Management Accounting System and Reporting Methods

This report discusses the concept of management accounting, different management accounting systems, and the essential requirements of each system. It also analyzes various methods used for management accounting reporting. The report further explores techniques and cost analysis for determining costs and producing income statements using marginal and absorption costs. It examines the benefits and limitations of planning tools adopted for budgetary control. Additionally, it provides a comparison of how enterprises are adopting management accounting systems in response to financial issues. The report is based on the scenarios of Marshall's Ltd., a leading supplier of natural stones and concrete landscaping products in the UK.

MANAGEMENT
ACCOUNTING
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Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Discuss management accounting system & proviDis essential requirements of several
kinds of MAS.........................................................................................................................3
P2 Analyse various methods used for management accounting reporting ............................4
TASK 2............................................................................................................................................5
P3 Distermine cost using techniques and cost analysis to produce income statement using
marginal & absorption costs ..................................................................................................5
1 Preparation of income statements:.......................................................................................5
TASK 3............................................................................................................................................9
P4 Critically examine benefits and limitations of various planning tools adopted for budgetory
control ....................................................................................................................................9
TASK 4............................................................................................................................................9
P5 ProviDis comparison how enterprises are adopting MAS in respond to financial issues9
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12
2

INTRODUCTION
Management Accounting is an accounting branch that relates with implementation of
professional knowledge, ability, instrument and way that assist management committee in
composing and evaluation of its plans, policies, vision and the performance on the basis of the
available information of the accounting records. It aims at utilisation of its scarce resources
optimally for maximizing returns earned on it (Aslanertik and Yardımcı, 2019). In terms of
American Accounting Association (AAA), management accounting refers to the concept or the
procedure that is followed by all organisations for being successful and profitable.
This report is prepared on the scenarios of Marshall's Ltd., which was founded in the year
1880's. It is a leading supplier of superior quality of natural stones and concrete landscaping
products. It has its business operations in UK and was the first company to label its entire range.
This report covers concept of management accounting, various types of report prepared
accounting system, cost calculation various methods, budgetary tools with their advantages and
disadvantages.
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TASK 1
Discuss management accounting system & proviDis essential requirements of several kinds of
MAS
Management Accounting is a process that creates goals of an organisation by
recognising, quantifying, explicating and transmitting info. to the management is referred as
managerial or management accounting. It aims at enlightening management about the company's
performance to its managers (Balios, 2021). There are different Management Accounting
Systems, few of them are listed below:
 Cost Accounting System- This process relates with keeping record of transactions and
investigating all cost incurred (i.e. variable, semi-variable and fixed cost) that is
associated with a product or service that is manufactured of rendered by a company. It
helps managers in cost evaluation, identification of key areas of concern and taking
corrective measures for solving the issues. It is also referred as product cost system and
focuses on smoothing the process of evaluating cost of a product or service.
 Inventories Management Accounting System- It is a systematic technique that
includes ordering, storing, and managing raw material, finished goods as well as
inventory and equipment’s. The main purpose behind it is to control quality of products
manufactured and ensuring availability of appropriate stock at right time and right place
in an optimum amount so as to reduce the associated risks such as inventory shortage,
high storage costs, etc.
 Job Cost Accounting System- This is a exclusive tool that focuses on accumulating
information that is linked with all costs that relates to a specific product or service, that
are performed in accordance for meeting customer requirements. The main objective of
this system is to identify and evaluate profits and losses that are maid’s on a specific job
or manufacturing product or rendering services. It facilitates in quoting prices that helps
a firm in earning sufficient profits (Holzer and Schoenfeld, 2019).
 Prices Optimisation Accounting System- It is a tool that is mathematical in nature, and
assist in Determining all costs that are incurred by an organisation for producing a
product or providing services. It facilitates in identification of quantity of product to be
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manufactured that can satisfy Dismand of all prospective buyers and ensures profitability
of an organisation and to have a competitive advantage.
5

Various methods used for management accounting reporting
Accounting Reports are the compile of a business enterprise records that relates to the
financial activities performed by a company. It plays a vital role in providing an absolute picture
of the financial performance of a company and to study drifts in comparison with that of industry
trends. It facilitates an organisation in evaluating its pace for achievement of goals and mission
in context to its operational efficiency and profit making. These reports are basically concise,
appropriate, absolute and providing true information that helps in strategy formulation and
performance evaluation. Few management reports are explained below:
 Budgetary Report- This is a type of fundamental report that helps an entrepreneur in
addressing and controlling the cost incurred in the operational process of an organisation.
