Management Accounting - System Types with Examples

This study material entailed the importance of management accounting of an organization, that has certified an efficient financial performance to foster the growth and development of the organization. It also evaluates the integration between the management accounting systems and management accounting reporting within an organizational process. It also produces a financial report which is can be applied reliably in order to interpret the data for business activities.

Executive Summary
In this assignment, I have produced written document, essay and report which has entailed the
importance of management accounting of an organization, that has certified an efficient financial
performance to foster the growth and development of the organization. The written document
mainly emphasizes on the management accounting and its different methods that can be applied
for management accounting reporting. It also evaluates the integration between management
accounting system and management accounting reporting within an organizational process. It
also produces a financial report which is can be applied reliably in order to interpret the data for
business activities.
In the Scenario 2
Part A
I have developed an essay which explains the pros and cons of various types of planning tools
which can be used for budgetary control.
In the Scenario 2
Part B
I have prepared a report which compares how an organization are adapting management
accounting system to respond to financial problem.
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Table of Contents
EXPLANATION OF MANAGEMENT ACCOUNTING WITH THE ESSENTIAL REQUIREMENTS OF DIFFERENT TYPES OF
MANAGEMENT ACCOUNTING SYSTEM................................................................................................................ 4
MANAGEMENT ACCOUNTING............................................................................................................................................4
PRINCIPLE OF MANAGEMENT ACCOUNTING......................................................................................................................4
THE DIFFERENCES BETWEEN MANAGEMENT ACCOUNTING AND FINANCIAL ACCOUNTING ARE AS FOLLOW:......................................4
DIFFERENT TYPES OF MANAGEMENT ACCOUNTING SYSTEM WITH ITS BENEFITS ARE EXPLAINED BELOW............5
1. INVENTORY MANAGEMENT SYSTEM.......................................................................................................................5
2. COST-ACCOUNTING SYSTEM.................................................................................................................................5
3. JOB COSTING SYSTEM.........................................................................................................................................6
4. PRICE- OPTIMIZING SYSTEM.................................................................................................................................6
EXPLANATION OF THE DIFFERENT METHODS USED FOR MANAGEMENT ACCOUNTING REPORTING.....................6
1. BUDGET REPORT................................................................................................................................................7
2. COST REPORT....................................................................................................................................................7
3. PERFORMANCE REPORT.......................................................................................................................................7
4. ACCOUNTING RECEIVABLE AGING REPORT...............................................................................................................7
5. JOB COST REPORT..............................................................................................................................................7
CALCULATING COSTS USING APPROPRIATE TECHNIQUES OF COST ANALYSIS TO PREPARE AN INCOME
STATEMENT USING MARGINAL AND ABSORPTION COSTS...................................................................................8
COST................................................................................................................................................................... 8
I. FIXED COST.......................................................................................................................................................8
II. COST- VOLUME PROFIT ANALYSIS (CVP)................................................................................................................8
III. FLEXIBLE BUDGETING..........................................................................................................................................8
IV. MARGINAL COSTING...........................................................................................................................................8
V. ABSORPTION COSTING.........................................................................................................................................9
EXAMPLE............................................................................................................................................................ 9
THE ADVANTAGES AND DISADVANTAGES OF DIFFERENT TYPES OF PLANNING TOOLS USED FOR BUDGETARY
CONTROL.......................................................................................................................................................... 11
BUDGETARY CONTROL................................................................................................................................................11
1. CAPITAL BUDGET..............................................................................................................................................11
2. MASTER BUDGET.............................................................................................................................................12
3. ACTIVITY-BASED BUDGETING..............................................................................................................................12
4. INCREMENTAL BUDGETING.................................................................................................................................13
5. ZERO-BASE BUDGETING.....................................................................................................................................13
TO UNDERSTAND THE OPERATION AND PRICING STRATEGY OF THE COMPANY, PEST, SWOT AND BALANCED
SCORECARD ARE ALSO PERFORMED BELOW:..................................................................................................... 14
1. PEST ANALYSIS................................................................................................................................................14
2. SWOT ANALYSIS............................................................................................................................................. 15
3. BALANCED SCORECARD......................................................................................................................................16
COMPARING HOW ORGANIZATIONS ARE ADAPTING MANAGEMENT ACCOUNTING SYSTEMS TO RESPOND TO
FINANCIAL PROBLEMS...................................................................................................................................... 17
KEY PERFORMANCE INDICATORS...................................................................................................................................17
BENCHMARKING........................................................................................................................................................ 17
FINANCIAL GOVERNANCE.............................................................................................................................................17
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1. ANALYTICAL........................................................................................................................................................18
2. CRITICAL THINKING...........................................................................................................................................19
3. INTERPERSONAL COMMUNICATION......................................................................................................................19
4. ADAPTABILITY..................................................................................................................................................19
CONCLUSION.................................................................................................................................................... 20
REFERENCES...................................................................................................................................................... 21
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Explanation of Management accounting with the essential requirements of different types
of management accounting system.
