Management Accounting Systems & Techniques (solved)

Management
Accounting Systems &
Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1 ...........................................................................................................................................3
P1 Management accounting and essential requirements of different types of management
accounting system..................................................................................................................3
P2 Different method used for management accounting reporting..........................................5
M1 Merits of management accounting system and its application in context of various
organisations:..........................................................................................................................6
D1 Evaluating of Management accounting system and management accounting which may be
integrated within organisational process...............................................................................7
Gantt chart:.............................................................................................................................8
P3 Preparation of income statement using absorption and marginal technique.....................8
M2.Applying Management accounting techniques and preparing documents of Financial
Reporting:.............................................................................................................................10
D2 Interpretation of income statements: .............................................................................10
TASK 3..........................................................................................................................................11
P4 Planning tools for budgetary control :.............................................................................11
M3 Usage of different planning tools and their usage and application in preparing budgets:13
D3 Planning tools for accounting assist to resolve issues and support for sustainable success:
..............................................................................................................................................13
P5 Management accounting systems to responds to financial problems. ...........................13
M4 Use of management accounting in solving financial problems and ultimately lead to
sustainable success...............................................................................................................16
CONCLUSION..............................................................................................................................17
.......................................................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Management accounting is a process that measure the operating business activities in
preparation of annual reports and other financial statements. It help in the decision making
process to management. It provide various managerial information as well as tools and
techniques to increase the business operations. In this report Oshodi plc is selected as base
organisation which provide the goods and services of fruit juice for all kind of age bracket. This
report focus on management accounting system and reporting, financial issue of the business,
income statement of the selected business by using marginal and absorption costing. In addition
to it covers the budgeting tools and techniques for the relevant business and giant charts. Further
it includes advantage and disadvantage of planning tools and adaptation of management
accounting system for respond the financial issue.
TASK 1
P1 Management accounting and essential requirements of different types of management
accounting system.
It is a process that describes as detailed research of the management performance in order
to control the business activities so profit can be higher in the long term. Management
accounting is important for the monetary and non monetary aspect of an organisation. Various
activities of the organisation is to depends on management accounting and those are like
planning, organising, directing, controlling and many other things. Beside it management
accounting system help the organisation to control day to day working process. Management
accounting systems refers to systematic utilisation of accounting information and records in
order to achieve targeted objects as per organisational policies and regulation.It also provide
framework to business for evaluation of the business static data (Takeda and Boyns, 2014).
There are various kind of management accounting system and its brief explantation are as given.
Inventory management system: As per this management accounting system, it traces
the stock of goods at stores, inward and outward inventory. It further assure the availability of
the stock at right time with right quantity. This system is too much important for the
organisation. Through that they can manage the inventory of the organisation by tracking the
inventory and raw material as well as in supply chain management. It also help to Oshodi plc in
reducing its cost of JOJO fruit juice item with the help of inventory management system in

effective manner. This system assure that stock is ordered from the creditors before the lead
time to obviate stock-out. For the purpose of valuation, different types of techniques are used i.e.
LIFO, FIFO, Weighted average method which are defined as follows:
LIFO: It means Last in, first out. It is a method that states the product which is last in at
the stores should be manufactured first.
FIFO: It means First in, first out. It is a method which states that the goods which are
produced at the occurrence at beginning should be use in the production first. This is the best
method to use in the business organisation.
Weighted average method: It is a method which divides the cost of goods sold from No.
of manufacture units.
Cost accounting system: This is the most essential system of management accounting
that based on the cost composition of a company. In the particular system of accounting,
company includes various aspects related to business to find out the cost of manufacturing of the
fruit items, provided services with the its effective strategies of cost like cost control. It play an
important role in the organisation. It provide framework in estimation of cost of products for
organisation. Oshodi plc is using this system in proper recording of the cost and price structure
of the JOJO fruit juice and it uses the data in preparation of cost sheet and other costing system
to find out the profitability in the business.
Price optimisation system: This system is helpful for the organisation in providing
correct pricing of the product and services. As per this system, organisation charge different
price for different product and services. It also keeps the price of the product and services which
it is in high demand and also focusing the quality of product and services. Oshodi plc is using
this system to assure the exact price of JOJO fruit juice with the profitability of the organisation.
As Customer satisfaction is obligation of an organisation so they manage all these things.
Job costing system: Job costing system is the process of management accounting system
that accumulated the cost data that is related with particular goods and services. In this method
the production cost is basically find on the no. of finished projects and task. This system is more
beneficial for the organisation because it identify the accurate cost of a specific job. All the
information is provided related to the product and services of a particular organisation. Oshodi
plc is using this system to manage the various expenditure that are allocated with JOJO fruit
juice.

