Management Accounting: Techniques, Systems, and Reporting

This study material provides an in-depth understanding of management accounting, including its techniques, systems, and reporting. It covers topics such as the essential requirements of managing accounting systems, different techniques used for managing accounting reporting, benefits of management accounting systems, and how managing accounting is included within organizational processes. It also includes calculations of costs using cost analysis techniques, preparation of income statements using marginal and absorption costs, and the accurate application of management accounting techniques to produce financial reporting documents. The study material is suitable for students studying management accounting in various courses and programs.

Management Accounting
Contents
1

Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
1.1Explanation of managing accounting and give the essential requirements of various types
of managing accounting systems.................................................................................................3
1.2 Explanation of different techniques used for managing accounting reporting.....................4
1.3 Benefits of management accounting systems and their application within The London
College.........................................................................................................................................5
1.4Critically evaluation of how managing accounting system and managing accounting is
included within organisational processes....................................................................................6
PART 2............................................................................................................................................7
2.1. Calculation of the costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs...........................................................................7
2.2. Accurately apply a range of management accounting techniques and produce a financial
reporting document......................................................................................................................8
2.3 Financial reports that accurately apply and interpret data for a range of business activities.
...................................................................................................................................................12
TASK 3..........................................................................................................................................12
3.1 Explanation of the purpose of budget and prepare different budget (listed at the end) with
the given information for coming months.................................................................................12
TASK 4..........................................................................................................................................18
4.1 Uses of management accounting system to respond financial problems............................18
4.3. Evaluate the planning tools used in management accounting to reduce the financial
problems to achieve success......................................................................................................20
CONCLUSION..............................................................................................................................21
REFRENCES.................................................................................................................................22
From books and journals...............................................................................................................22
2

INTRODUCTION
Management accounting , it is a procedure of representing accounting information in a way
through which manger able to take effect decision which help in generating gain and able
origination to solve all the problems suffering from past ear. To understand this concept, UCK
Furniture has been taken which is situated in UK and have proved effective furniture services to
their clients. In this report uses of effective planning tools to formulate policies and strategies has
been define briefly. This report also includes the way mangers solve financial pr by using
management accounting technique and system of management accounting in brief manner.
PART 1
1.1Explanation of managing accounting and give the essential requirements of various types of
managing accounting systems
Management accounting: This word play an important in accounting felid. Management
accounting is a way which helps in decision making procedure. Manager of the organization
record their financial transaction in systematic way, through which they interpreted
accounting information in front of internal customers of the business entity. It is a combined
processed of accounting and management activity in which organization record their
transaction by using effective management strategies which help in take better decision for
the organization (Maas, Schaltegger and Crutzen, 2016).
Job order costing system: This system of management accounting use in taking decision
regarding every job order. It will help in determining the stock order. With the use of job
3

costing system manger will be able it identify the cost value of materials of business
organization.
Price optimization system: This system of management accounting is developed within the
business organization for take decision regarding the price value of product and serves of
offering by business entities. There will be many techniques of price optimization system,
price skimming, discounted price policy, price premium. In all these policies the value of
price are determine on different methods. It is the choice of mangers which policy they use
for their organization which issue able for them ((Qu, and et.al2017)).
Inventory management system: It is also known as stock management system. In this
system various tools of inventory management are used by organization through which they
can identify the level of stock, requirement of purchase material, number of operating cycle
required time taken during delivery of product . With the use of EOQ and JIT technologies
manger can calculate the cost of maintain inventory and reduce on reducing it by effective
management policies.
Cost management system: It is one of the most useful systems in management accounting
process. As the name suggest this system is apply by business organizations in order to
recognized cost of every element of production process. They use standard costing marginal
costing process costing method through which organization easily recognized the cost of
each business transitions. They identify the relation of profit and expenses the rate of
profitability and mange all the elements of cost in systematic way. This system is apply with
every types of business organization. The London College at this organization cost
management system is utilized to identifying the overall cost of each and every business
activity required to run the college.
1.2 Explanation of different techniques used for managing accounting reporting
In management accounting branch managers prepared various types of reporting which
help in recording transactions in effective way. Following are the types of management
accounting reports use by The London College
Account receivables report: With the use of account receivable report manger identify the
numbers of debtors which are not able to pay their liabilities. It is made by finance
department of the organization. It will help in financed nonperforming assets and provide
4