Management Accounting
Management accounting system is defined as the method by which an information interlinked to
accounting are analyzed, interpreted and presented. The costing and accounting information is
used to collect the required information which helps the management of an organization in
decision making process applicable for short duration or daily purpose. Extent of performance,
observation of risk, preparation and presentation of financial statement for the organization are
the main core process of management accounting.
Principle of Management Accounting
 To determine the purpose and extend of financial and managerial accounting, as well as the
usage of accounting data in managers’ decision-making process.
 To explain the differences between operational and capital budgeting, as well as their roles in
planning, control and decision-making.
 To prepare an operating budget, describe its primary components, and explain how the
various components interact.
 To made explanation of performance evaluation methods.
 To make operational decisions based on accurate financial data.
 To demonstrate the utilization of accounting data for management choices in the areas of
product costing, cost behavior, cost control, and operational and capital budgeting.
The differences between management accounting and financial accounting are as follow:
Financial Accounting Management Accounting
Revenue, income and expenditure, and property
accounts are all maintained in financial
accounting records.
Cost and revenue are generally reported by
responsibility centers or profit centers in
management accounting.
Financial accounting reporting is required once a
year.
Management accounting reposting is not required
every year.
The focus of financial accounting is on the past
history.
Management accounting is concerned with the
future as well as the present.
Financial accounting aids in making investments Management accounting aids decision-making by
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decisions and credit rating choices. assisting management in recording, planning, and
controlling activities.
Different types of management accounting system with its benefits are explained below.
1. Inventory Management System
Inventory management system is the process that directs the monitoring and maintenance of the
stocked product i.e., raw materials, supplies, organization assets or any other final products
which are ready to be sold out in the marketplace. This system allows an organization to
maintain a centralized record of each item and asset (Hayes, 2019). However, it has also main
other drawbacks such as, consumption of storage spaces, running out of stock of essential
inventory supplies. (Pontius, 2020)
Benefits of Inventory Management System
 It helps to enhance the transparency.
 It helps in better reporting and sharpens the capabilities of estimating.
 It helps in improving the interpersonal relationship among suppliers, partners and vendors.
2. Cost-Accounting System
Cost accounting system is defined as the process concern with the classification, recording,
allocation, distribution, summarization and accounting aspects of the current and prospective of
cost. It is the mechanism by which the cost of products and services are determined. It is an
internal reporting system with the main purpose of aiding the management in the planning and
decision-making phase. (Tuovila, 2020)
Benefits of Cost Accounting System
 The cost accounting system helps in controlling the cost with the application of techniques
such as standard costing and budgetary control.
 It gives essential information related to cost to the management for planning, implementing
and controlling.
 It helps in introducing the cost reducing program.
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3. Job Costing System
Job costing system is defined as the system which is purely based on the customer’s description
used while evaluating the cost of specified jobs in an organization. In this system, each job’s cost
is determined individually which assists the organization to ascertain the profit or loss on the
individual job. It also helps the management of an organization to identify the job which may
either bring profit or loss to the organization.