P2 Different method used for management accounting reporting.
There are various methods of management accounting report that are help in the control
the operational business activities. Among of all these method an organisation can make the
report by using the detail related to business operations. Some of the methods of management
accounting reporting are as given.
Cost accounting report: It is helpful for the managers of an organisation for finding the cost
related to production cost, labour cost and various kind of variable productions. By using this
report they can reduce the overall cost of the organisation. This report impact on the growth of an
organisation in a positive manner. Oshodi plc is implementing this report to identifying the total
cost of JOJO fruit juice incurred by the organisation and the cost of manufacturing and other
relevant cost. Along with this it help an organisation to reduce their unnecessary expenditure so
there is increase in the profits of the organisation.
Performance report: This performance report help the organisation to evaluating the
performance of workforce and particular organisation. The object of this report is to know the
current performance and assist in the current issue and risk involved in particular task. By using
this report Oshodi plc can increase capacity of the employees as well as increase the
performance in effective manner. By utilization of this report organisation can meet with high
output with low cost by ascertaining the risk involved in the JOJO fruit items in the market
which is beneficial for the growth of organisation.
Inventory reporting system: This report system is too much beneficial for the
organisation in various manner. With the help of this system, mangers of the organisation can
take effective decision related to the inventory like cost holding, inventory holding and many
other. By using this system, organisation can make the valuation of closing stock. The method
of the valuation of stock are LIFO, FIFO and weighted average method. By assessing all these
method, business management can choose the best method of valuation of stored inventory
(Bryer, 2013).
A/C receivable ageing report: The main motto of preparation of this report is to find the
total no. of debtors with outstanding amount with them. This report provide the information
related to customer such as owed money, credit period. In the Oshodi plc , the report is used to
asses due with its customers so it is easy to recover the outstanding amount as per their credit
policy. Mangers can calculate all the information through this reporting system (Takeda and

Boyns, 2014). Furthermore it is also useful to make policies in relevance with debtors to identify
the number of bad-debtors that are present in the organisation.
.
M1 Merits of management accounting system and its application in context of various
organisations:
Cost Accounting system  In Oshodi plc cost accounting system
helps in estimation of various costs
associated with operations of
company.
 It also provides company information
for planning its operations.
 It also helps concerned managers to
know in which area expansion can be
done.
 If there is increasing costs then helps
company to take into account various
reasons for it and take corrective
measures for it.
Price optimisation system  It helps Oshodi plc in estimation of
various prices of its products.
 Company can test its market on
changing its prices and observing
customers response (Bryer, 2013).
 Customers can be categorized on
basis their reactions and demand on
product which helps in increasing
overall sales of company.

Inventory management system  Managing inventory is very
important in every company as
increased inventory always increases
cost for its maintenance and storage.
 Oshodi plc is a FMCG sector
company that provide fresh products
to its customers to increase their
brand loyalty.
 Minimization of costs is biggest
benefit of inventory management this
has a direct impact on increased
profitability of company.
Job costing system  Job costing is very helpful for
Oshodi plc in calculating cost
associated with material, lobar and
overhead in company.
 It helps management in calculating
cost of individual jobs to know
which particular job's cost is
exceeding its standard cost.
 If any variations are there then know
reasons and take corrective measures
for future.
 It is also helpful in increasing
employees effectiveness in various
jobs they are performing.
D1 Evaluating of Management accounting system and management accounting which may be
integrated within organisational process.
Management accounting systems and its reports are integrated with each other as both
help in attaining the objective and common goals. The main function of management

accounting system require in an organisation is to collect various kind of data related to business
management. These system help in formulation and implementation of the business and financial
strategies. And monitor the operating business activities in relevance of these management
accounting systems (Maskell, Baggaley, and Grasso, 2017). These systems also help in
controlling the function of production and workforce of the organisation in effective manner. By
applying these tools in the business, an organisation can increase the capacity and productivity
of the organisation effectively.
Gantt chart:
It is a bar chart that includes project schedule of an organisation. This chart shows the task is
going to be perform by a company during time interval.