direction to mangers through which they can able to collect their money in short period of
time.
Performance report: It is formatted n order to determine all the essential aspect
performance of the business cooperation. Managers formulate performance report for take
decision regarding incentives on the basis of evolution of performance of employers by using
this report.
Stock management report: Just lay other reports it is prepared for running specific function.
This report is build with the data collection from inventory management techniques.
Budget reports: Business Corporation’s use budget reports as it provides base for the
preparation of budget statement. This report proceeds information regarding future business
income and expenses and cost, time required to fulfil the target of business
1.3 Benefits of management accounting systems and their application within The London
College
Inventory management system This system is used for The London College to
collect information regarding material used in
the process of manufacturing and supplying
goods. In context with The London College it
is provides education facility and it is essential
to maintain data of each equipment, material
use during the process of providing services.
Job order system This system is applied by the mangers of the
London College to record all the order of
students admission, counselling, research
events organize within the college
Price optimization system It is most useful system, Manager of
The London College decide fee structure of
different department of students on the basis of
resources optimization system.
Cost accounting system With the use of cost accounting system
mangers able to adopt effective cost technique
to acquired the cost of every procedure started
5

with purchasing of raw material to distinctive
of service and products by The London
College
1.4Critically evaluation of how managing accounting system and managing accounting is
included within organisational processes.
Management accounting system and reports of this accounting branch both used by mangers
in integrated way. With the adoption of cost, inventory system they record all the transaction
and manger of The London College use these record as a base to formulate account receive,
budgeting and performance report. These reports help in decision making process regarding
future business events conduct in The London College (Yu, 2015).
6

PART 2
2.1. Calculation of the costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs.
7
Particular Descriptions Amount
(Pound) Particular Amount
(Pound)
a) Units produced 11000 9500
b) Cost of Direct Material
(4kilo-
gramx3Pound
/kilo-
gramx11000)
132000
(4kilo-
gramx3Pound/kilo-
gramx9500)
114000
c) Cost of Direct Labor
(4 hoursx
2pound/hours
x11000)
88000
(4 hoursx
2pound/hours
x9500)
76000
d) Cost of Variable Overhead (5pound/desk
x11000) 55000 (5pound/deskx950
0) 47500
e) Prime Cost 275000 237500
f) Production overhead 20000 20000
g) Cost of goods
produced 295000 257500
h) Variable revenues cost (1Pound/des
kx11000) 11000 (1Pound/deskx95
00) 9500
i) fixed selling cost 2000 2000
j) Cost of Goods sold 308000 269000
k) Profit= l-j 77000 63500
l) Sales
(35
POUND/des
kx11000)
385000
(35
POUND/deskx95
00)
332500
Cost Card by using absorption costing method
January February

2.2. Accurately apply a range of management accounting techniques and produce a financial
reporting document
FOR THE PERIOD ENDING
FEBRUARY
SALES
NET SALE FOR JANUARY 385000
NET SALE FOR FEBRUARY 332500
TOTAL SALE (A) 717500
COST OF GOODS SOLD
COST FOR THE MONTH OF JANUARY 308000
COST FOR THE MONTH OF FEBRUARY 269000
TOTAL COST OF GOODS SOLD (B) 577000
NET INCOME(C= A-B) 140500
WORKINGS-
COST OF
FINISHED
GOODS
JANUARY FEBRUARY
PARTICULAR DESCRIPTIONS AMOU
NT
DESCRIPTIONS AMOU
NT
8