Benefits of Job Costing System
 The profit for each job can be separately ascertained.
 It provides a detailed cost analysis of labor, materials and overheads whenever as per the
job’s requirement.
 It helps in preparing the estimates of an organization.
4. Price- Optimizing System
It is a system which computes how demand varies at various price level and then combines the
specific data with the cost information. And inventory levels in order to recommend a price
which will enhance the profit. This system helps an organization to determine initial pricing,
promotional pricing and discount pricing. (Walkowski, 2018)
Benefits of Price-Optimizing System
 It helps an organization to gain immediate financial benefits.
 It allows parallel working with various categories.
 It helps to eradicate the need of manual work and minimizes the possibilities of mistakes a
human is likely to make.
Explanation of the different methods used for management accounting reporting.
Management accounting reporting is defined as the process of preparing the accounts and
management reports of an organization with the sole purpose of aiding the managers by
providing validate and reliable information related to financial status and different plans and
policies of an organization. This reporting processes helps an organization by determining
various procedures that needs to be undertaken in effective ways through the managerial aspects.
Different methods used for management accounting reporting are:
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1. Budget Report
The budgetary control of an organization is determined by budget report. This report also helps
to evaluate the future performance of an organization. This report also enables an organization to
build a plan for spending money and ensures that the money is being spent cautiously.
2. Cost Report
The method of managing and controlling the future costs by providing information to the
managers and leaders that has authority on the cost related sector of an organization is known as
cost report. On the basis of cost of raw materials, manpower requirements, overheads, and any
other supplementary cost, the final cost report is prepared.
3. Performance Report
The reports that are used to assess and evaluate substantive expenses and revenues to the
amounts which has already been assigned is defined as performance report. This report is mainly
used by management accountants in order to forecast and define the future of an organization in
terms of increasement in both costs and production.
4. Accounting Receivable Aging Report
This report helps in identifying the unpaid invoice of the customer along with the unused credit
memos in-accordance with the particulars date and contact information for the consumer of an
organization. An organization can determine effectiveness of the credit function and data
collection of the consumer by the help of accounting receivable aging reports.
5. Job Cost Report
This report explores the list of job and the related cost which involves labor cost, materials cost,
overhead cost and forth. This report can be utilized to evaluate the expenditure on individual
activities that the organization undertakes.
Therefore, the above mention point are the different methods of management accounting
reporting.
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Calculating costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs.
Cost
Cost is defined as the amount measured in monetary units which is attributed in exchange for
some goods or services for the particular purpose. It can also be defined as the sacrifice or giving
up resources. Cost signifies an amount of expenditure to secure some benefits.
The types of cost are explained below:
i. Fixed Cost
A cost that remains consistent even though the amount of goods and services that is produced or
sold may increase or decrease is defined as fixed cost. It is independent of specific business
activities.
ii. Cost- Volume Profit Analysis (CVP)
CVP analysis is used to figure out how changes in expenses and volume effect a company’s
operating income and net income. Several assumptions were made in order to conduct CVP
which includes the constant sales price per unit, variable cost per unit is constant, the total fixed
cost are fixed and many more. All of the company’s costs including manufacturing, selling and
administrative costs must be classified as variable or fixed in order to do a CVP analysis.
iii. Flexible Budgeting
A flexible budget adapts to changes in actual revenue. Once an accounting period is concluded,
actual revenues or other activity metrics are loaded into the flexible budget which generates a
budget that is customized to the inputs. For control purpose, the budget is then compared to
actual spending. It helps to identify all fixed costs and segregate them in the budget model.
iv. Marginal Costing
Marginal costing is beneficial in profit planning. This cost helps to determine profitability at
different level of production sale. It is suitable in decision making about complex of selling
price, export decision and make or buy decision. P/V ratio and break even analysis are one of the
useful techniques of the marginal costing. By using marginal costing, different department of an
organization can be evaluated.
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v. Absorption Costing
The method of capturing all cost both variable and fixed to the manufacturing processes,
operation and products is defined as absorption costing. This cost includes production cost,
administrative cost, and other cost such as rent, insurance cost etc. It assigns fixed overhead costs
to the products in order to find out the total cost of production.
Example
Following information is related to XYZ company which sells Watchs. This information is from
the year ended 31st May 2019.
Particulars Amount (Rs)
Opening Stock (Valued at marginal cost Rs. 61900 and
total cost Rs.72,000)
Units produced
Closing Stock
Units Sold
Variable Cost
Factory Overheads(Fixed)
Selling Cost: Variable
Fixed
Selling Price Per Unit
10,000 units
60,000 units
4,000 units
66,000 units
Rs.3,57,000
Rs.70,200
Rs.3,40,000
Rs.50,000
Rs.20
Requirement:
Prepare income statement for the year ended 31st March 2017 using (a) marginal costing and (b)
absorption costing and brief about the differences between the two income statements.
Solution:
Marginal Costing Income statement
For the year ended 31st May 2019
Particulars Amount (Rs) Amount (Rs)
Sales
Less: Variable Cost
Add: Opening Stock
3,57,000
61,900
13,20,000
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Less: Closing Stock (3,57,000/60,000 x 4,000)
Variable Selling Cost
Contribution
Less: Fixed Factory Cost
Fixed Selling Cost
4,18,900
23,800
3,95,100
3,40,000
70,200
50,000
(7,35,100)
5,84,900
1,20,200
Net Profit 4,64,700
Absorption Costing Income Statement
For the year ended 31st May 2019
Particulars Amount (Rs) Amount (Rs)
Sales (66,000 x Rs. 20)
Less: Cost of Goods Manufactured: Variable Cost
Factory Manufacturing Overheads
Opening Stock
Less: Closing inventory (4,000/60,000 x 27,200)
Gross profit
Less: Selling Cost: Variable
Fixed
3,57,000
70,200
4,27,200
72,000
4,99,200
28,480
50,000
3,40,000
13,20,000
4,70,720
8,49,280
3,90,000
Net Profit 4,59,280
The difference is profit of Rs.5,420 (which is Rs.4,64,700 – Rs.4,59,280) under absorption and
marginal costing due to fixed factory overheads included in opening stock and closing stock.
Opening Stock (Rs) Closing Stock (Rs)
Marginal costing
Absorption Costing
61,900
72,000
23,480
28,480
10,100 4,680
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The advantages and disadvantages of different types of planning tools used for budgetary
control.
Budgetary Control
Budgetary control is defined as a planning tool which is used to plan and control the production
and selling of product or services and also to foster the communication and co-ordination
between several departments of an organization. Budgetary control is a detailed framework of all
the aspect of the organizational operation that ensure the organization will achieve its objectives
in the future.
Advantages of Budgetary Control
 It helps to coordinate different departments in the activities which the organization
conduct.
 It translates strategic plan into action
 It helps to carry out the strategic plan by specifying the resources, activities and revenues.
Disadvantages of Budgetary control
 In budgetary control the problem arises when the budgets are used rigidly and
mechanically.
 Due to lack of participation in budgetary control an employee can feel demotivated.
 It can cause insights of unfairness.
1. Capital budget
Capital Budget is a method which an organization uses for the long-term investment
opportunities mainly for determining whether to invest in a project or not. The investment
opportunities may include construction of building, factory facilities or a new plant and
machinery etc.
Advantages of Capital Budget
 It helps an organization to analyze the different risk involved in an investment
opportunity.
 It helps the organization to forecast which investment opportunity will produce more
benefits comparatively.
 It helps an organization to build a long-term plan on strategic investment.
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Disadvantages of Capital Budget
 Since the decision are for long-term in capital budgeting, they are mainly irreversible in
nature.
 Capital budgeting technique is based on estimations and assumption which cannot be
applied in the future as it is always uncertain.
 An ineffective capital budgeting decision-making process can affect the long-term
durability of an organization.
