Management Accounting: Techniques, Systems, and Applications for Sustainable Success

Unit 5 Management accounting
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Contents
Introduction................................................................................................................................3
P1 Explain management accounting and give the essential requirements of different types of
management accounting.............................................................................................................4
P2 Explain different methods used for management accounting reporting...............................5
M1 Evaluate the benefits of management accounting systems and their application within an
organisational context................................................................................................................6
P4 Explain the advantages and disadvantages of different types of planning tools used in
budgetary control...................................................................................................................7
M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets.............................................................................................................9
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing....................................................................10
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems....................................................................................................................13
M4 Analyse how, responding to financial problems, management accounting can lead
organisations to sustainable success.........................................................................................14
Conclusion................................................................................................................................15
References................................................................................................................................16
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Introduction:
In complex and competitive scenario, management accounting has become essential and
useful for decision making and simplifying complex situation. Zylla is an organisation, which
has gone through number of changes and the directors are of the view that the existing
systems need to go through changes and more appropriate system need to be installed which
are in accordance with the changing requirements of the system. Management accounting
systems provides large interface for keeping organisation data and designing activities in
appropriate manner. Thus, this management accounting report will make analyses of
management systems and management accounting techniques and there will also be analyses
of financial tools for responding financial issues. There will also be practical examples of
costing to show understanding about the varied accounting techniques.
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P1 Explain management accounting and give the essential requirements for different
types of management accounting.
Management accounting can be defined as a mechanism whereby data are collected,
recorded, and interpreted for relevant decision making. The origin of management accounting
was initiated from 18th century itself and with the increase in working complexities; there was
huge development in management models, theories and systems. There are large management
accounting systems such as cost accounting system, job accounting system, price optimising
system and inventory management system and their essential requirements are discussed here
below:
Job accounting system: This system is formulated with a view to estimate the costing for
specific jobs or batch systems. Different specific batches have their own costing criteria and
batches have to be costs accordingly. The most essential requirement of this system is that it
aids in assessing costing for units, it aids in inventory valuation, profitability measures and
also useful in comparing one batch costing with another batch costing(Guga, & Musa, 2015).
Price optimising system: This system can be defined as a system which is used for
estimating prices for different set of products. This system is mainly used for estimating
people reactions at different pricing and optimum pricing policy is used for estimating
product’s pricing. Optimum pricing strategy aid organisation in reaching its products to wide
range of consumers and making huge sales. Increasing sales is always one of the crucial
agenda for any organisation (Guga, & Musa, 2015).
Cost accounting system: This is a system which is used for estimating different set of costs
such as variable cost and fixed costs and other overheads costing, analyses of inventory
valuation and profitability analysis. Assigning costs to products manufactured is a critical job
which has to be done so as to assess the profitability portion and the productive capacity of a
concern.
Inventory management system: This system is implemented for analysing the inventory
level, re-order level, re-order capacity, productive capacity, EOQ level etc. Inventory can be
effectively managed through this system. For a manufacturing concern, it is highly useful that
investment in inventories is done appropriately and with due to attention so as to not invest
large funds into inventory mechanism. Thus, the major essential are that it eliminates
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