Management Accounting - Techniques, Applications and Costing Methods

Management
Accounting

EXECUTIVE SUMMARY
Companies utilise a variety of management accounting methodologies in the finance area. It
is an accountancy procedure in which accounting experts examine economic or non economic
information for internal managerial accounting purposes. This accountancy has a defined set
of roles and obligations for giant corporations. This report based on the IKEA Company
which is using management accounting to manage their financial information in effective
manner. In this report using various types of reports and systems like inventory management,
cost report and pricing optimising systems. Along with, company uses various costing
techniques to manage cost like managerial and absorption costing techniques. For planning
procedure company use different budget like operating, master and capital. To dealing with
financial problem company use different management accounting systems.

Table of Contents
INTRODUCTION.....................................................................................................................................3
P1: Management accounting explanation as well as key management accounting system needs .......3
P2: Various techniques of accounting applications...............................................................................5
P3: Calculate the price per unit using absorption as well as marginal costing. .....................................7
P4: An overview of both the benefits and drawbacks of various budget planning tools. ...................10
P5: Methods through which enterprises might utilise management accounting and address financial
issues ..................................................................................................................................................11
Conclusion ..........................................................................................................................................13

INTRODUCTION
Management accounting, often referred as managerial accounting, seems to be a
methodology that gives financial tools and help to administrators for making decisions
(Benjaafar and Hu, 2020). Management accounting is exclusively utilised by company's inner
staff, and that's the only difference between it and financial accounting. During this
procedure, finance management shares accounting records as well as statistics with business
unit head, such as invoices as well as corporate balance statements. The goal of managerial
accounting would be to use statistical data to make better and more accurate decisions about
the firm, business operations, as well as progress. Managerial accounting makes use of
numerous accounting and financial information to make important choices that affect the
growth of the organisation. It goes through numerous accounting processes with the goal of
delivering useful as well as correct information to the management authority in order for
them to better understand and analyse business operating metrics. Managerial accountants
analyse data linked to the cost of products sold and the company's sales revenue for goods
and services. Cost accounting is a subset of managerial accounting that focuses on finding as
well as capturing overall production costs by analysing the fixed costs and variable costs of
each manufacturing stage. This is beneficial to organs. The report has extensively have
included firm IKEA's managerial accounting procedure, which has secured an optimal
business performance in the fiscal years to assure good business growth. This report has
emphasised the debate about several financial accounting which have been assessed for
obtaining the specific judgement regarding the firm's good functioning. Various purposes of
management accounting reporting have been emphasised, and the correct features of using
their significance have been explored in the study.
P1: Management accounting explanation as well as key management accounting system
needs
Management accounting denotes to the accounting procedures that comprise the
integration of financial as well as non accounts with goal of providing the company more
effective decision-making possibilities (Hatchuel, and Segrestin, 2019). Accounting
information may be used by money planners to make informed decisions. Management
accounting is essential for managerial decision making, budgeting and monitoring
management systems, as well as unified financial statements. Management accounting is the

standard for providing a thorough description of revenue percentages, product offerings, and
client bases.
IKEA is now aiming to employ sophisticated management accounting for better
decision-making. Management accounting offers a thorough view of profit statistics, client
bases, goods and services; financial accounting aids in reporting and managing the business's
ultimate outcome (Shojaei. and Haeri, 2019). Financial accounting provides a clear view of
the company's financial situation, whereas managerial accounting identifies the root reasons
of managerial difficulties. Financial accounting aids in the preparation of financial
statements, whereas management accounting allows IKEA to concentrate solely on
operational reporting assigned inside the business. IKEA formerly had to conform with
numerous accounting standards; however, with the advancement of managerial accounting,
management no longer has to comply with any accounting rules if the data is utilised for
internal management as well as accounting reasons. As small and medium-sized businesses
face a plethora of accounting difficulties on a regular basis, managerial accounting is an
effective instrument that leverages accounting data and activities to provide an idea of the
business's profitability (Halkias and Neubert, 2020).
IKEA will be able to simply calculate the number of goods sold out using management
accounting. The accountant may simply calculate the associated expenses among the
advertising while ignoring the common expenditures. IKEA would indeed be able to identify
the actions for generating those product offerings across the world by implementing
managerial accounting approaches . Management accounting provides knowledge about
production and aids in the budgeting process for the ongoing development of management
processes.
Cost accounting, inventory management accounting, and task costing methods are the most
often utilised management accounting approaches (Al‐Dabbagh, 2020). IKEA will be able to
control overall management and operational expenses by documenting, analysing,
summarising, assigning, and classifying all activities through the use of cost accounting
techniques. Inventory management procedures are crucial for technology multinational
businesses such as IKEA since they allow the managerial accountant to understand when to
refill the inventory, the precise manufacturing volume, and so on. Inventory management
thus entails the act of storing and replenishing a firm's stock in order to enhance its
profitability. Another frequently utilised approach is job costing, which is a sort of

accounting management technique that is primarily employed in machine production units
since the accountant can readily see the precise cost for each and every work. Because IKEA
manufacture goods, the accountant will be able to analyse the expenses for all distinct batches
by assigning overhead charges individually.
Inventory management system: This system is primarily used to maintain an organization's
inventory and stock levels, as well as to retain archives of all information and goods. It is
critical for businesses to recognize their clients' demands in terms of market growth and to
keep accurate records in order to deliver accurate information about stock availability and
unavailable. This is necessary for IKEA administration to keep track of stock levels and
process customer.
Cost accounting system: This is a structure that organisations are using to calculate and
evaluate the cost of its products in order to preserve competitiveness. It explains how and
where to deal with product costs that may occur and how to handle them correctly. IKEA
employs a cost accounting system to measure expenses and monitor progress through cost
identification. This is necessary for making the company more cost-effective and to increase
revenues by controlling expenditures.
Price optimization system: The price optimization method is a logical tool that is primarily
used to establish the cost of things and services offered by businesses. IKEA determines the
pricing of its items and services, which can assist in profit analysis. The primary goal of a
price optimization plan is to identify pricing and meet consumer needs by providing products.
Job costing system: This might be understood as a management accounting system that is
properly linked to the cost measuring procedure in each unit produced. The goal of MAS is to
assist in the reduction of total direct cost. This is not suitable for small businesses due to the
limited product choice. It's perfect for businesses with a diverse product line. This accounting
method is expanded in the case of IKEA to include the cost of the products manufactured by
the manufacturer.
P2: Various techniques of accounting applications
Budgetary control refers to a method in which budgets are utilised to forecast as well
as drive down costs. Budgeting specifies what must be accomplished and how it must be
accomplished, whereas control guarantees that goals are accomplished and that actual
outcomes do not stray from planned course more than required. A corporate firm's budget