Management Accounting: Principles, Planning Tools and Case Studies

This report provides a comprehensive overview of management accounting, beginning with an explanation of its principles, the role of management accounting systems, and the techniques used. It explores the benefits of management accounting to organizations and evaluates its integration ...Read More

Management
accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART 1............................................................................................................................................3
An explanation of the principles of management accounting and the role of management
accounting and management accounting systems..................................................................3
The use of techniques and methods used in management accounting ..................................5
The benefits of the function to the organisation.....................................................................6
Evaluation of how management accounting is integrated within the organisation. ..............7
PART 2...........................................................................................................................................7
Compare and contrast three planning tools used in management accounting, indicating how
effective you judge each to be and why. Your judgements should be supported by examples to
demonstrate advantages and disadvantages............................................................................7
instruments that the institute will adopt to resolve these issue are : ...................................8
Using specific case studies as examples, compare ways in which management accounting is
applied, the effectiveness of management accounting in dealing with financial problems and
preventing financial problems in organisations....................................................................10
..............................................................................................................................................12
CONCLUSION .............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Establishment explanation is being considered as the most suitable method which is used
in an organisation by the mangers of the finance department in order to make the financial report
of the business activity. These reports help the manager to make short run and long term decision
for company. The different provisions of the accounting helps in determining all the financial
and statistical data in a very effective manner(Pinheiro, and Costa,eds., 2020). With the help of
this business operations can be controlled in a very proper manner so that firm can achieve the
set objectives with in the set time limit. The main purpose of the company behind the preparation
of the management accounting is to provide data related information to their stakeholder so that
they invest more and more in the company which ultimately increase the working efficiency of
the company. Along with this the data which is prepared by the company also help the internal
stakeholder of the company so that different department of the company can function and make
the decision in a very effective manner. The following report is based on the Speedboard
Assemble services which is well known medium scale manufacturing company. This report
cover the various management accounting system and the different method of management
accounting. This report also cover the cost accounting techniques and advantages and
disadvantages of the planning tool of the budgetary control. After words this report covers the
adoption of management accounting system to respond the financial problems.
PART 1
An explanation of the principles of management accounting and the role of management
accounting and management accounting systems
Management accounting may be define as the procedure of presenting the financial as
well as the economic data which not only help the company in improving the performance of the
management but also help the company in making the effective strategies for budgeting,
forecasting and for their competitor(Phornlaphatrachakorn, 2019). According to the American
Accounting Association, basically management accounting is a concept which helps the
organisation in planning the strategies for the different business activities so the the goals of the
firm can be attained in a very significant manner. There are different types of accounting
management system which help the business organisation to carry out their all the business

operations in a very effective manner. The different types of management accounting system has
been discussed below:-
 Cost Accounting System :- the cost accounting management system is basically a
frame which helps the company in estimating the cost of goods and services which are
produced by them, valuation of the inventory, profits of the company. With the help of
this management accounting the organisation is able to make their vision in best
possible manner. On the other hand, this accounting management system also support
the business organisation not only in determining the profit margins but also help them
company in identifying all the cost either fixed or variable. Due to this the overall
productivity of the company has been improved. In context to the Speedboard
company, cost accounting management system helps the manager of the company in
determining the cost of manufacturing the goods in a very effective manner. Along with
this cost can be controlled which ultimately help the company in increasing the profit
margins of the company.
 Price optimisation system :- This management accounting system help the company
in determining that how the taste and preferences of the consumer has been change
according to the changes in price. In context to the Speedboard company, the manger of
the company with the help of this accounting system can concentrate on the pricing
structure of the company's product which the clients are prepared to pay. Along with
this company can also use this in their organisation by collecting the data so that they
can set prices of their inventories and cost of the item beforehand.
 Inventory management system :- this accounting management system directly deals
with the stocks of the company. With the help of this accounting system the
organisation is able to manage their inventory in a very effective manner. Along with
this, this system also help the company in determining that how much stock have to
hold by the company and how much they have to sale in the market. In context to the
Speedboard company, the manager of the company have to focus on this accounting
system because this help them in growing their business in a very effective manner.
With the help of this the management of the Speedboard company will effectively
allocate their stock in different areas and places according to the activity of production.
With the adoption of this accounting management system the management of the