P3 Preparation of income statement using absorption and marginal technique.
Cost is monetary value of expenses of the firm that is subject purchase of items and for
other disbursement like services labour, equipment to manufacturing the good at production unit.
Cost includes different expenses like direct expenses.
Absorption costing: This concepts is refers to, it is related with manufacturing cost of a
particular product. In this method certain costs are included variable and fix cost which is
linked to the manufacturing cost. It also covers the other overhead and raw material cost for
production. This is also known as management accounting method as well as direct cost of
production.
Marginal costing: It is a important technique of costing. In this techniques, variable cost
is charges to production cost. In order to preparation of income statement it cover both the cost
variable and fix.
Income statement by absorption method:
Particulars November (£)
Sales 50 500000
Less: Cost of sales -340000
Gross profit 160000
Variable selling overheads (10% sale value) 10000*5 -50000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Under/over absorbed production expenses 9000
Net Profit 79000
Particulars December (£)
Sales 50 600000
Less: Cost of sales -408000
Gross profit 192000
Under/over absorbed production expenses -9000
Variable selling overheads (10% sale value) 12000*5 -60000
Fixed selling expenses -14000
Fixed Administration Overhead -26000

Net Profit 83000
Income statement by marginal method:
Particulars November (£)
Sales 50 500000
Less: Cost of sales
Direct Material Costs 18 -180000
Direct Labour costs 4 -40000
Variable Production Overheads 3 -30000
Contribution 250000
Less:
Variable selling overheads (10% sale value) 10000*5 -50000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Fixed production overheads -99000
Net Profit 61000
Particulars December (£)
Sales 50 600000
Less: cost of sale
Direct Material Costs 18 -216000
Direct Labour costs 4 -48000
Variable Production Overheads 3 -36000
Contribution 300000
Less:
Variable selling overheads (10% sale value) 12000*5 -60000
Fixed selling expenses -14000
Fixed Administration Overhead -26000
Fixed production overheads -99000
Net Profit 101000

M2.Applying Management accounting techniques and preparing documents of Financial
Reporting:
There are many types of management accounting techniques that are using in their daily
operations activities, accounting purposes, decision making, Financial planning. There are lot of
decisions to be made by company's management in their day to day accounting. These decisions
are very crucial as they affect overall functioning of Oshodi plc. In management accounting
system, the marginal and absorption both techniques can be used while preparation of financial
reporting documents. After evaluating the above question, it can be said that marginal costing
technique is better as compared to absorption technique. As it provides the actual profit and help
to management related to various aspects of business operations.
D2 Interpretation of income statements:
On observation of income statement of Oshodi plc, it can be clearly said that in month of
November profits are 79000, which are more than profits in December month 61000 in the
marginal costing techniques. As per absorption costing profits are 83000 in December which is
less than profits of 101000. This type of differences occur because of fixed production overhead
costs being treated differently in both techniques. After analysis of both techniques, absorption
and marginal, it can be concluded that marginal technique is best for manufacturing business.
(Endenich, 2014)
TASK 3
P4 Planning tools for budgetary control :
Budgetary control: Budgetary control is used by various companies in comparing their
forecasted numericals with actual ones to know their deviations. In relation to this, accounting
managers of oshodi plc estimates various figures and then make comparisons when such
expenses actually occur. Many types of different tools and techniques are available with
management team and they use them in making appropriate and timely decisions. Budgetary
control measures are essential for companies as it helps them in setting up of control of expenses
and set specific parameters for it. This can put restrictions on overall effectiveness in operations.
Budget: Budget is an estimate of all expenditures in a particular period of time. They
play a very important part of every company as it helps management to run various business
operations effectively and efficiently. Budgets also play a very important role in increasing