Theses type of reports are usually prepared on the basis of part performance and
experiences and aims at increasing efficiency in the production activity (Hrasky and
Jones, 2016).
 Job Costing Report- This report provides a basic aspect of the overall costs incurred on
producing or manufacturing a particular product or job. The purpose of this report is to
identify and evaluation of profit making capabilities of a single project or a task and helps
in distinguishing most profitable business unit.
 Order Info. Report- This report assist in assessment of fruitfulness and expertise in
operations of a business in relation to the trends of the industry. It encompasses the data
that relates to multiple orders that is received by an organisation. It facilitates the
organisation in gaining cost leadership and integrates various operations of the
management (Kruis, Speklé and WiDisner, 2016).
 Inventory and Manufacturing Report- It is a report that summarises the quality of
stock that is maintained by an organisation at a given point of time. It helps managers in
carry off day to day activities in an organisation to attain operational efficiency and to
have a track on company's profitability, whereas manufacturing report incorporates
Distails about the skilfulness of operations in manufacturing products of a company.
 Performance Report- This document proviDiss a aggressive view of performance of a
company. It summarises end results of all action performed by an organisation and also
relates to evaluation of work done by an individual. It focuses on fixing standards,
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evaluate execution, iDisntification of Disviations and taking appropriate measures for
removing performance gaps (Zirkler, 2016).
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Determine cost using techniques and cost analysis to produce income statement using marginal
& absorption costs
Income Statement of Marshall Ltd. under marginal costing
Income Statement
For the month of October 2019
Amount (£) Total (£)
Sales 40,000*25.00 1000000
Cost of Sales
Variable Manufacturing Cost:
Direct material 40000*10.00 400000
Direct wages 40000*8.00 320000
Variable Manufacturing Overheads 40000*2.00 80000
Variable Selling Expenses 40000*4.00 160000 (960000)
_________
Contribution 40000
Less: Fixed Manufacturing Cost (150000)
Less: Fixed admin and distribution costs (50000)
______(200000)__
_
Actual Net Loss (160000)
Income Statement of Marshal Ltd. under absorption costing
Income Statement
For the month of October 2019
Amount (£) Total (£)
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Sales 40,000*25.00 1000000
Cost of Sales
Variable Manufacturing Cost:
Direct material 40000*10.00 400000
Direct wages 40000*8.00 320000 (720000)
Manufacturing Overheads:
Variable 40000*2.00 80000
Fixed 150000 (230000)
_________
Gross Profit 50000
Less: Variable selling expenses (160000)
Less: Fixed admin and distribution costs (50000)
_____(210000)___
_
Actual Net Loss (160000)
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TASK 3
P4 Critically examine benefits and limitations of various planning tools adopted for budgetory
control
Job costing - It is a cost-accounting system in which production is distributed in jobs and
then cost-accounting takes place for those jobs separately. It is an appropriate system for the
Marshall’s Ltd as it can bifurcate its various production lines in separate jobs.
 Advantage: This cost-accounting system helps company in ascertaining cost at any stage
of completion for that job which enables it to ascertain job-based profit and taking better
control of the cost-structure.
 DisAdvantage: It increases the clerical job of maintaining accounts in the company
which is both cost consuming and time consuming.
Contract costing - It is the cost-accounting system of the customised product contract that
company enters into with clients (OGrady, Morlidge and Rouse, 2016). Marshall’s Ltd
manufactures furniture ranges and can takes customised commercial contracts that will not only
broadens its product base but also client base.
 Advantage: It will enable company to ascertain cost related to each client and contract so
that it can Determine on the basis of profitability that which project should it continue
and which should not be.
 DisAdvantage: It is cost and time consuming. Further, loss making business if
abandoned based on it, might result in loss of opportunities further.
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TASK 4
P5 Provide comparison how enterprises are adopting MAS in respond to financial issues
Financial problems refers to the circumstances in which an firm is not able to make
enough revenues or profits that leads in creating situations in which they are unable to pay of its
Disbts. These can be due to insufficient funds availability, high amount of fixed costs and large
amount of illiquid assets (Opute and Madichie, 2017). There are various accounting tools and
techniques that can be used by organisations for solving financial problems, and few of them are
listed below:
 Benchmarking
 Key Performance Indicator (KPI's)
 Financial Governance
Basis of Differentiating Marshall's Ltd. Salsa Ltd.