2. Master Budget
A summary of an organization’s plan which sets a particular target for production, distribution,
sales and financial activities is known as master budget. This budget demonstrates an overall
view of the management’s plan for the future and how this plan can be achieved. It comprises a
number of individual but interdependent budgets.
Advantages of Master Budget
 It helps an organization by generating an idea of where an organization wants to reach
and what should be done in order to reach there.
 It helps an organization to forecast cash flows in a project which will help the
organization in getting specific type of financing.
 It allows an organization to assess problems and plan ahead.
Disadvantages of Master Budget
 The preparation of master budget is time consuming.
 Lack of specificity is one of the disadvantages of master budget.
3. Activity-based Budgeting
Activity-based budgeting is a type of budgeting that calculate the sum of cost required to meet
the target of the expected level of activities.
Advantages of Activity-Based Budget
 It enhances the efficiency of an organization by identifying and shutting down the
performance gap.
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 It provides better cost control thereby, enhancing the bottom line.
Disadvantages of Activity-Based Budget
 It increases the workload and the workforce and financial resources many be exploited.
 It focuses on the present goal rather that the long-term goal.
4. Incremental Budgeting
Incremental budgeting is defined as a process which relies on an idea i.e. a new budget can be
build only by making some marginal changes to the current budget. It is commonly known as the
most conservative approach. It helps to show the growth of the business and changes in the
market.
Advantages of Incremental Budgeting
 Since the financial records of the previous periods are easily available, incremental
budgeting is easy to implement in an organization.
 It is very easy to use and does not requires complex calculation.
 It helps to scale down the time frame required for intervening the process and excludes
the need for hands-on training.
Disadvantages of Incremental Budgeting
 It may fail to adapt the allocation of resources to adjust their various needs when different
departments tend to have same incremental rise in share.
 It can promote unnecessary spending of the fund.
 It can demotivate the growth and development of innovative ideas.
5. Zero-Base Budgeting
Zero-based budgeting is a process which reflect the manager of an organization on how to
effectively utilize every penny in the budgeting period. This budgeting can have both advantages
and disadvantages. It differs from the conventional budgeting in a way that the budget for each
new period is allocated starting from zero base. (Investopedia.com, 2019)
Advantages of Zero-Based Budgeting
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 It improves accuracy by ensuring that the exact number of resources and the funds
required by every department is provided.
 It contributes to the strategic objectives of an organization thereby increasing the
efficiency.
Disadvantages of Zero-Based Budgeting
 It consumes a lot more time and effort to closely monitor and justify every budget
element rather than modifying an existing budget.
 It can be manipulated by savvy managers in order to get most of the resources into their
departments.
Therefore, above were the advantages and disadvantages of different types of planning tools used
for budgetary control.
To understand the operation and pricing strategy of the company, PEST, SWOT and
Balanced Scorecard are also performed below:
1. PEST Analysis
PEST analysis is a method of analyzing the political, economic, social and technological aspects
of a company’s environment. This analysis is used into a company’s strategic planning process.
Significant changes in the components of PEST might cause a firm’s market positioning to shift.
The following are the components of PEST:
Political Factor: Political stability of the country in which a business and its customers operate,
changes in employment laws that affect employee costs or working conditions, regulatory
changes, tariff, or customer regulation change or the implementation of new environmental
regulations are the example of political factors.
Economic Factor: The predicted pace of growth of the economy as a whole, the rate of
government spending that affects the company, the rate of inflation, and expected interest rate
and foreign exchange rate fluctuations.
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Social Factor: Changes in demography that affect the company’s consumer base, changes in
fashion that affect revenue and change in population behaviors.
Technological Factor: The introduction of new technologies that may have an impact on the
company, such as the amount of bandwidth available to customers, access to electricity, the rate
at which the industry spends on research and development, and the rate at which present
technology becomes obsolete.
Depending on the industry, a PEST analysis will have varying effects on a company. These
factors are beyond the organization’s control. These factors can, nevertheless, have a significant
impact on the organization, whether as threats or opportunities.