company can effectively identify their stock at any time and controlled their stocks
according to the market conditions. Different types of methods can be used by the
company in order to calculate the cost of inventory like LIFO, FIFO and AVOC.
 Job costing system- this accounting management system is generally used by those
organisation which are engaged in the manufacturing of the goods. The allotment of job
has been concerned in this accounting management system. With the help of this
system the manager of the company thrash the cost and the income which is earned
from a particular job(Octavia, 2019). Along with this this accounting management
system also help the organisation to identify their profit in very effective manner which
is earned from a particular job. In context to the Speedboard company, the manage of
the company with the help of this accounting system can effectively analyse the cost
and expenses which have been incurred during the process of manufacturing of goods.
Along with this, this system also help the respective company in order to take the
necessary step or action in order to improve their profit margin.
The use of techniques and methods used in management accounting
The management accounting report are those which comprises the reliable and more
accurate data which not only help the management in making the best decision for the company
but also help them in enhancing the productivity. The report which are prepared by the financial
department of the company helps them in understanding the financial and statistical data of the
company. Along with this, this accounting management reporting also help the company in
forecasting their financial position. Different types of report has been discussed below:-
 Budgeting report : budgeting report basically are those report which are prepared by
the business to identify their performance in the market during an accounting year. With
the help of this report the organisation is able to compare their actual performance with
the targeted performance in a very effective manner. Due to this the errors and the
problem which causes deviation can be faced and corrected with in the set time frame. In
relation to the Speedboard company, the preparation of the budgeting report will help the
company in identifying the reasons of deviation which came in the level of performance
and also assist the business to overcome from these deviations. Due to this financial
position of the company has also been determined.

 Inventory managerial report : this report are basically prepared by the organisation in
order to identify the level of stock which is hold by the company. Preparation of this
report within the company not only help the management in determining the demand of
the product in the market but also help the management in effectively supply their
product in the market according to the need and demand of the consumer. Along with
this, this report also support the firm in improving their productivity and profitability
level. In context to the Speedboard company, the formulation of this report will help the
company in determining the stock level in a proper manner and along with this
unnecessary cost has also been reduced and controlled (Tang, and Tang, 2019).
 Account receivables report :- this report is prepared by the company on periodic basis.
With the help of this report, company can identify their debtor and account receivables
of the company which are outstanding from a long period of time. In context to the
Speedboard company, the preparation of this report with in the company help the
management in determining that in how much time they received the payment form their
debtor and along with this, this report also help the company in developing the proper
credit policies for the company so that the effective flow of cash has been done within
the company in a very effective manner.
The benefits of the function to the organisation.
The management accounting system has huge importance in order to apply all these
system in the business to perform and conduct the business activities in a effective manner.
Some of the importance of the accounting system are as follow:
Management
accounting system
Advantage
Cost accounting system It is beneficial for the organisation in rendering detailed collection of
cost of processing unit's activities. In the Warwick fabrics UK
Ltd manufacturing company, recognised the actual cost of different
manufacturing activities by using this accounting system.
Inventory management
system
It is beneficial in better direction of stocks that is stocked in the
warehouses. Like in the above respective enterprises, management
implement this accounting system for the purpose of to track the inward

and outward movement of the raw material and manufacturing stock.
Price optimisation
system
The price optimisation system helps to the firm in distribution the exact
price of products and services. Same as in the Warwick fabrics UK
Ltd manufacturing, it is beneficial in setting the right price of products
and goods
Job costing system It is beneficial for above mentioned company in calculation the cost of
job or tasks separately. Such as for above mentioned company it is
beneficial in controlling the particular job assigned task cost.
Evaluation of how management accounting is integrated within the organisation.
The combine application of the management accounting system and it reports are aligned
with the function of the organization process. These are integrated with each other to find the
common objectives of the business (Nkundabanyanga, Muhwezi, and Tauringana, 2018) . In
the Warwick fabrics UK Ltd manufacturing company accounting reports like performance
reports, inventory reports with the help of accounting system of application of the cost effective
system. This concept is explained as costing system integrated in production to know the actual
cost of the project of the organization. By applying these tools in the business an organization
can gain the capacity and productiveness of the organization. That's the reason management
accounting system and reporting are connected within the organizational process.
PART 2
Compare and contrast three planning tools used in management accounting, indicating
how effective you judge each to be and why. Your judgements should be supported by
examples to demonstrate advantages and disadvantages.
All business concern have to undergo certain issues which may tends to reduce the
productivity level of the company(Nishimura, 2019). So in order to these issues the
authority will concentrate on the adaption of the different instruments. Issues and the
instruments to decreased those issues have been listed In below.
Unforeseen expenses : These disbursal are those which were not acquirable or were estimation
at the case of placement of the fund due to which the organization have to face the difficulty

