Management Accounting: Techniques, Advantages and Importance

This article discusses the techniques, advantages and importance of management accounting. It explores cloud-based management accounting and its benefits. It also explains the role of management accountants and financial accountants. The article is relevant for students studying accounting and finance courses in colleges and universities.

MANAGEMENT ACCOUNTING 1
ACCOUNTING

MANAGEMENT ACCOUNTING 2
Contents
Question 1:.................................................................................................................................4
Question 2:.................................................................................................................................8
Question 4:.................................................................................................................................9
Question 5:...............................................................................................................................12
Question 6:...............................................................................................................................16
Question 7:...............................................................................................................................17
Question 8:...............................................................................................................................19
Question 9:...............................................................................................................................22
Question 10:.............................................................................................................................23

MANAGEMENT ACCOUNTING 3
Question 1:
The following are the relevant workings:
Bank reconciliation as at 31 August 2018
Cash balance as per bank
statement
$25,720.9
2
Add: Outstanding Deposits $1,190.40
Less: Unpresented Cheques
- Chq 1470 $410.00
- Chq 1474
$1,027.0
0
- Chq 1478 $538.20
- Chq 1481 $807.40
- Chq 1483
$2,360.0
0
- Chq 1484 $832.00
- Chq 1486 $972.00 $6,946.60
Cash balance as per ledger (should have
been)
$19,964.7
2
Journal
Entries Dr. Cr.

MANAGEMENT ACCOUNTING 4
01-08-
2018 Bank Fee A/c $60.00
01-08-
2018 To Bank A/c $60.00
(Being Bank Fee recorded)
12-08-
2018 Bank A/c $2,423.00
12-08-
2018 To Accounts Receivables A/c
$2,423.0
0
(Being direct deposit by Debtor recorded)
18-08-
2018 Bank A/c $1,000.00
18-08-
2018 To Accounts Receivables A/c
$1,000.0
0
(Being cheque of $1,922 correctly recorded in place of
$922)
18-08-
2018 Accounts Payable A/c $475.50
18-08-
2018 Bank A/c $475.50
(Being cheque no. 1482 of $475.50 recorded)
20-08- Bank A/c $9.00

MANAGEMENT ACCOUNTING 5
2018
20-08-
2018 To Accounts Receivables A/c $9.00
(Being cheque of $2,954 correctly recorded in place of
$2,945)
24-08-
2018 Accounts Payable A/c $90.00
24-08-
2018 Bank A/c $90.00
(Being cheque no. 1485 of $540.80 correctly recorded in
place of $450.80)
30-08-
2018 Bank A/c $148.62
30-08-
2018 To Interest received A/c $148.62
(Being Interest Received Recorded)
Bank Ledger A/c
Date Particulars
Amount
Debit Date Particulars
Amount
Credit
01-08-
2018 To Opening Balance $11,085.60
01-08-
2018 By Bank Fee $60.00
03-08- To Accounts $1,211.60 01-08- By Accounts $1,640.70

MANAGEMENT ACCOUNTING 6
2018 Receivable 2018 Payable
07-08-
2018
To Accounts
Receivable $2,365.10
02-08-
2018
By Accounts
Payable $1,300.00
12-08-
2018
To Accounts
Receivable $2,423.00
02-08-
2018
By Accounts
Payable $2,130.00
15-08-
2018
To Accounts
Receivable $2,672.70
04-08-
2018
By Accounts
Payable $538.20
18-08-
2018
To Accounts
Receivable $1,922.00
08-08-
2018
By Accounts
Payable $2,180.00
20-08-
2018
To Accounts
Receivable $2,954.00
10-08-
2018
By Accounts
Payable $600.00
25-08-
2018
To Accounts
Receivable $2,567.30
17-08-
2018
By Accounts
Payable $807.40
28-08-
2018
To Accounts
Receivable $2,836.00
18-08-
2018
By Accounts
Payable $475.50
30-08-
2018
To Accounts
Receivable $3,025.00
22-08-
2018
By Accounts
Payable $2,360.00
30-08-
2018
To Accounts
Receivable $1,190.40
23-08-
2018
By Accounts
Payable $832.00
30-08-
2018 To Interest Received $148.62
24-08-
2018
By Accounts
Payable $540.80
30-08-
2018
By Accounts
Payable $972.00
30-08-
2018
By Closing
Balance $19,964.72
$34,401.32 $34,401.32

