Management Accounting

Accounting

INTRODUCTION...........................................................................................................................4
SECTION 1.....................................................................................................................................4
1.1 Explaining management accounting with essential requirements of its several systems......4
1.2 Explaining different methods that are used for reporting under management accounting....5
1.3 Evaluating benefits of the MA systems and its application...................................................6
1.4 Critically evaluating integrating between systems and reporting under management
accounting....................................................................................................................................8
SECTION 2.....................................................................................................................................8
2.1................................................................................................................................................8
2.2..............................................................................................................................................10
2.3..............................................................................................................................................10
SECTION3....................................................................................................................................12
3.1..............................................................................................................................................12
SECTION 4...................................................................................................................................13
4.1..............................................................................................................................................13
4.2..............................................................................................................................................14
4.3..............................................................................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is a branch of accounting that helps a business in taking
managerial decisions by optimum utilization of resources. Management accounting is only used
by the internal management of an organization which distinguishes it from financial accounting.
It is essential for every business as it not only helps in adequate decision making but also
increases the profitability of the company in long run. Furthermore, it acts as a bridge between
the finance function and other parts of business. The current study will focus on the overall
concept and advantages of management accounting and how it can contribute towards
achievement of goals and objectives of an organization effectively and efficiently.
SECTION 1
1.1 Explaining management accounting with essential requirements of its several systems
Management accounting referred as the practice that facilitates financial resources and
information for the managers in the process of decisions making. In other words, it is called as
managerial accounting or the cost accounting. It is the process of assessing the costs and the
operations of business for preparing an internal financial report, account and records that helps
the managers in achieving the business effectively and efficiently (Ghasemi and et.al., 2016). It
is an act of the costing and the financial data by translating data into meaningful information for
the officers and the management within an enterprise. MA is counted as one of the essential units
of the company as it helps in formulating financial reports internally, accounts and records for
helping the managers in an organization to make suitable decisions in order to achieve long and
short term goals of the business. There are several aspects in which MA a system plays a crucial
role that are as follows-
Determining aim- Based on the information available, MA systems helps in determining
the goals and tries in finding out route by which it could reach the business or set goals.
Helps in preparing plan- It helps in formulation of the plan in accordance to needs and
the preferences of consumers. It helps the managers in studying and assessing future and present
prospects of business.
Better customer service- MA systems assist in reducing the cost incurred in
manufacturing the product by making use of cost accounting systems. It helps in defining the
quality standards in producing the product which in turn helps in providing better services to the
customer.

Increases efficiency- MA helps in enhancing efficiency of the processes as the targets of
the different department of an enterprise are been determined or identified in advance and
achieving such goals is been taken as the tool in measuring an efficiency.
Measuring performance- The planning tool under MA helps in measuring the
performance of an organization by way of determining the variance between the standard and an
actual cost.
Easy in taking judgment- Before determining any plan or the policy, an organization
uses MA systems so that best or the most suitable policy can be chosen.
1.2 Explaining different methods that are used for reporting under management accounting
Inventory management system- It is the system that manages an inventory and the stock
items of the business, keeping track of the areas where an asset of the business are present and its
worth. It also assesses an inventory need of the business and could automate the ordering. This
system of management accounting helps in reporting the level of inventory flowing within the
premises and also helps in keeping the business more organized. It presents information
regarding the need of an inventory and the amount of unused inventory at the workplace. It is the
system which is used for reporting and managing an optimum level of inventory so that wastage
can be avoided and more productivity can be achieved. It includes information relating to hourly
labor cost, per unit cost of overhead and inventory wastage. It also helps in comparing the
different assembly lines present within the business organization for the purpose of highlighting
areas for an improvement and offers bonuses to the departments that are best performing.
Job costing system- It is the method that records cost for producing or manufacturing the
job instead of the processes. Along with this system, manager could keep a track of cost for each
and every job, maintaining the data that is seen as more relevant to operations of business. This
system reports an expense for the particular project that is financed by the small business
(Amran, 2020). Such expenses are usually matched with an estimate of the revenue so that
profitability of the job can be evaluated in an appropriate manner. It helps in determining the
areas that provides higher earnings so that company could focus or put additional efforts in
developing those areas rather than in wasting money and the time on the low profitable areas.
This system reports analysis of disbursements at the time when project is at progressing stage so
that it could correct the areas of the waste before cost spiral is seen as out of control.
Price optimization system- This system means use of the mathematical tools by a firm for
determining response of the customers towards different price level in relation to its products and
the services. The data or information used in this system includes operating cost, survey data,
historic prices, inventories and the sales (Taylor and Scapens, 2016). It reports for the most
suitable price that the company should set up for the purpose of gaining large customers and
market share. This helps in producing the goods as per the specifications and the preferences of