2. SWOT Analysis
A SWOT analysis is the most widely used method for auditing and analyzing a company’s
overall strategic position and its environment. Its primary goal is established techniques for
developing a firm-specific business model that best aligns and organization’s resources and
competencies with the needs of the environment in which it works. SWOT stand for Strengths,
Weaknesses, Opportunities and Threats. It serves as the foundation for assessing internal
potential and constraints, as well as potential/likely external possibilities and dangers. It
considers all good and negative elements that influence the firm’s success, both inside and
outside the company.
Strengths: In a SWOT analysis, strengths are the characteristics inside an organization that are
thought to be important for a project’s ultimate success. Resources and capabilities that can be
exploited to gain a competitive advantage are known as strengths. Example of strengths are
strong brand name, band reputation, cost advantages and many more.
Weaknesses: Weaknesses are the aspects in the SWOT analysis formula that could prevent a
project form succeeding. A high level of competitiveness between departments, a shaky internal
communication system, a lack of funds, and an insufficient number of supplies are all examples
of weaknesses. Weaknesses have the potential to undermine a project before it even gets started.
Other weaknesses include weak brand reputation, ineffective and high-cost structure.
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Opportunities: Opportunities are defined as external components that may be useful in attaining
the project’s objectives. These variables could include vendors who want to partner with the
company to help it succeed, the public’s favorable opinion of the company, and market
conditions that make the project appealing to a specific market segment. Opportunities include
arrival of new technology, new training and development program and many more.
Threats: These external elements may have a significant impact on the project’s or business
venture’s success. A negative public image, a lack of ready-made markets for the final product,
and a shortage of vendors capable of supplying raw materials for the project are all potential
threats that must be considered in any SWOT analysis. Threads include change in the trend, new
rules have been implemented, new substitutes are being developed and many more.
3. Balanced Scorecard
The term “balanced scorecard” refers to the idea of looking at strategic as well as traditional
financial measurements to achieve a more “balanced” picture of success. A balance scorecard is
a performance indicator for identifying, improving, and controlling the various operations and
results of an organization. A framework for putting strategy into action and managing it. Balance
scorecard connects strategic objectives, measures, targets, and actions to a vision. It strikes a
balance between financial indicators and performance indicators and objectives relating to all
other aspects of the business. The balanced scorecard concept has progressed beyond the mere
usage of viewpoints to become a comprehensive strategy management system. It is also known
as business performance management tool.
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Comparing how organizations are adapting management accounting systems to respond to
financial problems.
An organization who are facing financial crisis can respond to problem by adapting management
accounting system as which are discussed below:
Key Performance Indicators
The set of quantitative measurement of an organization’s overall long-standing performance is
defined as key performance indicators. It needs to be outlined according to the core objectives of
the business. It helps an organization to establish financial and operational achievements and also
an organization’s strategy. Many organizations are adopting key performance indicator at
different level to explore their success at meeting the per-set targets. An organization will be
able to allocate its fund in order to prevent any problems that could yield during finance
management by the help of key performance indicators.
Benchmarking
The process of refining an organization by assessing its scope for improvement and comparing
the current position with the pervious is known as benchmarking. It is a strategic management
tool which acknowledges an organization to set goals and compute its production on the basis of
fine industrial practices (M, 2018). It is a process where things are evaluated based on the
comparison made between them by using a point of reference. This practice helps in measuring
the processes programs, strategy and performance of an organization with other organization of
similar objectives.
Financial Governance
A practice which an organization uses to monitor, collect, manage and control the financial
information is defined as financial governance. It consists of information on how industries are
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tracking financial transaction, managing the performance and controlling the data and
disclosures. When an organization uses good financial governance, it ensures correct financial
data. By regularly monitoring financial information, the financial governance can detect any
business risk in a quicker way.
The following points demonstrate that how financial governance can help an organization to
identify financial problems and help to monitor strategy.