of failure in their concern. These are those disbursal which has arisen unluckily due to some
act related to protection etc.
instruments that the institute will adopt to resolve these issue are :
Bench marking - the term Is used in company to set the bench mark is mainly focused with
the setting of best activity which can be utilised by the firms in order to increase the
competitiveness. In order to speed board, in their association as this will guide their employees
to work for the benchmark which have been set to accomplish the target of present as well as the
future period of time.
Planning Tools to solve the Financial Issues
Planning tools are very important for the business in order to resolve their issues related
to finance. Planning tools helps the business in solving these issues as these are interlinked to the
estimation of the future situation regarding expenses and revenues. As the business of Speed
board has used various budget which will support them in resolving their financial issues.
Speedboard assemble Airdri Ltd.
 Issues related to fund and
improper participation of the
employees has been seen because
business operate their functions
at a very large level.
 This comp[any also operated their
business functions at a very large level
but the problems of the company are not
defines due to which they are not able to
attain the objectives and goals in very
effective manner.
 To evaluate the performance of the
company as well as the employee
the business organisation use the
benchmarking and key
performance indicator method.
With the help of this method they
can attain the objectives in a very
effective manner.
 Tools of finance governance has been used
by the company in order to formulate the
strategies for the business. This tools help
the business to empower their different
business operations and also help the
business define their goals.

Budgetary Control: It is the procedure which includes preparation of the financial plans in
advance and the goals related to the actions which is to be revenue and also compare the
real to the benchmark and take essential actions which is required to resolve the reprobate.
In below listed are various some strategy techniques to the budgetary control.
Cash Budget - It refers to as the documents which has been create by the enterprise in
relation to determine the amount of their cash transactions and during a specific budget
period. The reason behind the creation of these cash budget is that it able the business in
analysis the capital that has to be spend in relation to reach their regular activities. This
will also render benefits to the business of speed board.
Advantages Disadvantages
This will able the enterprises of speed
borad in rapidly determining the deficit to
meet the needs of money so that the
relevant information can be collected.
The disadvantage that the institution is going
to face the shortage of capital ans that leads to
have issue in preparing cash budget.
Master budget -
This is also coined as the budget which is total of overall transactions which is prepared
by each individuals sections with in the company so that the analysed about the future sales,
productions, profitability can be complete.
Advantage Disadvantage
Preparation of the master budget will assist
in the company of speed board in
determining in advance about the strategy
and issues which the company is going to
face in the upcoming.
It is not that easy for the company of speed
board to make changes in the master budget
after its making as these are hard in attitude.
Flexible Budget - as the name suggested these are the budget which can be modified
according the requirement of the particular condition. These statement are those which are
proceed with less amount and time.
Advantages Disadvantages
These statement are advantageous for the
business as this permits the company of
The concern will face because of its
flexible attitude the information with in the

speed board comparing the real activity to
the target.
concern will keeps on changing in a
constant of the institution will be posterior.
Using specific case studies as examples, compare ways in which management accounting is
applied, the effectiveness of management accounting in dealing with financial
problems and preventing financial problems in organisations.
Cost : Cost is being considered as that amount which are incurred to produce the product of the
company. The cost of the product comprises the many things like raw material cost, time,
electricity, distribution cost and many more. Following are the various methods which are used
by the company in order to find the cost:-
 Marginal costing:- the marginal costing is being applied when there is change in the total
costing has been seen by increasing in the total production by one unit. In simple terms
cost of producing the additional one unit called marginal costing. This method is used by
the companies in order to determine the economics of scale of the business (Loft, 2020).
 Absorption costing :- this method is also used by the companies in order to decided the
cost of the product. This method consist with all the cost which have been incurred in
producing all the goods and services of the company. In this method both types of cost
i.e. variable cost and fixed has been included. This method is being considered as one of
the most suitable method which are used by the organisation in order to determined the
accurate stock and price of the product.

