Management Accounting: Types, Reports, and Costing Methods

Management Accounting

Contents
INTRODUCTION.................................................................................................................................3
TASK 1.................................................................................................................................................3
P1: Management accounting system and their types........................................................................3
P2: Different types of management accounting reports....................................................................5
M1 Identify the benefits of management accounting system and it's application in the
organisational context.......................................................................................................................6
D1 Critically evaluate that how management accounting system or management accounting
report linked within organisational process......................................................................................7
TASK 2.................................................................................................................................................7
P3: Costing methods along with a calculation of net profitability.....................................................7
M2 Management accounting techniques and financial reporting documents................................12
D2 Financial reports which applies to interpret business activities.................................................12
TASK 3...............................................................................................................................................12
P4: Different planning tool used for budgetary control with their advantages and disadvantages.12
M3 Use of planning tools for preparation and forecasting the budgets..........................................14
TASK 4...............................................................................................................................................15
P5: Organisations are adapting management accounting systems to respond to financial problems
.........................................................................................................................................................15
M4 Management accounting in response to solve financial issue that can lead to the sustainable
success.............................................................................................................................................17
D3 Planning tools to resolve the financial problems........................................................................17
CONCLUSION...................................................................................................................................17
REFERENCES....................................................................................................................................19

INTRODUCTION
Management accounting play an essential role in the growth and success of an
organisation as it directs managers to prepare a suitable reports and make an effective
decisions in order to operate its business functions more smoothly. Such reports contains all
valuable information related with financial as well as non-financial transactions made by
various departments on daily basis so that the actual financial position of company can be
easily identified. For this, mutual support by various departments such as marketing,
production, finance etc. should required in order to give reliable and accurate information to
the management. The present assignment report is based on BRIGHTSTAR company which
is engaged in providing financial services to the clients operated business in UK market. The
project describes the management accounting and reporting systems along with their
integration and benefits. The project also discusses the costing methods with a suitable
example of calculation of net profitability. Various planning tools to control budget and
resolving financial issues are also briefly explained under this report.
TASK 1
P1: Management accounting system and their types
Management accounting is concerned with an activity of identifying, evaluating,
recording, and interpreting financial information which is useful for managers to make
suitable decisions and effective plans for smooth functioning of business. The main purpose
of management accounting is to track and estimate costs that will help managers to prepare
an effective budget for future business activities. It provides information both financial as
well as non-financial information which is useful for internal as well as external interested
parties to an organisation regarding their decisions for betterment of an organisation. For this,
it is important for all the departments of an organisation such as marketing, production,
finance etc. to provide sufficient details about their transactions made on daily basis so that it
can be accurately recorded and utilised while decision-making process (Baars and et.al.,
2015).
Therefore, BRIGHTSTAR company should support its accounting manager to perform their
roles and responsibilities through motivating and guiding them so that they can bring
valuable outcomes to company by analysing the actual financial position of company.
Types of management accounting systems

Cost accounting system: It is valuable system which is utilised by management to
estimate the cost that will be further incurred in future business activities so that cost has been
controlled, inventory has been valued and profitability should be increased. It is also called as
product costing which valued the cost of products after determining the actual cost incurred
in manufacturing and selling products to the final customers. It is most beneficial to use by
manufacturing company such as BRIGHTSTAR company in order to monitor and record
transactions made during financial transaction process. Therefore, BRIGHTSTAR company
must use such system in order to establish a framework and estimate the cost that will be
utilised in future transactions with their clients. It makes easy for company to value its
products and after that sell into market with an effective prices in adding with their margin
(Brennan and Merkl-Davies, 2013).
Price optimisation system: It is another useful system which brings valuable
information about the actual perception and buying behaviour of targeted people regarding
the pricing policies implemented by an organisation on their offerings. It assist managers of
BRIGHTSTAR company to think twice about their existing pricing policy and accordingly
make suitable changes in order to maximise the satisfaction level of customers and achieve
their loyalty with company for longer period of time. For this, managers should first
determine the rivals’ pricing policy along with the quality of their offerings and on the basis
of which decide to charge prices in exchange of their products and services to the customers.
It directly makes position impact on their existing consumer base as well as profitability.
Inventory management system: It is a system which directs the managers of an
organisation to track and monitor the products through the whole supply chain or some
portion of it which is used in its business operation. The main purpose of using such system is
to make control and monitor the level of stock along with the deliveries and orders. It also
facilitate managers to acquire knowledge about the requirements of inventory so that the
order has been take place in advance which increases their capabilities to meet customers’
needs and requirements on timely basis. Along with this, it ensures company to have
sufficient amount of funds due to which allows company to run their process without any
interruptions. It increases the brand loyalty as well as profitability of company (Hasniza
Haron, Kamal Abdul Rahman and Smith, 2013)
Job costing system: It is the framework which gathered information about the total
expenses incurred in particular generation process. Such expenses are utilised to produce