Management Accounting Systems and Techniques

This document provides an introduction to management accounting and discusses the essentials of different types of management accounting systems. It also explores various methods of management accounting reporting and cost techniques. The document includes income statements to calculate costs. The subject is Management and the course code is not mentioned. The document type is not mentioned and there is no mention of a specific assignment type. The content is relevant to students studying management accounting.

Management
Accounting Systems
&
Techniques

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essentials of different types of management accounting
system..........................................................................................................................................1
P2 Various methods of management accounting reporting........................................................3
M1 different types of system and benefits..................................................................................4
D1 Management Accounting system report within the organisational process .........................4
TASK 2 ...........................................................................................................................................4
P3 Cost techniques and prepare income statement to calculate cost...........................................4
M2 Different management accounting tools ..............................................................................9
D2 Financial reports that apply and interpretation of data........................................................10
TASK 3..........................................................................................................................................10
P4 Merits and demerits of various types of planning tool........................................................10
TASK 4..........................................................................................................................................11
P5 A critical analysis of how organisation have adapted different accounting approach in
resolving financial problem by management. ..........................................................................11
M4 Managing accounting system for achieving long term success of business. .....................13
D3 Through effective planning tool financial problem are been resolved by management. ...14
CONCLUSION .............................................................................................................................14
REFERENCES .............................................................................................................................15

INTRODUCTION
Management accounting is a tool which is used to analysis organisational activity with
different tools and techniques with help in collecting relevant information. (Chiarini and
Vagnoni 2015). It is a systematic information which is used for collecting data and information
in an effective manner. Financial decisions-making which aid to planning, controlling
formulation of plans and policies in order to achieve organisational objective. Berkeley
Partnership which is established in 1990. This company offers different services to number of
client companies in form of independent management consultancy. Essentra packaging which is
a manufacturing firm deals in tear tapes and many more, is a client company of Berkeley
Partnership and is selected in this project in which it is been discussed about the concept of
management accounting, cost techniques which is beneficial for company and advantages and
disadvantages of planning tool.
TASK 1
P1 Management accounting and essentials of different types of management accounting system
This management accounting tool is a process which describe various activities which is
done to analyse and collect information in terms of monetary (Harrison and Lock 2017). There
are different advantages of accounting which aid in decisions making and also control over
business financial functions. With management accounting system, Essentra packaging can
effectively work in proper manner to achieve organisational goals. This is important for a
company to consider accounting management to their operation for effective planning and
achieve higher growth. Some of the characteristics are been mentioned below:
Study on causes and effects relationships: Financial accounting system which is been
prepared to know profit and loss, so under management accounting system it causes effects
relationship between variables and profitability of business.
Essentials of management accounting in organisation is important tool which is used to
analyse financial stability of organisation in an effective manner. Some of the points regarding to
it has been mentioned below:
Inventory management system: In organisation there are two main important function
that is manufacturing and production which manages inventory and stock and keeps tract on
organisational structure (Armitage, Webb and Glynn 2016). With the use of this system

inventory wastage can be reduced resulting in higher profit. To increase overall productivity,
company can work on this strategy to avoid less wastage and use optimum resources in effective
and appropriate manner. Some of ratio of inventory which will be help organisation in
impressive way.
 FIFO- (First in first out)
 LIFO- (Last in first out)
There are two main tools which are used by the organisation in day to day operation.
FIFO denotes when product is manufactured and it should be sold out first as earlier as possible
and LIFO denotes or means that after production when stock come last and goes first. The
company uses FIFO method which help to aid profit in effective manner.
Price optimisation system: This Model are mathematical programs that calculate demand
varies at different price levels. Price optimisation is use to determine how customer will respond
to different prices of its products and services through different channels. Essentra Packaging
which can increase their sales margin in effecting pricing strategy in different products. Through
this method which will aid to attain more profit company.
Job costing system: Job costing system is for assigning and accumulating manufacturing
costs of an individual unit of output. Company can perform operations by detailed information
which been carried out which aid to relate cost within an accounting period. More over with job
costing system, this company Essentra collects information which will assign job role according
to company roles and duties of employees. Through this system which will help to maintain cost
in effective way.
Difference between Financial Accounting and Management Accounting
Financial Accounting Management Accounting
 The main purpose of using this financial
accounting is in external company. The
accounting is used in internal company
to maintain rules and regulation
 Management accounting is different
from financial accounting. It includes
details of company's available cash, sales
revenue and current state of organisation
account payable and receivable.
 It covers all financial related data inside
an organisation.
 It involves non financial form of
information based on qualitative

