Management Accounting: Types, Techniques, and Implementation

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
P1. Management accounting and requirements of different types of accounting systems.........3
a. Features and Principles............................................................................................................3
P2. Management accounting reporting and implementation.......................................................6
P3. Techniques of cost analysis and interpretation.....................................................................7
P4. Planning tools in management accounting.........................................................................10
P5. Ways the organisation are adapting management accounting systems to respond to
financial problems.....................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is an important element that helps in the managers to take
strategic decisions. The methods and techniques that forms management accounting and the
usage and implementation of it is popular among the management of the organisations. The use
of financial instruments of the management accounting helps in the improvement of the
organisation's performance. It aims for the efficient use and allocation of the resources within the
process by keeping the cost drivers low (Nørreklit, H. ed., 2017). The report highlights the
analysis of the financial information of the company IKEA a producer of children’s scooters
which started operations on 1st January 2019. The marginal costing approach and absorption
costing approach is being introduced to find out the valuation of the stocks. Further in this report
the advantages and disadvantages of the various planning and budgetary tools are highlighted. At
the end of the report the use of management accounting in solving financial problems is outlined.
MAIN BODY
P1. Management accounting and requirements of different types of accounting systems
Management accounting is the execution of strategic planning and resource allocation in
such a way that it provide maximum productivity (Collis and Hussey, 2017).
Management accounting provides important information of costs of the various functions of the
business to helps in cost control and the preparation of budgets to track the performance and
proper allocation of the resources (Drury, 2018). The effective implementation of the methods
and systems by the managers of the IKEA helps in the improvement of the output and hence
increase the performance of the organisation.
a. Features and Principles
The management accounting systems provides information related to finance to the managers of
the company. It shows the analysis of costs that affects the operation and revenue of the
organisation. Use of different tools like marginal costing, absorption costing, ratio analysis, etc.
that uses accounting data. Management accounting helps in forecasting and setting of standards
that helps in improving efficiency of the organisation.
There are 4 basic principles that adopted in management accounting that are as follows:
Influence

Management accounting helps in to find out the impact of various activities of the organisation
on each other. By analysis of different types of costs managers will be able to influence the
overall costs.
Relevance
Management accounting use past and present data for the analysis of the effect of costs and
results in future estimations.
Value
Management accounting helps in identification of the unnecessary activities in the production
process and through budgeting managers are able to establish reasonable pricing of the products
and services.
Credibility
Management accounting helps in the taking informed decision based on critical analysis and
ethical practices. It generates credibility for the stakeholders of the organisation.
Types of management accounting systems
Cost Accounting
In this method of accounting Several costs are calculated viz. variable costs, fixed cost
and Semi-variable costs. These costs arises in the production process and the estimation of these
cost required helps to ascertain the profit and per unit contribution (Wang and et.al, 2020). The
methods and techniques helps IKEA to find out how much cost is incurred in the production
process and helps the managers to device strategies that reduce the cost of production. Example:
Cost accounting calculate both specific and overall cost. That will help to reduce costs
Advantages of cost accounting
The cost accounting method will be adopted easily and helps the IKEA's management to
find the total cost of the production and the overheads that can be controlled to maximize the
revenue of the company.
Disadvantages of cost accounting
For the adoption of the cost accounting, managers have the knowledge of the system.
What are the constraints used and understanding of the accounting methods.
Inventory Management
Management of the inventory also incur costs. Effective management of the stocks of the
company IKEA is done with the help of different methods of inventory systems viz. First In First