(GBP) (GBP)
UNITS
PRODUCED
11000 9500
A
)
DIRECT
MATERIAL
(4KILO-
GRAMX3POUND/KILO-
GRAMX11000)
132000 (4KILO-
GRAMX3POUND/
KILO-GRAMX9500)
114000
B
)
VALUE OF
DIRECT
LABOUR
(4 HOURS X
2POUND/HOURS
X11000)
88000 (4 HOURS X
2POUND/HOURS
X9500)
76000
C
)
VALUE OF
VARIABLE
OVERHEAD
(5GBP/DESKX11000) 55000 (5GBP/DESKX9500) 47500
D
)
PRIME COST 275000 237500
E
)
VALUE OF
PRODUCTIO
N OVERHEAD
20000 20000
F
)
COST OF
GOODS
PRODUCED
295000 257500
G
)
VALUE OF
VARIABLE
REVENUES
COST
(1POUND/DESKX11000) 11000 (1POUND/
DESKX9500)
9500
H
)
FIXED
SELLING
COST
2000 2000
I) COST OF
GOODS SOLD
308000 269000
MONTH HOURS EXPENS
9

SPENT ES
JANUARY 630 7960
FEBRUARY 505 7410
MAR 705 8285
APRIL 555 7535
MAY 780 9110
JUNE 795 9820
HIGHEST NUMBER OF HOURS =
JUNE = 795
LOWEST NUMBER OF HOURS =
FEBRUARY = 505
VARIABLE COST=
(9820-7410)/(795-505)
VARIABLE COST= 8.310345 GBP PER
UNIT
FIXED COST= 9820 - (795X8.31)
FIXED COST= 3213.55 GBP
EXPENSES FOR JULY= 3213.55 +
(650X8.31)
EXPENSES FOR JULY= 8615.05 GBP
EXPENSES FOR AUGUST=
3213.55 + (750X8.31)
EXPENSES FOR AUGUST= 9446.05 GBP
OPENING INVENTORIES 0
PURCHASE 100 10 1000
10

UNITS
200
UNITS 11 2200
130
UNITS 13.84615 1800
LIFO
130 13.84615 143.85
200 11 2200
70 10 700
COST
OF
GOODS
SOLD
3043.85
VALUE
OF
CLOSIN
G
STOCK
(30 X 10)
300
FIFO
100 10 110
200 11 2200
100 13.84615 1384.615
COST
OF
GOODS
SOLD
3694.615
VALUE
OF
CLOSIN
415.3845
11

G
STOCK
(30 X
13.84615
)
AVCO 100 10 1000
200 11 2200
130 13.84615 1800
AVERA
GE
COST
(13.8461
5 + 11
+10)/3
11.61538
COST OF GOODS
SOLD
4646.154
(400X11.61538)
CLOSING STOCK 348.4615
2.3 Financial reports that accurately apply and interpret data for a range of business activities.
Financial reports are prepared with the collection of data which is calculated and record with the
use of management accounting technique. Various types of costing technique is used
marginal costing in which variable cost is determine and absorption costing in which all
the factors of manufacturing and selling are added the calculate cost and determine
profits .They also use standard costing in which variance are calculated to find out
deviation and calculation of profit margin analysis through which the relation between
profit and sales has been identify (Schratzenstaller, Krenek, Nerudová and Dobranschi,
M2017).
12

TASK 3
3.1 Explanation of the purpose of budget and prepare different budget (listed at the end) with
the given information for coming months.
Planning tools can be defined as those methods thorough which business organization able to
take decision and tools which provides major base for planning and organizing business
activities. Following are the tools of planning
Zero base budgeting: In this method of budgeting, financial statements are prepared on the
basis of deep research of each and every aspect of business organization which is started from
initial level (Soldatos, 2015.).
Benefits:
This planning tool used to provides accurate information regarding future.
In Zero base budgeting method chances of having any error in budget is comparatively less as
compare to other methods.
Drawbacks: This method is not useful for small enterprises required huge cost for preparing
budget.
Rolling budgeting: It is a type of planning tool in which budgets are prepared for short term
period. Managers made budget for quarterly, monthly or yearly basis and when the time period
of budget is stop then they supervise each and every element and then formulate another budget
to overcome all the errors thus it is known as rolling budget.
Benefits
Rolling budget help in cut throat additional or wastage activities through which resources are
optimally utilized.
This method can be applied b every type of business organization
Drawbacks
It is expensive method
It require time to rebuild Rolling based budgeting procedure is time consuming process as
required time for formulate budget again on short term period.
13