improvisation.
 Liabilities on companies is prepared in
form of financial accounts
 In management accounts no legal rules
are applicable while preparing.
P2 Various methods of management accounting reporting
Different types of management accounting which aid to record information related to
financial growth. To increase productivity of organisation. Management accounting which
necessary to be made by finance department for evaluating and increasing production level of
company (Otley 2016).
Budget report: This report is made for accounting of the year of company managers of
company which uses this kind of report for comparison of actual report as well as budget in
accounting. This report is used to manage expenses and other cost of company which is going to
occur during the year. For every company budget is necessary, in context to Essentra packing
manger operations which need to make budget to analyse financial part effectively.
Cost report: Another report which is being aid to estimate cost in manufacturing and
production process. This cost report will improve and leads to higher growth and increase in
production level. Additional benefit is that it gives assurance to activities which is conducted
during time span of company management. In context to Essentra packing company cost report
will able to cost in better and discipline manner, also which leads to higher profit.
M1 different types of system and benefits
Inventory management system: The major benefit behind this system is have record of
all inventory which is within organisational structure which offers different products and services
to consumer according to demand and need. Inventory tool which is important element for
growth of company. Essentra Packing which need to adopt this system to control over inventory
because it is a manufacturing company so proper inventory management is necessary to avoid
wastage of resource.
Cost Accounting system: Cost is important tool of making business development in
effective manner more over accounting is such way which will lead to higher growth.
In context to Essentra packing using this management accounting tool will able to mange cost in
appropriate way. (Appelbaum Kogan Vasarhelyi and Yan 2017)

Price optimisation system: The system which is increases company customer base with
assistance of fair price in appropriate manner. Company which need to work upon this matter.
Essentra packing can adopt this system in to their organisation to avoid price fluctuations and
can be able to set a standard pricing.
Job costing system: The activity which will evaluate different activities and which need
to maintained in effective manner so that company achieve its goals and objective in impressive
way. Through this system Essentra packing will help to achieve objective in effective manner.
Essentra packing can use this system to produce homogeneous products with the view to mitigate
wastage of cost.
D1 Management Accounting system report within the organisational process
Management accounting system which involves preparing and providing timely financial
and statistical information to business mangers so that short term objectives can be achieved in
effective manner. This is important parameter to analyse company growth and to evaluate
financial position of company in a competitive market. Essentra packing need to adopt
management accounting system report in their company through which manger of this company
can tract their product information design according to marketing trend. Cost accounting system
is used to develop cost accounting report which is integrated to ascertain cost of manufacturing
operation of Essentra packaging company in effective way.
TASK 2
P3 Cost techniques and prepare income statement to calculate cost
Cost techniques are methods which controls over cost and control and aid in decision
making hence major functions is that it aid in decisions making, negotiation and prise appraisal
and more over assess in purchasing performance. Cost techniques which are been discussed
below:
Marginal Costing: The cost which includes labour, material and fixed cost, selling cost,
overheads and administration expense. Moreover, it states that it is a charging variable expenses
in all over business development and with the help of accounting techniques organisation which
can able to increase the efficiency of employees as well as of organisation. This is a cost which is
been taken into the proper manner and goals which is to be in form of different achievements.