MANAGEMENT ACCOUNTING 7
Bank
Balanc
e as per
Bargai
n Buy's
Ltd.
17009.
6
Question 2:
Part i:
There is an absence of any sort of internal control in the given case. This is mainly due to the
reason that the accounting for all of the transactions which pertains to cash should be dealt in
with utmost seriousness. If cash is not available, then the company may not be able to meet
its day to day expenses. For the purposes of avoiding in too much idle cash, cash must also be
utilised in a way so that it helps in the generation of income such as the interest. This helps in
the prevention of cash due to theft or fraud (Lumen learning,2018).
For the purposes of having a control over the cash, the person who issues the tickets and the
person that collects cash for that ticket must be different. This means that the cashier and the
person who issues the tickets must be different. There could be online payments for the
tickets.
Part ii:

MANAGEMENT ACCOUNTING 8
If they wanted to misappropriate cash, then they could easily state that few of the tickets
though were issued but were refunded.
Question 3:
To: M A
From: Z
Date: October 10, 2018
Re: Importance and role of management accountants
Context Line: the purposes and the role of management accountants and that of financial
accountants
I do understand the fact that your goodself have bene looking for way to cut down the
expenses but there is a huge difference between the work that is performed by the financial
accountant and the work that is performed in by the management accountant. The financial
accountant deals with the tracking in of the financial information about the company but the
management accountant deals with the financial and the nonfinancial information which
relates in with the company. The work of the financial accounting is used in by the internal
management but the work of the management accountant is used in by the other users of the
management. The financial accountant reports in his work publicly whereas the management
accountant reports his work to the company and is therefore, confidential. The financial
accountant deals with the monetary information but the management accounting deals with
both the monetary and the non-monetary information. The financial accountant deals in the
providing in of the information about the day to day functioning of the company but the
management accounting deals in with the providing in of the information which helps in the
evaluation of the performance of the company (Wall street mojo, 2018).

MANAGEMENT ACCOUNTING 9
It is mainly due to these reasons, it is important for the company to have both the financial as
well as the management accountants.
Question 4:
The cloud based management accounting technique is the technique which deals with the
saving in of all of the work on cloud which is based on internet.
The following are the advantages of the technique:
 One of the greatest advantages of the cloud based accounting is its accessibility which
means that one would just need in a device and an internet connection through which
one would be able to access in the records, reports and the receipts. The best thing is
that one would not require in to download and install in any software, one just needs
an internet connection. One just would no require to download in any software and
install the same into the system. It’s easy to work in to collaborate in into the business
with the partners and the employees.
 Cost: there is another use wherein the cloud accounting is very much perfect for the
start-ups, entrepreneurs who are just starting in their businesses and the small
businesses. All one just requires in the setting up of a personal account wherein he
could upload in the financial data and learn the way the same could be used. There is
just a payment of a monthly subscription. And one is good to go. There are also easy
tutorials which could be studies that would help in understanding these functions of
the technique. The technique though consumes a fee but there is a saving of
electricity, fewer employees for information technology and this also does not require
in the investment or the resources for the purposes of setting up of the officer servers.
The cloud proves to be a better option.
 Security serves as the most important thing for any company. This way all of the
sensitive information and the most vital information which pertains with the strategic

MANAGEMENT ACCOUNTING 10
decision making for the upper most management could be saved all in one place and
without any human interference which would save in its integrity and confidentiality.
The cloud based system also addresses in many of the safety concerns that have the
higher and a uniform security standards. This helps in the reduction of the
redundancies too for all of the data. There are many of the seamless security upgrades
that entails no cost for the users.
 Scalability: the cloud grows in with the business, hence, this is able to cater to the
needs of a small business and also that of a big business. This allows in the businesses
to grow and collaborate with the businesses. Hence, the accounting of cloud is very
much accessible and also cost effective and has a secure solution which is able to
integrate into the current structure of the business (Digit books, 2018).
 It is capable of being used anywhere and anytime. It can be hosted anywhere and so,
there is no need to worry in about downloads which could prove to be time
consuming and the updates. The invoices could be accessed in from anywhere even
by using in the latest mobile phone. This helps in giving an additional amount of
flexibility and also gives in a peace of mind.
 All of the business information gets saved in on to the cloud which ensures that the
person viewing the financial statements are all up to date and inform about the current
financial situation about the company. The use of the traditional methods would mean
scrolling down on the pages and looking at the out of date management reports.
 The cloud based technique helps in building in the better relationship technique with
the accountant. As the owner of the business, business being your baby, one would
still need to collaborate in with his accountant to make sure that all of the financials
are very much up to date. This is especially when it comes to the filing in of the tax
returns of the revenues of the company.