Activity based budgeting: It is one of the most useful methods of budgeting, in this method
budgets are formulated on the basis of allocation resources. This method is use as planning tool
for manufacturing organizations.
Benefits
This method is help in providing reliable information
Properly organized resource of business organization.
Variances: It is a tool of management accounting which is used as planning tool to identify
deviation between various items of business organization (Dahler-Larsen, 2014.).
Benefits
Help in find out errors and reason of difference between budgeted and achieved target.
Use as tool of controlling mechanism,
Drawbacks
This tool can be used after preparation of financial statements.
It is no flexible it is rigid method of planning.
Pricing policies: With the use of pricing policies manager will be live to take decision regarding
price.
Benefits
Pricing strategies help in selecting best price for products though which UCK furniture will be
able to generate gain.
This method is helpful in attain competitive advantage.
1) PROGRAMME
OF ACCEPTED
CASH
COLLECTION
FOR THE
MONTH OF
SEPTEMBER
14

PARTICUALR SEPTEMBER
(GBP)
CASH INCOME 39000
COLLECTION FOR
SALE ON
ACCOUNT
JULY 392
AUGUST 4416
SEPTEMBER 840
TOTAL EARNING 44648
2) SCHEDULE OF EXPENDED CASH DISBURSEMENTS FOR MERCHANDISE
INVENTORY PURCHASES IN SEPTEMBER
DESCRIPTIONS SEPTEMBER
(GBP)
15

PAYMENT FOR
INVENTORY
PURCHASED IN
SEPTEMBER
4800
(24000X.2)
PAYMENT FOR
INVENTORY
PURCHASED IN
AUGUST
15000
TOTAL
DISBURSEMENT
FOR INVENTORY
PURCHASE
19800
3) CASH BUDGET
DESCRIPTIONS SEPTEMBER
(GBP)
OPENING
BALANCE
(A) 20000
COLLECTIONS
CASH SALE 39000
16

COLLECTION FOR
REVENUES ON
ACCOUNT:
JULY 392
AUGUST 4416
SEPTEMBER 840
TOTAL
COLLECTIONS
(B) 44648 64648
DISBURSEMENTS
PAYMENT FOR
INVENTORY
PURCHASED IN
SEPTEMBER
4800
(24000X.2)
PAYMENT FOR
INVENTORY
PURCHASED IN
AUGUST
15000
SELLING AND
ADMINISTRATIO
N EXPENSES
9000
17

(EXCLUDING
DEPRECIATION
OF 4000)
PURCHASE OF
EQUIPMENT
18000
DIVIDEND TO BE
PAID
3000
TOTAL
DISBURSEMENTS
(C) 49800
BALANCE (A+B
-C)
14848
FINANCING
ACTIVITY:
LOAN TAKEN 1152
CLOSING
BALANCE
16000
Manager of UCK Furniture used activity base budget method and skimming pricing policies an
standard costing method with the use of these planning tools they are able to make effect budgets
and plans through which they can achieve prep determine goals
18

TASK 4
4.1 Uses of management accounting system to respond financial problems
Financial problem: It is a situation face by business organizations in which business entities
suffers from problem and unable to pay their current and long term liabilities. This problem is
related with the monetary issues. At present time UCK furniture is suffers from this problem due
to lack of managerial skill and decline in the sales rate. The can overcome this problem by using
managements accounting tools.
Key Performance Indicator: these methods of management accounting help in solving
financial problems. Business organizations set their target and on the basis of that the company
achieved and targeted sales value. On the basis of that they can enhance their sales by compare to
past sales target are. They will help in influencing and motivating workforce as if their work
effective then they can achieve target sales and though which organization profits increase and
them incentive also increase (Davidson and et.al 2017).
Benchmarking: The UCK furniture suffers from financial problem because of their policies and
strategies not impotent in effective manner, mangers not able to format policies though which
they can able to recover debtors amount. Thus by using benchmarking, they can meet a bench
mark and on the basis of this benchmark employers have time to cover up all the cot receivable
money with given time period (Kruger and Hancke, 2014).
Financial Governance: With the use of financial governance policies mangers will be able
to done their work in legal and ethical manners. This will help in reducing any illegal and
fraudulent activities within the premises.
UCK furniture Sunshine Limited
The organization suffers from
monetary issue due lack of effective
managerial policies and decline rate of
sales. By the use of KPI and activity
based budgeting they can able to
overcome this problem
In Sunshine limited they suffers from
financial issue because of they did not
have proper resource and due to lack
of goodwill they can alb to take loan
of higher amount from bank. But with
the use of effective pricing policies
19