Marginal cost which reflects company profit margin and efficiency which has to be considered
by manger in appropriate way. Labours and overheads which is to proper manner hence variables
and overheads which has been added in marginal cost with direct marginal expenses. This is
accounting techniques which is used to increase net benefits which determine it in period of
bookkeeping. The formula which is mentioned is to calculate marginal cost which is under:
[Marginal Cost= Direct Labour+ Variable overheads +Direct expenses +Direct material]
Income statement under Marginal costing method for month of May & June
Particular May June
(in £) (in £)
Total Sales 50 15000 25000
Less: variable cost
Opening stock - 3200
D.L. 5 2500 1900
D.M. 8 4000 3040
Variable Cost 3 1500 1140
Less: Closing stock -3200 -1280
Total Variable cost 4800 8000
Contribution 10200 17000
Fixed indirect production cost 4000 4000
Selling & Distribution costs 4000 4000
Administrative costs 2000 2000

Sales commission cost 750 1250
N.P. (Net profit) -550 5750
Absorption Cost per unit
Direct Labour cost per unit 5 5
Direct Material cost per unit 8 8
Variable cost per unit 3 3
Marginal Cost per unit 16 16
May June
Opening stock - 200
Produced units 500 380
Sold Units 300 500
Closing stock 200 80
Absorption costing: This costing is used for costing the strategy in terms of
bookkeeping and for administration. Organisation which is working effectively which leads to
development of business. Moreover, fixed cost and variable cost, compensation and cost of
material which will increase the costing (Alsharari, Dixon and Youssef 2015). This cost which
helps in making strategies to overcome the crises which involved in the business. This cost is
majorly focusing on such cost which can be absorbed and some of technical tools which need to
be taken in consideration by the mangers of company. Hence this cost is made for affecting
which is directly or indirectly in accurate manner and hence this a form which is been generated
in such way that is applicable in organisation. The bookkeeping is a way of accounts which has

to be seen in appropriate way. Absorption which is not only taken in to the company
achievement but due to which goals are to be achieved.
Income statement under absorption costing method for month of May & June
Particulars May June
(in £) (in £)
Total sales 50 15000 25000
Less: Cost of Goods sold
Opening stock
D.L. 5 2500 1900
D.M. 8 4000 3040
Variable production cost 3 1500 1140
Fixed indirect production expenditure 4000 4000
Closing stock -4800 2122.4
Total cost of goods sell 7200 7957.6
G.P. (Gross profit) 7800 17042.4
Selling & Distribution expenses 4000 4000
Administrative cost 2000 2000
Sales commission expenditure 750 1250
N.P. (Net profit) 1050 9792.4

Absorption Cost per unit
Direct labour cost per unit 5 5
Direct material cost per unit 8 8
Variable cost per unit 3 3
Fixed indirect production expenses per unit 8 10.53
Total Absorption Cost per unit 24 26.53
May June
Opening stock - 200
Units produced 500 380
Sold units 300 500
Closing stock 200 80
Material cost variances:
Given information is as follows-
Standard price(SP)- £10 @ per kilograms
Actual price (AP)- £ 9.5 @ per kilograms (20900/2200)
Actual quantity (AQ)- 2200 Kilograms
Standard quantity(SQ)- 1000 Kilograms
Material price variance (MPV)= (SP-AP) * AQ
(10-9.5)* 2200= £1100 F
Material usage variance (MUV)= (SQ-AQ)*SP
(1000-2200)*10= £12000 A

Material cost variance (MCV)= Standard material cost- actual material cost
Valuation of closing stock using LIFO
Date Reference Purchase Issues Balance (Inventory)
Units £/Units £ Total Units £/Units £ Total Units £/Units £ Total
05/01 Previous balance
(inventory) 40 3.00 120.00
05/12 40 3.00 120.00
Bought 25 units
at £ 3.60 each 20 3.60 72. 20 3.60 72.00
05/15 20 3.60 72.
Issued 36 units 16 3.00 48. 24 3.00 72.00
05/20 24 3.00 72.00
Bought 20 units
at £ 3.75 each 20 3.75 75. 20 3.75 75.00
05/23 Issued 10 units 10 3.75 37.5 24 3.00 72.00
10 3.75 37.50
05/27 9 3.75 33.75
Issued 25 units 25 3.00 75.00
05/30 Issued 5 units 5 3.00 15.00 4 3.75 15.00
Valuation of closing stock by using weighted average method:
05/01 Previous balance
(inventory) 40 3.0000 120.0000
05/12 Bought 25 units at £
3.60 each 25 3.60 90. 65 3.2308 210.0000