Interpretation :
From the above table it has been observed that marginal and absorption costing method
has been used by the company in order to determine the net profits because of the changes in
opening and closing stock of the company(Ferramosca, and Ghio, 2018) . In context to the
Speedboards company absorption costing method is being considered as a suitable method for
the company because it help the company in getting the accurate data.
Material cost variances:
Given information is as follows-

Standard price(SP)- £10 @ per kilograms
Actual price (AP)- £ 9.5 @ per kilograms (20900/2200)
Actual quantity (AQ)- 2200 Kilograms
Standard quantity(SQ)- 1000 Kilograms
Material price variance (MPV)= (SP-AP) * AQ
(10-9.5)* 2200= £1100 F
Material usage variance (MUV)= (SQ-AQ)*SP
(1000-2200)*10= £12000 A
Material cost variance (MCV)= Standard material cost- actual material cost
Valuation of closing stock using LIFO
Date Reference Purchase Issues Balance (Inventory)
Units £/Units £ Total Units £/Units £ Total Units £/Units £ Total
05/01 Previous balance
(inventory) 40 3.00 120.00
05/12 40 3.00 120.00
Bought 25 units
at £ 3.60 each 20 3.60 72. 20 3.60 72.00
05/15 20 3.60 72.
Issued 36 units 16 3.00 48. 24 3.00 72.00
05/20 24 3.00 72.00
Bought 20 units
at £ 3.75 each 20 3.75 75. 20 3.75 75.00
05/23 Issued 10 units 10 3.75 37.5 24 3.00 72.00
10 3.75 37.50
05/27 9 3.75 33.75
Issued 25 units 25 3.00 75.00

05/30 Issued 5 units 5 3.00 15.00 4 3.75 15.00
Valuation of closing stock by using weighted average method:
05/01 Previous balance
(inventory) 40 3.0000 120.0000
05/12 Bought 25 units at £
3.60 each 25 3.60 90. 65 3.2308 210.0000
05/15 Issued 36 units 36 3.2308 116.307
7 29 3.2308 93.6923
05/20 Bought 20 units at £
3.75 each 20 3.75 75. 49 3.4427 168.6923
05/23 Issued 10 units 10 3.4427 34.4270 39 3.4427 134.2653
05/27 Issued 25 units 25 3.4427 86.0675 14 3.4427 48.1978
05/30 Issued 5 units 5 3.44 17.2135 9 3.4427 30.9843
Receipts £
Cash sales 250
Credit sale receipts from debtors 320
Other income received 415
Total receipts (a) 985
Payments
Purchases 215
Wages- Labor and overheads 115
Fixed costs 200
Capital expenditure - Plant 650
Advertising 20
Total Payments (b) 1200
Surplus/Deficit (a) – (b) -215

these techniques are useful in preparing the financial statements. As management tools
provides a structure for the different kind of financial aspects. In this report section of financial
statements are prepared in in relevance with the company by using the costing techniques
marginal and absorption costing. These costing tools are based on the activities based techniques.
The activity based costing method is based on the calculative the cost of every activities and task
(Fakhari, and Rezaei Pitenoei, 2018).
In this part, the interpretation is made of the absorption and marginal costing technique.
As per the absorption costing method, this statement shows the net loss of 630 in month of May
and there are net profit of 4550 in the month of June. While in other tools of costing, in the
marginal costing technique, net loss is of 550 in month of May and there was net profit of 5750
in the month of June(Bebbington, and et., al., 2021). So it is concluded that company Galway
plc' s financial status is goods in month of June in both the methods.
Planning tool and techniques are used in the business to approximation of the budgeting
control system in appropriate manner. These budgeting process related to forecast the future
situation of the processing and budgeting requited detail planning of the business functional
operation (Balios, 2021). As the master budgeted provides the detail of all budget that help in
estimation of cash, production unit, sales level and other expenses that may occur in the business.
The management accounting system may help in the resolving the financial issue that
bearing by the company. There are a different accounting process that help to settle the issue ,
such as company Warwick fabrics UK Ltd use cost and price system in the function of the
processing unit to address the problem. So the extra cost can controlled by the unit. It may use to
set a exact price to its product so more customer can attract with it(Adhariani, 2020). By
applying these effective planning tools in the business all these problem can be resolved
In the same manner, planning techniques are play a crucial part in solving the financial
issues. These planning tool are based on the budgetary control system that help in estimation of
the future income and expenses. Company Warwick fabrics UK Ltd is using the planning tools to
understand the application of the different budget to control the operating activities related to
future circumstances. All these budget program are helping to company in finding and resolution
the financial problems.

CONCLUSION
It has been concluded from above report that there is mega seriousness of the board
accounting records in the accomplish of the authority as this develops the interlinking of the
board bookkeeping in the accomplishment of the organization. This is possible on the
evidence that agreement of assorted model assist to get the widen data which betterment the
understanding and consequence in authentic betterment in their on the job. Preparation of
different sort of reports aids to class the data to wrong spouse and directors which improves
basic leading and help to get wanted results.

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