Management Accounting: Types, Systems, Reporting, and Planning Tools

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
The essential requirement of different types of management Accounting.................................3
Different types of management accounting systems...................................................................4
Different methods used for management accounting reporting..................................................6
Preparing income statement using absorption and marginal costing system .............................7
PART 2...........................................................................................................................................9
Benefits and drawbacks of various types of planning tools........................................................9
Use of management accounting system in responding to financial problem............................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is the process in which managers use accounting information in
decision-making. It is a practice of measuring, analysing, interpreting financial information to
achieve organizational goals. In response, a range of management accounting principles has
emerged to cater essential requirements in report. The present report is based on Sollatek (UK)
Limited, founded in 1983. the company deals and manufacturing equipment such as electronic
equipment and industrial electrical. The current report will outline the understanding of
management accounting and explain the various methods used in cost accounting reporting.
Along with that report will describe about planning tools and their advantages and disadvantages.
At last report will also justify the comparisons in which the company uses management
accounting system to deal with financial problems of the organization.
PART 1
The essential requirement of different types of management Accounting
Management accounting method is being defined as undertaking the financial
information. The main objective of management accounting is to identify past trends and predict
future requirements to achieve financial goals.
Principles of management:-It includes budgetary control and costing system in company. This
is designed in such a way showing relevant data. The accounting information can be adopted to
meet the needs of management. Let us discuss few important principles of management
accounting.
 Integration- This principle assists firm in integrating all the required information which
company need to use at time of decision-making and attain overall objective of business.
 Designing and compiling- this principle of management accounting assist Sollatek in
designing the various reports so that all information relating to the business can be
analysed properly (Maheshwari, Maheshwari and Maheshwari, 2021). This in turn will
assist company in taking effective decision.
Role of management accounting and its system - The main objective of management
accounting is to maximize profit and minimize losses. The system assists company in decision-
making process and achieve organizational success. Sollatek must work on risk management,

planning, budgeting, investments, strategic planning (Massicotte and Henri, 2021). This system
plays a vital role in company to influence members in organizations to achieve firm's target.
Different types of management accounting systems
Cost accounting system: It is designed to record production activities using inventory
system and is also known as product costing system. It is helpful to estimate the cost of their
products for inventory valuation and profitability analysis.
When a firm uses a combination of both above mentioned system is known as hybrid cost
system.
Advantages Disadvantages
1. Cost accounting system assist in proper
planning as it involves accounting
relating to machine, labour, material,
overhead costs which assist company in
making proper strategies.
2. It is helpful in decision-making process
related to cost analysis, financial
analysis, control over materials.
3. Reducing price and profit maximization
is the main objective of cost accounting
system.
1. Cost accounting system is expensive in
nature. It consumes a good amount of
finance.
2. Unnecessary and time-consuming
process
3. cost accounting is based on estimates
and therefore cannot be relied upon.
Thus, it is not reliable process.
Job costing system:
Business unit must follow job costing system as it gives detailed information about cost
of material, production, labour (Hadid and Al-Sayed, 2021). Also cost associated with particular
production or service job are taken into consideration in the books of cost accounting.
The cost associated with a specific production or service job are taken into books of cost
accounting system.
Three types of job costing system: