Management Accounting Techniques (PDF)

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Explain management accounting and give the essential requirements of different types of
management accounting systems...........................................................................................1
P2. Explain different methods used for management accounting reporting..........................3
M1 Evaluation of benefits of various management accounting systems...............................4
D1 Management accounting reporting and management accounting system that is related with
organisation process...............................................................................................................5
TASK 2............................................................................................................................................5
P3: Cost accounting techniques to prepare an income statement...........................................5
M2. Management accounting techniques that is used to prepare financial reporting documents
................................................................................................................................................8
D2 Financial reports that interpret data for different types of business activity....................8
TASK 3............................................................................................................................................8
P4 Advantages and Disadvantage of planning tools that are used for budgetary control .....8
M3 Analyse of different planning tools and their application in organisation to prepare and
forecast budget......................................................................................................................10
TASK 4..........................................................................................................................................11
P5 Comparison of organisation to solve the financial problem with the help of management
accounting system................................................................................................................11
M4 Responding to financial problems and management accounting to sustainable success13
D3 Planning tools of accounting period for responding financial problems appropriately. 13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is used by business to analyse their internal financial reports and
statistical information. Preparation of this reports will help the business in their decision making
process. It can also be termed as the process of collecting, interpreting and summarising all the
financial and non financial data. To understand the concept of management accounting in
broader sense, the chosen association in this project is LM engineering Ltd. which is the largest
manufacturing company it deals in manufacturing for both, commercial and domestic market.
LM engineering Ltd. Manufacturer is the foremost manufacturer of glue mixer, doctor roll glue,
mortar glue mixer and plywood machinery. The company has built trust among their customers
(Jamil, and et. al., 2015). In this assignment the company has focused on the certain areas that
are various techniques of management accounting, different tools of planning used in
management accounting in order to enhance their business. Here, company also looks into the
matter of total production cost, cost per units, sales cost and profit and loss statements of the
business so that the amount of profitability can be determined. Apart from this, at last the
company has focused on the role of management accounting in solving the issues and financial
problems of the business.
TASK 1
P1. Explain management accounting and give the essential requirements of different types of
management accounting systems.
To monitor the financial condition, every business is required to record their financial as
well as non financial data. Management accounting helps the organisation's in determining their
expenses and income (van Helden, and Uddin, 2016). LM engineering Ltd. Is required to
implement this concept of management accounting in their business so that they can evaluate the
performance of their business can predict about the company’s financial condition and status.
This would also help the business in developing the strategies so that they can operate their
operations effectively. These are prepared as per the requirement of the companies for
understanding budgeting, break even charts, products cost analysis, trend charts and forecasting.
For maintaining this the company is required to cover various types of management accounting
which are mentioned below:
1

Cost accounting system: This concept of management accounting has been designed for
manufacturer so that they can easily track the flow of inventory continuously through the phases
of productions. This would help the business of LM engineering Ltd. in computing the overall
cost of operation separately and will also help them in determining which product is beneficial
and which is not by providing them the exact information of inflow and out flows of inventory.
Company can also use the different type of cost accounting in order to identify the amount of
inventory the firm needs to produce (Shields, 2015). These types are job order costing and
process costing.
Job order costing: This type of cost accounting will help the business of LM engineering
Ltd. In calculating the cost of each job separately and will record all the cost more accurately and
efficiently to facilitate the cost control in the business operations. This will also support the
organisation in evaluating the spoilage and defective products in the process of production so
that they can smoothly compare their actuals with their estimates.
Process costing: This will support the business in calculating the cost of manufacturing
for the each process individually. It would also help LM engineering Ltd. In allocating their
expenses to each process so that they can compute the exact cost.
Inventory management system: To maintain the levels of raw materials, finished goods stock
the organisation uses inventory management system. The company like LM engineering Ltd.
Would used this to balance the level of inventory and to determine how much inventory is
needed exactly by the organisations to carry out their operations smoothly. This would also help
the company in maintaining high efficiency. The company here can also adopt some techniques
in order to maintain their level of inventory these are :
Just in time method : This is the method of controlling inventory which will allow LM
engineering Ltd. To control the level of inventory. As this concept states that no extra amount of
inventory should be produced if it is not required during the production process.
Economic order quantity: This techniques is used by the company to minimise the total
holding cost and ordering cost. (Tappura, and et. al., 2015). This will also help the business in
saving the cost of ordering as this involves producing an inventory at the time only when the
order is placed. Through this the business will be able to place the right amount of inventory that
is required by the business.
2