productivity of company. Budgeting helps managers of oshodi plc in making important decisions
and also superior authorities in forecasting future requirements of companies.
 Merits: Budget is helpful in estimation of expenses of company and taking control on
different expenses.
 Demerits:Budget planning requires a lot of time and also results in increasing cost for
companies.
Capital Budget: This budget is defined as allocating the fund for purchase of the fix
assets. There are various types of investment that needs to be made by company to enhance the
profitability structure. It includes fixed assets such as land & building, machineries, plants etc.
Oshodi plc has appropriate management which usually makes capital budgets to know various
requirements in acquisition as well as maintenance of such fixed assets.
 Merits: Fixed assets are very important part of every company as they form basis of all its
operations. Especially for a company like oshodi plc which deals in beverages. capital
budgets are used to make effective decisions related to it(Cleary, 2015)
 Demerits: people with adequate skills and knowledge is required in preparing capital
budgets. As this activity requires strong knowledge of various accounting policies and
practises to be applied in preparation of these capital budgets.
Master Budget: Master budget is basically aggregation or combination of all types of
budgets in every company. They are usually prepared on monthly or quarterly basis depending
upon company. Oshodi plc also prepare their master budget while taking into account various
expenditures in different activities of company.
 Merits: In oshodi plc the management of company that consolidation of all different
budgets. It plays a very essential role in preparing other subsidiary budgets.
 Demerits: There are changes in working capital of company which have to be taken into
consideration. This affects already set budget, it becomes very difficult to make changes
in set budget.
Sales Budget: Sales budget includes the estimated sales of company. These estimations
are made on basis of past sales data available with company. It plays a very important role in
estimating future level of sales of company. On estimated sales level planning of various other
operations can be done by managers (Endenich, 2014)

 Merits: Sales budget plays a very important role in improving overall performance of
company. As if attempts are made to make accurate forecasts then this can be very
helpful in increasing productivity of operations at all levels.
 Demerits: There are so many sources and efforts required in preparation of sales budgets.
As if there will be no accuracy in it then it may lead to wrong estimation of all other
expenses also.
Flexible budget: This can be defined as the budget that flexes with alteration in the sales
quantity or volumes. This is more useful and sophisticated than a static budget. This is the
financial plan of estimation of income and expenses based on the actual output. It adopt the
financial needs quickly in the business that's the reason it is being prepared at certain level of
production.
 Merits: It can be prepared at any level of production and it save the resources of
expenditure. It fluctuate as per the requirement of the business so it good solution for the
monthly expenditure.
 Demerits: It little bit more confusing as it created at various level of output. Flexible
budget is time consuming to find out the variable cost at certain level.
M3 Usage of different planning tools and their usage and application in preparing budgets:
There are many different types of tools used in planning by companies like incremental
budget, fixed budget etc. can use and adopt any of them which is best suitable for fulfilling its
forecasting requirements. Oshodi plc is using budgeting tools as flexible budget for the better
planning for the level of production. By applying all these planning tools of budgeting and
forecast can be enhance the capacity and productivity of the business. Budgetary planning may
reduce the uncertainty of future by assessing the future expenses and level of production. This
tools used in the measuring the organisational performance and for financial aspects to final
reporting of the firm.
D3 Planning tools for accounting assist to resolve issues and support for sustainable success:
In Oshodi plc, company uses the tools such as cost accounting, inventory management to
better planning and control of the operational activities which help in maintain the business
environment of organisation as well as these planning tools to resolve the financial issue. These
planning tools are help in the reducing the indirect cost and management of stock in effective
manner to resolve the financial issue. (Holsapple, 2013). Oshodi plc also reduce the extra

expenses related to the task with there help of these management accounting method. Planning
tools provide many strategies tools and techniques which are beneficial for the organisation. It
also improves the quality of the goods and services in the less price and support to sustainable
success.
TASK 4
P5 Management accounting systems to responds to financial problems.
Financial problems: It is the biggest issue of an organisation related to money and fund.
All the daily performance of the organisation depends on finance. All these problems in an
organisation can accrues because of internal; and external factors. Financial problems can occurs
in barrios kind of ways like poor management of the organisation, economic cycles, sometimes
payments of customer and many intimidate expenses which come suddenly.
Mismanagement of stock: This is the problem that may effect to the business
organisation in certain way. This problem generates various other problem related to inventory
which effect the organisation directly. It is the basic requirement of analyse the stock movement
at stores and warehouse. After maintaining the stock records in proper systematic way this
problem can be solved. And It may fulfil the requirement of an organisation.
Unforeseen expenses: These kind of expenses are not involved in the budget list of the
organisation. These are accuse when some sudden expenses are events are come which are also
necessary for the organisation. All these kind of expenses are also related to the machine
breakdown, technological change and many other reasons are these. So all these unexpected
expenses also a big problem, for an organisation which already suffering from financial issue.
There are various tools and techniques which help the organisation to in financial
problems. So all these tools and techniques are as given which are important for the growth of an
organisation. So all these tools are as given.
Benchmarking: It is process in which an organisation set a standard and compare the
whole performance of an organisation. It is a practice of comparing business performance like,
cost, time, quality and various other things in a effective manner. It provide the actual position in
the industry as well as find actual competitor in the same industry. With the help of this tools
Oshodi plc can identified the problem of unforeseen expenses by assessing the future expenses in
the business that may incur by the business in huge variety of range related to indirect cost so it