05/15 Issued 36 units 36 3.2308 116.307
7 29 3.2308 93.6923
05/20 Bought 20 units at £
3.75 each 20 3.75 75. 49 3.4427 168.6923
05/23 Issued 10 units 10 3.4427 34.4270 39 3.4427 134.2653
05/27 Issued 25 units 25 3.4427 86.0675 14 3.4427 48.1978
05/30 Issued 5 units 5 3.44 17.2135 9 3.4427 30.9843
M2 Different management accounting tools
In present scenario organisation which aid to take benefits with respect to decision
making and cost method will help to improve the work in effective manner. The management
techniques which is used by manger in different form and tools which need to aid information in
proper manner (Azudin and Mansor 2018) The use of marginal profit which is calculated for cost
term production and operational work which is taken take while working in organisation. The
advantages with regard to manager is that it suitable in working of production as well as
operation in proper manner. Hence working with regard to variances in cost which need to
treated in both methods which will change in net earnings figure for a year. The solution is that
attaining right solution which affective in nature.
D2 Financial reports that apply and interpretation of data
Financial reports which includes major three accounts that is balance sheet, cash flow and
revenue statements. With the help of these financial reports organisation of business which can
work effective in the organisation and which showcase financial strength of company. Above
mentioned table it results to net profit with different method which has been mentioned in report.
The marginal cost is a tool which is to be taken into consideration that fixes cost at periodical
form. If it has been seen that cost is absorbed, then for that it is important to produce particular
goods. It has been evaluated that in May month profit is 1050 Euros and in June profit is 4750
Euros with absorption of costing. It is essential that for manger needs to schedule resources with
the concern of organisation and along with that cost and along with revenue which is required in
different projects in side business operations.

TASK 3
P4 Merits and demerits of various types of planning tool
Budget is an important tool for an organisation it is set of outline related to financial
statements and planning which going to be occurred during the year. Hence, this company is
need accomplish their work in effective and estimated time period. In company of Essentra,
manger take advantages of budget to control over expenses. It has been mentioned about some of
advantages and disadvantages:
Fixed Budget: This budget does not change in any of the conditions and budgets which
is estimated actual funds which required for achieving goals and increasing sales margins.
(Spraakman Grady Askarany and Akroyd 2015)
Merits of Fixed Budget
 Fixed budget which allows a business to measure both short- term and long term budgets
in effective manner.
 In the fixed budget cost are largely fixed so that expenses don not change as revenue
fluctuate.
Demerits of Fixed Budget
 One of the big problem of fixed budget is that it does not account for life's which are
unpredictable events. For example, fixed bills such as mortgage, car payments, variable
expenses are unpredictable which will ultimately exceed budget stress.
 Fixed budget is one of the draft which is based on specific criteria without any provision
for any changes at any point during the period of time covered by the budget.
Flexible Budgets: A flexible Budget means adjustment with changes in volume or
activity. Hence flexible budget which includes a variable rate per unit of activity instead of one
fixed total amount.
Merits of flexible budget which is estimated for evaluating in effective manner. The
industry which manger need to allocate funds in each activity of business. Demerits is a type of
budget which have to critically analysed by mangers in achieving goals of organisation. So more
over company need to work on this matter. Mangers of company which need to allocate in
effective manner to reduce loss. Company need to influence some of changes which need to be
taken into consideration in amount to which mangers have to implement some of changes which
will lead to growth of business in proper way. The merit of using this flexible budget in company

