Management Accounting: Types of Systems, Reporting and Costing

This report explains the techniques and various types of management accounting systems, its uses, and the benefits of using these systems for decision-making. It also elaborates on different types of management accounting reporting and costing methods such as marginal and absorption costing. The report is relevant for students studying accounting and finance courses in universities and colleges.

Accounting

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
P1 Define the various requirements and types of management accounting systems.............3
P2 Elaborate the different types of management accounting reporting.................................4
P3 Calculate the costs by preparing income statement using marginal and absorption costing. 5
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting is a process which is used to make the decisions which are
related to management. It gives a brief analysis of the business activities (Lee and Carline, 2019).
The report has explained the techniques and various type of management accounting systems, its
uses. Further, various type of cost are calculated using the marginal and absorption costing
methodologies.
MAIN BODY
P1 Define the various requirements and types of management accounting systems.
Management accounting is used for creating reports which helps the managers in taking
short – term and long – term decisions. It will help in achieving the objectives of the
organisation.
Management Accounting Systems: It applies all concepts and works across all departments of
a company. An effective and impressive system will examine each of the areas of sales,
information technology, finance, human resources, operations and marketing. In addition to
financial data, it also provides non-financial information.
Types:
1. Job Costing System: It means to allocate the manufacturing cost of the single product or
bath of the commodity and these cost are implemented on the products if they are
different from one another (Makhaiel and Sherer, 2018). The type of data that is required
for the accumulation of information is direct labour, material and overhead. The essential
requirements are:
 The cost sheets are collected of the similar jobs.
 Evaluates the work quality.
 Helps in estimating the costs which are used in production process.
2. Price Optimisation System: It is used to decide the price of numerous commodities at a
specific time and also controls the costs of resources. It will help in optimising the needs
of consumer and the value of those goods. The requirements are:
 the attitude of customers are defined on the basis of different costs.

 It gives a competitive insight of the prices from the external sources to improve the future
price of the commodities.
3. Inventory Management System: It involves the process of storing and re-storing the
inventory of the company to increase sales volume. The needs are:
 It improves the accurate number of stock.
 Helps in forecasting the cost requirements (Paolone and et. al., 2020).
4. Cost accounting system: It is a framework used by any business to improve the
estimated cost of the product for which profitability, inventory valuation and cost control
analysis can be performed. The requirement are:
 It collects the exact demand of the product and accordingly use the information of the
products.
 Corrective and co-operative participation for taking the efficient and effective decisions
of the costs.
P2 Elaborate the different types of management accounting reporting.
Management Account Reporting is a form of financial reporting that is used for day-to-
day strategic decision-making. These are created monthly or quarterly and provide an insight into
the company's financial situation. It gives a deeper perceptive of finance as it concentrates on the
few segments rather than the overall business. Some of the techniques are:
1. Budgetary Report: It is used to measure the performance of business by controlling
costs. The budgets are prepared by the managers for a certain time period. Synergy Ltd.
can motivate the employees by reflecting the financial goal of the organisation.
2. Job Cost Reports: It gives an analysis of costs which has been incurred through the
completion of the project . It also prepares a statement of the payments which is received
by the customers (Swamy, 2019). This will give Synergy Ltd. A insight of the utilisation
of labour and material and will help in identifying the projected amount for the project.
3. Accounts Receivable Ageing Report: This report is fundamentally worried for
stretching out the credits to their clients. It is a record that shows the outstanding voucher
adjustments that are expected by the clients alongside their length. It will help Synergy
Ltd. to estimate the bade debts which are to written- off.

4. Performance Report: It tends to the result of the work done by the representatives
which decides the productivity of the organization. Synergy Ltd. can gather the data of
the work performance, then, can examine it by making reports.
5. Inventory and Manufacturing Report: Organizations associated with the
manufacturing of goods set up these reports, so their stock and production process
become smooth and compelling (Velte, 2019). Synergy Ltd. make these reports on the
per unit cost of work and overheads.
P3 Calculate the costs by preparing income statement using marginal and absorption costing.
Costing is termed as the expenditures which will be incurred for selling or manufacturing
a product.
Income statement
Particulars £s £s £s £s
Product A Product B
Turnover 828000 4800000
Less : cost of goods sold 303600 146400
Direct materials 150000 84000
Direct labour 180000 76800
Less Closing Stock 26400 14400
Gross profit 524400 333600
Less Fixed cost 264000 264000
Production 210000 210000
Administrative 54000 54000
Less: Variable overhead 129200 62400
Production 120000 56000
Selling 9200 6400
Profit 131200 7200

Income statement under absorption costing
Particulars £s £s £s £s
Product A Product B
Turnover 828000 480000
Less Full cost of sales 690000 332800
Fixed production overhead 300000 140000
Direct material 150000 84000
Direct Labour 180000 84000
Variable Production
overhead
120000 56000
Less Closing Stock 60000 31200
Adjustment
Over absorption/(under-
absorption)
90000 (70000)
Gross profit 228000 77200
Less Non-production cost 63200 60400
Variable cost 9200 6400
Fixed cost 54000 54000
Profit 164800 16800
Income statement under marginal costing
Particulars £s £s £s £s
Product A Product B
Turnover 828000 480000

Less variable cost of sales 422400 210600
Direct material 150000 84000
Direct Labour 180000 84000
Variable Production overhead 120000 56000
Variable selling overhead 9200 6400
Less closing stock 36800 19800
Contribution 405600 269400
Less Fixed cost 354000 194000
Production 300000 140000
Non-Production 54000 54000
Profit 51600 75400
CONCLUSION
Choosing of the accurate management system is very crucial and essential for the firm. It
is used for the benefit of the organisation and for this the accurate and reliable information
should be accessed and the correct structure of business model should be followed. The Synergy
Manufacturing Co. Ltd. Should apply these management system to solve their fiscal issues. It
will helps the firm in sustaining for the long – term in the market.

REFERENCES
Books and Journals
Lee, B. and Carline, N., 2019. Professional journals, accounting systems and engineers. In Issues
in Accounting and Finance. (pp. 25-62). Routledge.
Makhaiel, N.K.B. and Sherer, M.L.J., 2018. The effect of political-economic reform on the
quality of financial reporting in Egypt. Journal of Financial Reporting and Accounting.
Paolone, F. and et. al., 2020. Integrated processing of sustainability accounting reports: a multi-
utility company case study. Meditari Accountancy Research.
Swamy, M.R.K., 2019. Towards Strengthening Scientific Accounting Information: Focus on
Environment Accounting System in Hungary. Journal of Financial Management and
Analysis. 31. pp.2018-2019.
Velte, P., 2019. What do we know about meta-analyses in accounting, auditing, and corporate
governance?. Meditari Accountancy Research.