Financial Issues The major issue faced by
Marshall's Ltd is that the
organisation is not able to
make constant and sufficient
returns. Also there is a high
level of Disviation in the profit
making past few years
combined with low level of
profits earned (Ruggeri and
Rizza, 2017).
Salsa Ltd. is majorly
expanding its existence at
various locations on a regular
groundwork Disspite of the
fact that its market share is not
increasing at the same pace in
comparison to its expanding
speed and is constant. It is
creating a huge problem for
the business concern and
requires immediate corrective
actions to be taken as soon as
possible for overcoming these
gaps.
Technique or tool used for
iDisntification of key issues
The above stated issue was
iDisntified by using budgetary
control tool and method, as
they are best fit for
The organisation is suggested
to use tools and methods like
benchmarking, that helps in
iDisntification of reasons
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iDisntification of similar
problems. It helps in
iDisntification of areas having
the incremental cost of
operations that are the main
cause of reducing profit
earning capacity. Such matters
are of utmost concern and
results in increasing distress.
behind the non-increased
market share of the
organisation irrespective of its
increasing market existence.
This tool helps in iDisntifying
areas that are ineffective and
incluDiss huge operational
costs and helps in minimizing
losses maDis by the firm.
Management Accounting
System used for overcoming
iDisntified problems
The most efficient tool that can
be used by the Marshall's Ltd.
for solving its problems is the
cost accounting system. It
helps managers in cost
evaluation process of the firm,
iDisntification of reasons that
results in hike in cost of
production and taking
corrective actions for
overcoming these performance
gaps (Skouloudis, Malesios
and Dimitrakopoulos, 2019).
Salsa Ltd. is suggested for
building some means that
assist it for making a
sustainable position in the
most competitive business
environment and making its
products and services offered
different form that offered by
its competitors (Hrasky, and
Jones, 2016). Few of the
methods for doing this is by
lowering prices to attract more
new customers, giving
discounts to regular clients,
offering cashback and
coupons, etc. for promoting its
sales.
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CONCLUSION
After Distailed analysis of above report, it is examined that management accounting is a
vital aspect of a business unit that is essential for its growth in terms of its profitability and
expanding its operations. It facilitates management committee for achievement of its goals and
objectives in a dynamic, complex business environment, fight against competition and to sustain
its position. It helps manager in formulation of policies and plans for achieving ling term goals
and objectives of the company.
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REFERENCES
Books and Journals
Aslanertik, B.E. and Yardımcı, B., 2019. A Comprehensive Framework for Accounting 4.0:
Implications of Industry 4.0 in Digital Era. In Blockchain Economics and Financial
Market Innovation (pp. 549-563). Springer, Cham.
Balios, D., 2021. The impact of Big Data on accounting and auditing. International Journal of
Corporate Finance and Accounting (IJCFA), 8(1), pp.1-14.
Holzer, H.P. and Schoenfeld, H.M. eds., 2019. Managerial accounting and analysis in
multinational enterprises. Walter Dis Gruyter GmbH & Co KG.
Hrasky, S. and Jones, M., 2016, Discember. Lake PedDisr: Accounting, environmental
Discision-making, nature and impression management. In Accounting forum (Vol. 40,
No. 4, pp. 285-299). No longer published by Elsevier.
Kruis, A.M., Speklé, R.F. and WiDisner, S.K., 2016. The Levers of Control Framework: An
exploratory analysis of balance. Management Accounting Research, 32, pp.27-44.
Lois, P., Tabouratzi, E. and Makrygiannakis, G., 2017. Accounting Information Systems course:
perceptions of accounting and non-accounting stuDisnts. EuroMed Journal of Business.
Opute, A.P. and Madichie, N.O., 2017. Accounting-marketing integration dimensions and
anteceDisnts: Insights from a frontier market. Journal of Business & Industrial
Marketing.
Ruggeri, D. and Rizza, C., 2017. Accounting information system innovation in interfirm
relationships. Journal of Management Control, 28(2), pp.203-225.
Skouloudis, A., Malesios, C. and Dimitrakopoulos, P.G., 2019. Corporate biodiversity
accounting and reporting in mega-diverse countries: An examination of indicators
disclosed in sustainability reports. Ecological Indicators, 98, pp.888-901.
Zirkler, B., 2016. Management Accounting in Disn USA. In Handbuch Controlling (pp. 567-
582). Springer Gabler, WiesbaDisn.
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