which helps to evaluate in proper manner. The demerit of using this budget by company will
critically manges in achieving goals and objective.
TASK 4
P5 A critical analysis of how organisation have adapted different accounting approach in
resolving financial problem by management.
At early stage, each organisation faces some problems while growing or expanding
business at any market place. Some firm indulges in financial crises due to wrong planning of
funds in operating business activities. In recent business environment, most of the managers have
to develop cordial relationship with stakeholders, in maintaining accurate balance for the flow of
financial liquidity in an organisation. Some of the financial problems might occur due to
incorrect planning, more incurred expenses, ineffective quality staff and unsatisfied investor
withdrawing funds from firm. Thereafter, resulting in decline of business in competitive market
in any industries. When talking about Essentra Packaging, the firm are currently facing some
funds relating problem like lack of cash flow, low practise of accounting and unnecessary
expenditure on manufacturing of tear tapes.
Unnecessary Expenditure: Due to incorrect planning, supervisors have allocated
inappropriate funds on different business activities, which have not given desired output to the
organisation. These kinds of strategies used by managers in their decision have impacted in
supplying less funds for conducting task that are required for achieving short term objectives of
the organisation.
Lack of cash flow: If the financial budget is not structured properly, it will have huge
influence on operating routine business activities in an organisation. This type of financial
problem was faced by firm due to unhealthy relation with stakeholders. Thereafter there was
inaccurate supply of funds in an organisation.
These financial problem have major influence on profitability and productivity of both
employee and organisation in a specific industries. As employee are the one who gets affected
from drastic decision taken by management of any organisation. As it is said to every problem
there are some alternative solution that are effectively utilised for performing any task in
company. In regards to Essentra Packaging, the manager has use some method like financial

governance, benchmarking and key performance analysis for solving financial problem which
they are facing in growing business. These methods are briefly mentioned below:
Financial Governance: The financial governance is described as set of framework of
guidelines and policies that are designed to systematically manage accurate financial record of
any organisation. In context with Essentra Packaging, the supervisor could critically planned
strategies for recording financial statements in accounting software that are taking place in an
organisation. It is also help finance leaders in controlling the inflow and outflow of funds, having
a check on all financial transaction and securing this information with effective authentications.
Through financial governance which will able to set proper guidelines with effective final goal.
(Sledgianowski Gomaa and Tan, 2017).
Benchmarking: This technique involves comparison of the performance of business with
competitor, in order to sustain and grow the business in competitive market. When talking about
Essentra Packaging, the manager could set standards while allocating funds in completing
different activities at the time. So that incurred expenses could generate some revenue for
growing the business. Through this techniques proper benchmark can be set and can be resolved
while which will help to allocate fund in different activities.
Key Performance Indicator: It is a tool used for assessing the performance of business
while grabbing successful growth of business in cut throat competitions. KPI shows the accurate
result to leader and accordingly they forecast and plan strategies to gain competitive advantages.
The managers could utilise this technique for improving the quality of product and services.
Also the management will consume more time. Through these techniques manger which will
able to maintain profit in proper manner.
Comparison:
Essentra Packaging TPG
The firm are facing major financial problem
like unnecessary expenditure on manufacturing
of cost and lack of cash flow in operating
business activities. These problem have
resulted in reductions of productivity and
market share of business.
The TPG company are facing problem like
unhealthy relationship from investor resulted in
withdraw of all funds from the organisation
drastically influenced business in competitive
market. This problem arise because of lack of
communication between the management and