MANAGEMENT ACCOUNTING 11
 The cloud based management accounting would mean no paper work for the
company. All of the expenses, receipts, invoices are straight online and there is no
need to keep these invoices. One could use the technique to import in all of his
previous documents into the software. This helps in the minimisation of the risk of the
manual error and this would result in a much faster and a more carefree method of
keeping up of the finances.
 The cloud based technique helps in the creation of an ecosystem that fits into each and
every business. This helps in the delivering in of all of the business needs. There are
many software’s that could be used and would serve the business. The choice of the
software would depend upon the needs of the business but the software would help in
the improving in of the efficiency of the business.
The core advantage of this lies in the fact that there is a huge volume of data that could be
used for the purposes of storing in the data as compared with the traditional servers. And also
all of the historical information is saved on to them which recoverable. Suppose, there is an
emergency which takes place, the back-ups are readily available. This could make or break
the business. But the information stores in on to the cloud would still retain in all of the
information pertaining with the business. This technology gives a greater amount of
accessibility when compared in with the other traditional methods. The business owners
could work their way even when they are not in office.
These packages are cheap and allows in the businesses to have the reduced amounts of the
overheads. These could also be updated in some real time so that the system does not have to
wait for long and the waiting time for nay new version introduced is actually nil. This
technology is constantly revolving and changing for the better with each passing day
(Absolute accounting, 2018).

MANAGEMENT ACCOUNTING 12
In the nutshell, cloud accounting is something towards which each and every company is
moving. Since it leads to a greater efficiency, safety and accessibility.
Cloud accounting is the way the accounting industry is heading. This is no surprise due to the
benefits offered though user accessibility, efficiency and safety. To make the best decision
for your business, ensure you evaluate all the options available and ensure your data is
sufficiently protected before heading straight to the cloud (The profit books, 2018).
Question 5:
Part i:
Particulars
Amounts in
$ Per hair cut
Revenue
68,000.0
0
34.0
0
Less: costs:
Variable costs
40,800.0
0
20.4
0
Fixed costs
21,000.0
0

MANAGEMENT ACCOUNTING 13
Net income for
the month of
July
6,200.0
0
Break-even
point
(Fixed
costs/Contributio
n per hair cut)
1,544.1
2
Particulars Amounts in $ Per hair cut
Revenue
82,518.0
0
34.0
0
Less: costs:
Variable costs
49,510.8
0
20.4
0
Fixed costs
21,000.0
0
Net income for the month of July
12,000.0
0

MANAGEMENT ACCOUNTING 14
Let the number of haircuts be x
34x-20.4x-21000=12000
2,426.470588
the break-even number of haircuts should be
2,427
Part ii:
Revenue
68,000.0
0
Variable costs
40,800.0
0
Fixed costs
21,000.0
0

MANAGEMENT ACCOUNTING 15
Revenue
Variable costs
Fixed costs
- 20,000.00 40,000.00 60,000.00 80,000.00
68,000.00
40,800.00
21,000.00
CVP Analysis
Part iii:
Revenue
68,000.0
0
34.0
0
Less: costs:
Variable costs
44,200.0
0
22.1
0
Break-even
point
(Fixed
costs/Contributio
n per hair cut)
1,764.7
1

MANAGEMENT ACCOUNTING 16
Revenue
82,518.0
0
34.0
0
Less: costs:
Variable costs
20.4
0
Fixed costs
21,000.0
0 -
Net income for the month of July
12,000.0
0
Let the number of haircuts be x
34x-22.1x-21000=12000
2773.109244
the break-even number of haircuts should be
2,774
Question 6:
Part A:
Any prudent person would go in for a change in the option since he would want to choose the
door which has car behind itself. And so, I also changed my option.