and benchmarking technique they can
overcome with this problem.
PARTICULAR FORMULA UCK FURNITURE
DESIGN DIVISION
VALUES
RATIO UCK
FURNITURE
GEAR BOX
DIVISION
VALUE
RATIO
Return on
capital
employed
Operational
Profit/ Capital
employed x
100
Operating Profit:
5,890
Capital employee:
23,100
25.49 Operating
Profit: 3,600
Capital
employee:
31,930
11.274
Assets
Turnover
Net sale/Total
assets
Net Sales: 13000
Total assets =
Capital employed
= 31,930
0.562771 0.191801
Operating
profit
Operational
revenue
margin =
Operating
Profit/ Total
revenues x 100
Operating Profit
5,890
Total revenues
13,000
45.30769 Operating
Profit: 3,600
Total
revenues:
24900
14.45783
20

4.2 Use of management accounting system for achieving organization success
Management accounting system are help in achieving organization success as mange if UCK
Furniture adopts key performance indicator ad benchmarking technique to solve their issue
related o finance. With the use of pricing policies and standard and actively based costing
method they can recognize cost and take decision regarding prices though which they can earn
more profits on selling of their product to overcome the problem (Seuntjens, van de Ven
Zeelenberg and van der Schors, 2016).
4.3. Evaluate the planning tools used in management accounting to reduce the financial problems
to achieve success
Planning tools are developed provide assistance to mangers during the formulating of plan
and policies of UCK use activity based budgeting method as it is manufacturing organization
with the use f this planning too they can able to recognized cost of each process and by applying
benchmarking and KPI method they can recover money from debtors and enhance sales rate in
order to solve their problem.
CONCLUSION
From this report it has been concluded that management accounting is extremely essential part of
buses organization though which they can able to maintain position and lead organization
success within the market. With the uses of effective planning tools of budgeting and various
cost management system they can able to recognized cost and decided pricing policies through
which they generate profit. With the use of effective KPI and benchmarking method s they can
resolve financial problem and able to build strong posting in market again.
21

REFRENCES
From books and journals
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production, 136,
pp.237-248.
Qu, T., Zhang, J .H., Chan, F .T., Srivastava, R.S., Tiwari, M. K. and Park, W. Y., 2017.
Demand prediction and price optimization for semi-luxury supermarket
segment. Computers & industrial engineering, 113, pp.91-102.
Yu, C., 2015. The analysis of the China national logistics costs structure. Management &
engineering, (21), p.77.
Schratzenstaller, M., Krenek, A., Nerudová, D. and Dobranschi, M., 2017. EU Taxes for the EU
Budget in the Light of Sustainability Orientation–a Survey. Jahrbücher für
Nationalökonomie und Statistik, 237(3), pp.163-189.
22

Soldatos, P., 2015. Economic aspects of bioenergy production from perennial grasses in marginal
lands of South Europe. BioEnergy Research, 8(4), pp.1562-1573.
Dahler-Larsen, P., 2014. Constitutive effects of performance indicators: Getting beyond
unintended consequences. Public Management Review, 16(7), pp.969-986.
Davidson, F., Heffernan, E., Greenberg, D., Butler, T. and Burgess, P., 2017. Key performance
indicators for Australian mental health court liaison services. Australasian
Psychiatry, 25(6), pp.609-613.
Kruger, C .P. and Hancke, G.P., 2014, July. Benchmarking Internet of things devices. In 2014
12th IEEE International Conference on Industrial Informatics (INDIN) (pp. 611-616).
IEEE.
Seuntjens, T .G., van de Ven, N., Zeelenberg, M. and van der Schors, A., 2016. Greed and
adolescent financial behavior. Journal of Economic Psychology, 57, pp.1-12.
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