Management Accounting.

Management
Accounting

Contents
TASK 1..........................................................................................................................................................3
P1: Explanation of management accounting and the essential requirement of its systems....................3
P2: Management accounting reporting methods....................................................................................4
M1: Benefits of management accounting systems..................................................................................5
D1: Critical evaluation of management accounting systems...................................................................6
TASK 2..........................................................................................................................................................6
P3: Application of various techniques of management accounting.........................................................6
M2: Accurate application of techniques................................................................................................13
D2: Producing of financial reports.........................................................................................................13
TASK 3........................................................................................................................................................13
P4: Advantages and disadvantages of planning tools............................................................................13
M3: Analysis of planning tools...............................................................................................................15
TASK 4........................................................................................................................................................15
P5: Comparison of organizations in adapting to management accounting systems to solve financial
problems...............................................................................................................................................15
M4: Analysis of organizations dealing with financial problems.............................................................16
D3: Evaluation of planning tools............................................................................................................16
CONCLUSION.............................................................................................................................................17
REFERENCES..............................................................................................................................................18

INTRODUCTION
Management accounting refers to the use of financial provisions, data and information
effectively and efficiently by the managers in order to help in decision-making process
(Alawattage, Wickramasinghe and Uddin, 2017). It is a technique which helps the managers to
take the required decisions at the right time for the enterprise. It helps the managers to better
inform themselves before they take the required decisions which can impact the operations of an
enterprise both in the short-run as well as the long-run. Thus it is quite a helpful tool for the
managers. This report is based on Creams Ltd. which sells ice-creams, doughnuts and waffles in
the market. In this project, specific focus will be made on demonstration of understanding of
management accounting systems, application of a range of techniques. Additionally, analysis on
use of planning tools and comparison of ways in which firms can use management accounting
data will be analyzed.
TASK 1
P1: Explanation of management accounting and the essential requirement of its
systems
Management accounting refers to use of various types of techniques in order to help in
taking of various types of decisions for the benefit of the management of the enterprise
(Alsharari and Youssef, 2017). It is used by the managers of Creams Ltd. in order to help them in
raising the overall efficiency, effectiveness and productivity of the enterprise.
Management accounting systems-
Cost accounting system- Cost accounting system is used for identification of various
types of costs which can incur within an organization such as fixed costs, semi-variable costs and
variable costs. The managers of Creams Ltd. can make use of this system to identify and
segregate their costs in order to reduce it. This will help them in maximizing their level of profits
and achieving their short-term and long-term objectives in the future.
Essential requirements-
 Cost accounting system must be able to identify various types of costs which are
incurring within an enterprise.
 Cost accounting system must be able to identify the overheads and should be able to
provide different techniques to absorb them.
Inventory management system- Inventory management system is used for the purpose
of management of items in the inventory of the enterprise. It can be used by the managers
of Creams Ltd. to better track the stock items and properly manage them so that there is
no mismanagement of stock occurring within the organization. The managers of Creams

Ltd. can make use of this system so that the stock can be effectively managed within the
organization.
Essential requirements-
 Inventory management system should be able to facilitate better management of
inventory.
 Inventory management system must be able to facilitate the use of techniques like LIFO,
FIFO etc. which help in tracking of inflows and outflows of stock items.
Job costing system- Job costing system is used in order to maintain a track record of job
orders received and job orders given within the enterprise (Alsharari, 2019). It is most
commonly used by manufacturing organizations. As Creams Ltd. deals in manufacturing
it can use this system. This system will help the company to properly manage its job
orders. By proper management of job orders and tracking those from starting till
completion the company can raise its efficiency, effectiveness and productivity level in
the future.
Essential requirements-
 Job costing system should enable checking of status of job orders from receiving the
orders till their completion.
 Job costing system should enable to maintain a proper track of the job orders received in
the company.
Price optimization system- Price optimization system is used in order to facilitate the
setting up of the right price of a product or a service within the organization. It can be
used to revise the strategies related to pricing. The managers of Creams Ltd. can make
use of it in order to set a right price.
Essential requirements-
 Price optimization system must facilitate setting up of a right price.
 Price optimization system should be able to identify the change in price so that profits
can be maximized by changing price.
P2: Management accounting reporting methods
There are plenty of methods which can be used for management accounting reporting
(Aouni, McGillis and Abdulkarim, 2017). The managers of Creams Ltd. make use of the
following methods which are explained as follows in the context of the company-
Job cost reports- These reports can be used for identifying the various types of costs
associated with the job orders. These reports are prepared on the basis of job costing accounts
within the organization. These reports summarize the overall job orders on the basis of orders
received and orders given. The managers of Creams Ltd. can use these reports to identify