company stakeholder.
The manager of Essentra Packaging could
solve this problem through bench marking
technique, as it will help them in planning
strategies for estimating price of product which
will be comparatively low from competitors
cost. This initiative will be helpful in bringing
back the business in competitions. The major
problem is that company manger not able to set
cost which leads to higher lose to company.
Essentra Packaging company manager can use
Pricing optimisation management accounting
system through which they can resolve their
issues of pricing in effective manner.
The leader of this firm can use key
performance indicator technique for improving
the performance of business and will be
beneficial in generating revenues. Thereafter
will result in satisfying stakeholder by sharing
earned profit with them. The KPI tool will also
help in proper functioning of business activities
in work culture. The main problem which is
faced by company manger is that less revenue
is been maintained by operational manger
which leads to more loss. TPG operational
manger should adopt inventory management
system into their company to avoid day to day
business problem.
M4 Managing accounting system for achieving long term success of business.
The management accounting system is different from financial accounting as it deals in
recording of all activities that are taking place in an organisation. Thereafter the summary reports
are presented in front of the supervisors. The effective management help every firm to achieve
desired goals that are set by every organisation. If it is talked about Essentra Packaging, the
managers need to give emphasis on deciding an accurate financial budget, so that business
activities could operate effectively. Thereafter the manager should maintain record of all the
transaction that are taking place every day so that they can allocate funds for purchasing raw
materials. They could also improve the quality of product which are offered to target consumer.
These initiative will help in successfully growing business at national and international
platforms.
D3 Planning tool for financial problem
The top management have to critically plan strategies for resolving problem that are
currently faced by every firm in specific industries. If it is talked about Essentra Packaging, the

financial issues that have occurred is unnecessary expenditures and lack of cash flow which have
drastically hampered the day-to-day operation in an organisation. The manager need to satisfy
the stakeholder, so that they could invest in market share and inflow of funds could effectively
take place. This will result in smooth functioning of business activities. Hereby, help in attaining
competitive advantage in market. In nutshell it could be said that financial problem has to be
solved on time, so that work could be performed in accurate and systematic manner.
CONCLUSION
As per the above mention detailed report it can be concluded that work of the
organisation which is important elements and management accounting which is important role
for growth of organisation. Mangers of company have make such budgets which can be done in
effective manner. Perhaps through these financial accounting systems which aid to develop the
company in effective manner, more over this company need to make such budget in which
company growth depends upon accounting planning and more over enhance satisfaction to
customer as well as organisation.

REFERENCES
Books and Journals
Alsharari, N. M., Dixon, R. and Youssef, M. A. E. A., 2015. Management accounting change:
critical review and a new contextual framework. Journal of Accounting &
Organizational Change, 11(4), pp.476-502.Alsharari, N.M., Dixon, R. and Youssef, M.
A. E. A., 2015. Management accounting change: critical review and a new contextual
framework. Journal of Accounting & Organizational Change. 11(4). pp.476-502.
Appelbaum, D., Kogan, A., Vasarhelyi, M. and Yan, Z., 2017. Impact of business analytics and
enterprise systems on managerial accounting. International Journal of Accounting
Information Systems. 25. pp.29-44.
Armitage, H.M., Webb, A. and Glynn, J., 2016. The use of management accounting techniques
by small and medium‐sized enterprises: a field study of Canadian and Australian
practice. Accounting Perspectives. 15(1). pp.31-69.
Azudin, A. and Mansor, N., 2018. Management accounting practices of SMEs: The impact of
organizational DNA, business potential and operational technology. Asia Pacific
Management Review. 23(3). pp.222-226.
Chiarini, A. and Vagnoni, E., 2015. World-class manufacturing by Fiat. Comparison with
Toyota production system from a strategic management, management accounting,
operations management and performance measurement dimension. International
Journal of Production Research. 53(2). pp.590-606.
Harrison, F. and Lock, D., 2017. Advanced project management: a structured approach.
Routledge.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research. 31. pp.45-62.
Sledgianowski, D., Gomaa, M. and Tan, C., 2017. Toward integration of Big Data, technology
and information systems competencies into the accounting curriculum. Journal of
Accounting Education. 38. pp.81-93.
Spraakman, G., O'Grady, W., Askarany, D. and Akroyd, C., 2015. Employers’ perceptions of
information technology competency requirements for management accounting
graduates. Accounting Education. 24(5). pp.403-422.