Management Accounting: Types, Reporting, Cost Analysis, Budgetary Control

MANAGEMENT
ACCOUNTING

Table of Contents
MANAGEMENT ACCOUNTING.................................................................................................1
Introduction......................................................................................................................................3
P1 Management accounting and its requirements related to its types of essential requirements.
................................................................................................................................................3
P2 Elaborate methods of management accounting reporting.................................................4
M1 Critically analyse the advantages of management accounting systems and its use within an
organisational context.............................................................................................................5
D1 Analysis of how the integration between management accounting systems of a company
and management accounting reporting is establishes and maintained?.................................6
P3 Calculation of costs with the use of different techniques of cost analysis in order to prepare
income statement with the help of marginal and absorption costs.........................................6
Marginal costing:..................................................................................................................6
D2 Develop financial reports that will help in accurately applying and interpreting financial
data for the business organization..........................................................................................8
P4 Critically evaluate the advantages and disadvantages of various types of planning tools
which are applied in budgetary control..................................................................................9
M3 Evaluate the application of different planning tools for preparing budgets and forecasts.11
P5 Compare how companies adapt their management accounting systems to address financial
issues.....................................................................................................................................11
M4 Analyse how management accounting leads organizations to sustainable success in
responding to financial problems.........................................................................................13
D3 Requirement of budgetary planning tools for accounting in order to solve financial
problems...............................................................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................14
Books & Journals.................................................................................................................14
APPENDIX 1.......................................................................................................................16
M2 Accurately apply different tools of management accounting techniques and develop the
required financial reporting statements................................................................................16

Introduction
Management accounting can be defined as an effective tool which helps an organization
in dealing and handling with the administrative reports and records in order to provide budgetary
and measurable data to the different stakeholders of the companies. It helps an organization to
keep a check on the functioning of the company in relation to its business operations in the best
possible manner. Management accounting is a key tool that aims at increasing the efficiency and
effectiveness of the financial operation resulting into high amount of growth in long run.
Management accounting is mainly used by the internal team of the organization which makes it a
different concept as compared to financial accounting. It helps in providing a way towards planning
the executive financial reports to make short and long term decisions for achieving the
organizational goals. It also helps out the managers by providing all the information regarding
market factors, profitability and many more in order to decide the prices of the products or
services. In context to this report, different tools and techniques that helps in running an
organization in a smooth and efficient manner. Also, it includes the financial reports that help in
interpreting the financial data in order to take different business decisions in relations to the
operations of business.
P1 Management accounting and its requirements related to its types of essential requirements
of the accounting system of management.
This process or a technique can be defined as identification, measurement, analyses and
interpretation of the accounting information helping the managers of the business to take sound
and e4ffective financial decisions to deal with the daily operations of the company (Ajayi and et.
al., 2017). There are different uses of management accounting that helps an organization to work
effectively. They are mentioned below:
 Planning: Management accounting plays an important role in developing plans that can
help the organization to set standards on the basis of which the organization will be able
to achieve the organizational goals efficiently.
 Decision Making: It is an essential tool that helps the managers of the organization to
take certain important financial decisions that are required to achieve the objectives of the
firms (Tang, Ziyuan, Gautam Srivastava and Shuai Liu, 2020). Management accounting
considers uses the financial data of the company that ultimately portrays the financial
status of the company.

 Measure the performance: Management accounting also helps in keeping a check on
the results that re obtained from the business operations. Therefore, in consideration to
the planned standards the output must be equal. Therefore, this is how the performance of
the company is measured with the application of management ccounting.
 Increases efficiency: The efficiency of the company can be increased to higher levels
because optimum utilization of the resources is done by the use of management
accounting (Brink, Hobson and Stevens, 2017). Therefore, it helps in achieving the
standard objectives of the company.
 Increases profitability: When all the functions of the business organization in financial
as well as overall capacity are performed effectively with the use of management
accounting, it helps the organization to increase the profit margins achieving high level
growth in the long run.
 Budgeting and forecasting: Management accounting is an important tool that helps in
projecting and developing the budget related requirements of the company that helps in
having a pro active approach towards the future financial requirements of the company.
 Communication : When the financial data is effectively collected and used in the
financial operation of the company, it is communicated to the various parties which are
interested in the different activities of the business. Therefore, this concept majorly helps
in communicating efficient and relevant information through different levels of
management to different stakeholders of the company.
Some types of management accounting systems are explained below:
 Costing system: This is a kind of management accounting system mainly used by
manufacturers to record production activities with the help of permanent inventory
system. Simply put, it is an accounting system specially designed for manufacturers
or producers that allows them to track inventory flow at various stages of production.
It is also useful for profitability analysis, cost control and inventory valuation.
 Inventory Management System: Can be defined as a system or process that
supports effective tracking and management of physical inventory. The system
focuses on tracking the exact quantity of products that can be sold, allowing
companies to place the right number of units in the right place, at the right time, and
ultimately at the right price