as price optimization,
inventory system to enhance their profitability for their overall business to deal with all financial
problems which are seen in an organization. There are various financial problems that are
mentioned underneath:
Rule and regulation aspect; It has been found that every company need to be registered in
proper manner and make arrangement of necessary needs. In case any document is missing can
be create major issue to the company (Sjögrén, Syrjä and Puumalainen, 2014).
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Product and service quality issue: It seems to be more effective as well as vital for the
company that all the specific requirement that are needed to be included under the product can be
of mentioned. In case any issues are being found in that can have major consequences over the
company’s performance.
Financial tools and techniques
KPI: It refers to such financial tools and techniques which help management to evaluate
the performance of employees through comparing actual performance with standard so that
deviation if any are easily identified. This enable management to make corrective actions and
measures to eliminate deviations and improve financial strength of company.
Benchmarking: It refers to such financial tools and techniques in which the management
set target among the employees after analysing rivals' strategies which help company in bringing
ahead than their rivals (Soin and Collier, 2013).
Comparison
Unicorn Grocery Hichrom Ltd
As this company is operating for the
production of grocery items. They used to
resolve their financial issues by using key
performance indicators.
This company is operating at minimum level so
the chances of mistake can be more. To
overcomes all those financial problems they
need to make use of financial governance and
other accounting systems in effective manner.
M4 Planning tools for responding the financial problems to lead organisation
Organization accounting is a method of preparing managerial accounting records and
reports to serve imperative information about affiliation's real position. Accounting incorporates
diverse methodologies and strategies which can help a relationship with accomplishing viable
achievement paying little respect to each and every cash related issue as organization accounting
systems has techniques like salary examinations and minor costing which helps in choosing all
costs of an affiliation which can settle money related issues (Ward, 2012).
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CONCLUSION
It has been concluded from the above project report that management accounting plays an
important and valuable role in achieving growth and success of an organization. This help
company in enhancing their financial position in market due to which certain plans and polices
are formulated. There are various management accounting system and reporting which help
management in making an effective decision. The management also required to consider
planning tools to control budget and financial tools in order to maintain financial position of
company.
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REFERENCES
Books and Journals:
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An exploratory study. Journal of Accounting Education. 32(4). pp.24-30.
Van der Stede, W. A., 2011. Management accounting research in the wake of the crisis: some
reflections. European Accounting Review, 20(4). pp.605-623.
Quinn, M., Strauss, E. and Kristandl, G., 2014. The effects of cloud technology on management
accounting and business decision-making. Financial Management. 10(6). pp.1-12.
Parker, L. D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting, 23(1). pp.54-70.
P. Tucker, B. and D. Lowe, A., 2014. Practitioners are from Mars; academics are from Venus?
An investigation of the research-practice gap in management accounting. Accounting,
Auditing & Accountability Journal, 27(3). pp.394-425.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research, 31. pp.45-62.
Chapman, C., Kern, A. and Laguecir, A., 2014. Costing practices in healthcare. Accounting
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Storey, J., 2014. New Perspectives on Human Resource Management (Routledge Revivals).
Routledge.
Ward, K., 2012. Strategic management accounting. Routledge.
Soin, K. and Collier, P., 2013. Risk and risk management in management accounting and control.
Sjögrén, H., Syrjä, P. and Puumalainen, K., 2014. Use of management accounting information in
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Information Systems 9. 17(3). pp.340-354.
Shah, H., Malik, A. and Malik, M. S., 2011. Strategic Management Accounting-A Messiah For
Management Accounting?. Australian Journal of Business and Management Research,
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Renz, D. O. and Herman, R. D. eds., 2016. The Jossey-Bass handbook of non profit leadership
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Zirkler, B., 2013. Führungsorientiertes US-amerikanisches Management Accounting:
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students.com/accounting-reports.html>.
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