 Helps to produce a policy that leads the management in developing business plan including
the budget and financial plan. This largely relates to the business’s operating revenue and
cost as well as the organization’s cash flow management.
 Helps to create a policy that provides the foundation for the organization’s success. This
relates to the management of the company’s assets and liabilities.
 Help to monitor the techniques that give the organization with enough financial information
to ensure that the finances are being properly handled in order to meet the company’s short
and long-term objectives. This includes developing key performance indicators and
benchmarks for performance evaluation, as well as a framework that delivers an accurate and
timely reporting system to the board management and staff.
 Helps to keep track of whether the organization is doing a good job, pitting its strategy into
action, and getting good value for money.
 Approve an annual spending budget based on the cost of related operations.
 Assures that the organization has adequate internal controls and accounting procedures in
place to ensure that funds are correctly allocated.
 Monitor financial information on a regular basis, including the income and expenditure
statement and balance sheet.
Management Accountant also play an important role while solving financial problem of an
organization. So, an organization should have skilled management accountant which can deal
with each and every problem related to finance. The skills required for management
accountant and how they can assist managing a financial problem are explained below:
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1. Analytical
Accounting work necessitates a thorough, detail-oriented approach. Accountants must go
through hefty financial documents to ensure that every detail is correct and up to date.
Otherwise, their analysis could produce contradictory results. This skill helps management
accountant to examines the results and determine whether it is acceptable, so that no one’s time
is wasted on an analysis that makes no sense when viewed from a distance which helps to
prevent form financial problems.
2. Critical Thinking
Management accountants are regularly confronted with errors, discrepancies, and inaccuracies
which if not identified and corrected can have major consequences for companies and clients.
Accountants must approach situations seriously, taking into account all variables and potential
dangers, in order to handle these complicated challenges which will prevent financial problem of
an organization.
3. Interpersonal Communication
Management accountant must explain their findings to collogues and clients, many of whom may
not have a solid comprehension of complex financial concepts, in addition to evaluating and
optimizing financial records. As a result, accountants are essentially data interpreters. Strong
communication skills can strengthen these interactions so to help weed out the unnecessary
details and to prevent from financial problems accountants should have interpersonal
communication skills.
4. Adaptability
Management accountants must always be ready to adopt to new norms and protocols as well as
technological advancements, workplace dynamics and new client-interaction platforms. Its
critical to be able to adapt and be comfortable with change that comes in rules and laws.
Adopting these changes according to situation can prevent the financial problem of an
organization.
Accounting professionals who can think through financial strategy and plan for the future are
seen as true assets by the company.
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Conclusion
To sum up, management accounting system enhances the overall efficiency of an organization.
Management accounting system plays a key role in running a business effectively. By applying
range of management accounting techniques, an organization can calculate it expenditure and
revenues. Management accounting system effectively responds to financial problems so as to
lead the organization towards the path of sustainable success.
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References
Tuovila, A., 2020. Investopedia. [Online]
Available at: https://www.investopedia.com/terms/c/cost-accounting.asp
[Accessed 3 April 202].
Pontius, N., 2020. Camcode. [Online]
Available at: https://www.camcode.com/asset-tags/what-is-an-inventory-management-
system/
[Accessed 1 April 2020].
Walkowski, R., 2018. Brandly360. [Online]
Available at: https://brandly360.com/en/5-advantages-of-price-optimization-that-you-need-to-
know/
[Accessed 4 May 2020].
M, P., 2018. The Investors Book. [Online]
Available at: https://theinvestorsbook.com/benchmarking.html
[Accessed 3 September 2020].
Investopedia.com, 2019. Investopedia. [Online]
Available at: https://www.investopedia.com/ask/answers/051515/what-are-advantages-and-
disadvantages-zerobased-budgeting-accounting.asp
[Accessed 23 July 2020].
Hayes, A., 2019. Investopedia. [Online]
Available at: https://www.investopedia.com/terms/i/inventory-management.asp
[Accessed 11 May 2020].
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