MANAGEMENT ACCOUNTING 17
The following is the relevant chart:
Allison Change
Dora Change
Jimmy Change
Daniel Change
Pierce Change
Maria No change
Jackson No change
Maggie No change
Abhi No change
Susan No change
Name Whether changed or not
Choosing the door contest
Part ii:
I got the answer right by chance.
60% of the friends got the answer correct and the rest got incorrect.
Part B:
It would not be a prudent and a wise decision since there is still a 2% chance that he does not
have that disease.
Part C:
The answer would be red since there are maximum number of red coloured marbles in the
urn. Even if 5 red marbles are taken out from urn, even then the majority of the marbles are
red.
But if the Gamblers fallacy is applied, then it is quiet probable that the next guess would be
black marble. Even when 5 red marbles are taken out, still the Gambler’s fallacy would hold
good (Valentine, 2016).

MANAGEMENT ACCOUNTING 18
Part d:
After working on the above stated scenarios, it has become apparent that the humans think
differently. There are few humans that would think that the previous results would hold good
for the near future too but then there are few of the managers that may think that the opposite
of the previous derived results would hold good for the near future.
Question 7:
Divisions
Particulars 1 2 3 4
Sales
4,90,000.0
0
4,10,000.0
0
2,00,000.0
0
3,00,000.0
0
Less: variable
costs
2,30,000.0
0
2,40,000.0
0
2,20,000.0
0
2,40,000.0
0
Fixed expenses
1,30,000.0
0
90,000.0
0
40,000.0
0
90,000.0
0
Profit/(Loss)
1,30,000.0
0
80,000.0
0
-
60,000.00
-
30,000.00
Particulars
Division 3 is
eliminated
Both divisions
3 and 4 are
eliminated
Both divisions
are
discontinued

MANAGEMENT ACCOUNTING 19
Sales
12,00,000.0
0
9,00,000.0
0
9,65,000.0
0
Less: variable
costs
7,10,000.0
0
4,60,000.0
0 512000
Fixed expenses
3,10,000.0
0
3,05,000.0
0
3,10,000.0
0
Profit/(Loss)
1,80,000.0
0
1,35,000.0
0
1,43,000.0
0
Conclusion: the above table shows the total amount of the profit that the company would
earn under each one of the alternatives. Since the option wherein division 3 is eliminated
entails maximum amount of the profit for the company, it must be chosen.
Hence, the first option in the above table must be chosen.
Question 8:
Cash budget:
(Amounts in $)
Data April May June
Cash outflows:
Inventory purchases:

MANAGEMENT ACCOUNTING 20
February
2,340.0
0
March
7,700.0
0
March
3,300.0
0
April
7,000.0
0
April
3,000.0
0
May
16,100.0
0
Wages and salaries
4,000.0
0
3,800.0
0
4,200.0
0
General and
administrative expenses
1,500.0
0
1,500.0
0
1,500.0
0
Insurance
500.0
0
500.0
0
500.0
0
Total cash outflows
45,440.0
0
5,800.0
0
6,200.0
0
Cash inflows:

MANAGEMENT ACCOUNTING 21
Opening balance
3,500.0
0
32,040.0
0
50,240.0
0
Sales
February
3,900.0
0
March
16,000.0
0
March
4,000.0
0
April
20,000.0
0
April
5,000.0
0
May
18,400.0
0
Total cash inflows
23,400.0
0
56,040.0
0
73,640.0
0
Net cash inflow/(cash
outflow)
-
22,040.00
50,240.0
0
67,440.0
0
Cash balance - 50,240.0

MANAGEMENT ACCOUNTING 22
22,040.00 0
Amount to be borrowed
32,040.0
0
50,240.0
0
Question 9:
The following are the desired calculations:
Standard Actual
Particul
ars
Quantity Price
per
quant
ity
Total Particu
lars
Quan
tity
Price
per
quanti
ty
Tota
l
Direct
material 500.00 6.00
3,0
00.00
Direct
material
550
.00 5.80
3,19
0.00
Direct
labour 250.00
2
2.00
5,5
00.00
Direct
labour
300
.00 18.00
5,40
0.00
Direct
material price
variance
(Standard price-
actual price)*actual
quantity
110.0
0 F

MANAGEMENT ACCOUNTING 23
Direct
material
quantity
variance
(Standard quantity-
actual
quantity)*standard
price
-
300.00 A
Direct labour
rate variance
(Standard price-
actual price)*actual
quantity
1,200.0
0 F
Direct labour
efficiency
variance
(Standard quantity-
actual
quantity)*standard
price
-
1,100.00 A
Question 10:
Part i:
The following is the desired statement:
(Part i)
Amounts in $
Particulars
Year 0 1 2 3 4 5 6 7 8
Cash outflow:

MANAGEMENT ACCOUNTING 24
Initial cost 75,
000.00
Total cash
outflow
75,
000.00
Cash inflows:
Per year 8,40
0.00
8,40
0.00
8,40
0.00
8,40
0.00
8,40
0.00
8,40
0.00
8,40
0.00
8,4
00.00
Overhaul costs 5,60
0.00
Residual value 21,0
00.00
Total cash
inflow -
8,40
0.00
8,40
0.00
8,40
0.00
14,00
0.00
8,40
0.00
8,40
0.00
8,40
0.00
29,4
00.00
Net cash
inflow/(outflow
)
-
75,000.
00
8,40
0.00
8,40
0.00
8,40
0.00
14,00
0.00
8,40
0.00
8,40
0.00
8,40
0.00
29,4
00.00
PV Factor

MANAGEMENT ACCOUNTING 25
1.00 0.92 0.84 0.77 0.71 0.65 0.60 0.55 0.50
Net present
value
-
75,000.
00
7,70
6.42
7,07
0.11
6,48
6.34
9,91
7.95
5,45
9.42
5,00
8.65
4,59
5.09
14,7
54.87
-
14,001
.15
Part ii:
(Part ii)
Amounts in $
Particulars
Year 0 1 2 3 4 5 6 7 8
Cash
outflow:
Initial cost 75
,000.0
0
Total cash
outflow
75
,000.0

MANAGEMENT ACCOUNTING 26
0
Cash
inflows:
Per year 8,
400.0
0
8
,400.0
0
8,
400.0
0
8,
400.0
0
8,
400.0
0
8,
400.0
0
8,
400.0
0
8,
400.
00
Additional
cash inflows
9,
800.0
0
9
,800.0
0
9,
800.0
0
9,
800.0
0
9,
800.0
0
9,
800.0
0
9,
800.0
0
9,
800.
00
Overhaul
costs
5,
600.0
0
Residual
value
21,
000.
00
Total cash
inflow -
18,
200.0
0
18
,200.0
0
18,
200.0
0
23,
800.0
0
18,
200.0
0
18,
200.0
0
18,
200.0
0
39,
200.
00

MANAGEMENT ACCOUNTING 27
Net cash
inflow/(outfl
ow)
-
75,000
.00
18,
200.0
0
18
,200.0
0
18,
200.0
0
23,
800.0
0
18,
200.0
0
18,
200.0
0
18,
200.0
0
39,
200.
00
PV Factor
1.00 0.92 0.84 0.77 0.71 0.65 0.60 0.55 0.50
Net present
value
-
75,000
.00
16,
697.2
5
15
,318.5
8
14,
053.7
4
16,
860.5
2
11,
828.7
5
10,
852.0
7
9,
956.0
2
19,
673.
16
40,
240.
08
Part iii:
In order for the business to make a no profit or no loss case, it has to earn an additional
amount of $14,001.15 which is the amount of the net loss in case, the business earns no
additional benefits.

MANAGEMENT ACCOUNTING 28
References:
References
Advantages and disadvantages of cloud accounting - Absolute Accounting Solutions Ltd.
(2018). Retrieved from https://absoluteaccounting.co.nz/advantages-disadvantages-
cloud-accounting/
Cash and Internal Control | Financial Accounting. (2018). Retrieved from
https://courses.lumenlearning.com/sac-finaccounting/chapter/cash-receipts-and-
disbursements/
Erkins, A. (2018). The Benefits of Accounting in the Cloud. Retrieved from
https://www.digitbooks.com.au/the-benefits-of-accounting-in-the-cloud/
How Cloud Accounting Can Benefit Your Small Business. (2018). Retrieved from
https://www.profitbooks.net/cloud-accounting-benefits-for-small-business/
Padhy, B. (2018). Financial Accounting vs Management Accounting (Top 11 Differences).
Retrieved from https://www.wallstreetmojo.com/financial-accounting-vs-management-
accounting/
Valentine, N. (2016). The gambler's fallacy - explained. Retrieved from
https://www.thecalculatorsite.com/articles/finance/the-gamblers-fallacy.php