help the organisation in reducing the unforeseen experiences of organisation. This provide the
possible contingencies of future expenditure which also take place in the financial year.
Key performance Indicator (KPI ): It is a very effective technique for an organisation
which help the organisation to analysis the performance of whole organisation for target
achievement. It help the organisation in target achievement with higher performance. The
manger of oshodi plc also focusing on the these tools and techniques and also use all these in
target achievement which is necessary for the growth of an organisation. With the help of this
tools management can identified the problem related to stock. Company is misusing the material
at the warehouse and does not have any record of movement of inventory. So they find the
financial issue in the business by applying this tools.
Financial governance: It help the organisation to proving framework in which how they
can gather records, establishment gather, survives and control financial data. It is also help in
tracking the financial operations, controlling data, operations, compliance, performance
evaluation and disclosures. With the help of this techniques oshodi plc can increasing the overall
performance of these employees and achieve the target by analysing the variable expenses by
adopting the budgeting control system. Company finds the additional expenses that are incur in
excessive amount and unforeseen cost too. For the problem of stock company uses the proper
management of stock by maintaining appropriate records at stores and warehouse. When oshodi
plc use this technique they can understand the problems related to funds, it also control through
all these techniques. Organisation can use this tool and techniques for achieving long term goal
of that particular organisation.
Basis Oshodi plc Pepsi
Financial problems This organisation produce
JOJO juice products which
provide various kind of
production and services in the
market. Income and
unforeseen expenses are the
financial problem of this
organization. This organisation
spend more money on some
Pepsi is also dealing in soft
drinks. it is a multinational
company which run its
business on a large scale. They
cover whole market with there
various of product. provide
product and services according
to the demand and requirement
of that age group.

non effective activities which
also increase the difficulty of
this organisation. All this
things also create various kind
of challenge for the
organisation. It also impact on
the performance of the
organisation.
Mismanagement of stock is the
biggest problem of this
organisation. by using effective
management system they can
reduce this problem in the
organisation.
Management accounting
system
Through implementation of
cost management system this
organisation can contrition the
problem related to low income
and high income which is a big
problem in this organisation. It
may reduce the raw material
cost and excessive cost of
promotion. With the help of
this organisation can control
the extra expenses in effective
manner which is also known as
cost reduction and cost control.
Beside it company also reduce
various financial problem with
the help of cost accounting
system. It also help the
organisation in target
achievement which is too
much beneficial for the
organisation.
In this organisation all these
problems are increase because
of mismanagement of stock in
the organisation. Through
applying this system this
organisation can reduce
problem. It may reduce the
extra carrying and ordering
cost of Inventory as it uses
appropriate system. It is linked
with the management of stock
in a effective manner. It is
helpful for the organisation in
effective manner. it also hold
the inventory of Pepsi
organisation in a effective
manner which is important for
the organisation. This
inventory management system
is also provide various kind of
method which provide
valuation of its closing

inventory.
M4 Use of management accounting in solving financial problems and ultimately lead to
sustainable success.
Through implementing management accounting system, an organisation can focus on its
development of financial performance and also help in the controlling and auditing with the help
of performance indicator. Beside it benchmarking is also a effective strategy which help the
organisation by provide a standard in particular industry. By applying these accounting tools, It
help in overcome the organisational and financial issue that mention above that will lead to
sustainable success . And it also focus on effective method and certain process of management
accounting which helpful to reducing extra cost of organisation. These method also incise the
proactivity in a better manner which are beneficial for organisation to accomplish the goal and
attain the economical success. So it is right that by using management accounting an
organisation can reduce its financial problems.

CONCLUSION
From the above report it has been analysed that management accounting system play an
important role in an organisation. Overall success of an organisation is depends on the
management accounting. Various kind of management accounting system are there and some of
them are inventory management, cost accounting system and they provide various benefits to the
organisation as well as improve the effectiveness in the organisation. Various organisation use
management accounting system to reduce the financial issues in organisation. Apart it
management accounting system also provide various kind of tools and techniques which is
beneficial in budgetary control. Organisation also consume various benefits with the help of
management accounting system. It can say that it is the basic of an organisation. But sometime
organisation also want to limitation of this planning tools.

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