Management Accounting: Types, Benefits, and Techniques

Management Accounting

INTRODUCTION
Management Accounting (MA) is the accounting system. It encompasses the various
facets of accounting with the objective of improving the quality of information provided to the
management. It helps in identifying and analyzing financial information which assist the internal
management team to take effective decisions with respect to planning and exercising control.
Management accounting is very helpful in knowing efficiency of the business on account of
budget, cost related to business operation and allocating resources as the requirement of various
departments. In this report, Nisa is taken as a small organization. It provides help to retailers for
flourishing their business in the retail market by providing quality products all round UK. This
report, present about the role of management accounting (MA), various types of MA systems
along with their benefits. It also includes different methods of reporting and costing techniques
that can be used by management. Along with this, it covers various planning tools which can be
utilized for budgetary control and identifying the ways management handles the financial
problems leading to sustainable success.
Task 1
Definition of management accounting
According IMA, management accounting (MA) can be defined as a profession which the
key personnel’s in the organization to take relevant managerial decision for the business (Malina
ed., 2018). These strategic business decisions are in respect to the planning and controlling of
strategies and providing expertise in financial reporting.”
Principles of Management Accounting
There are two types of principles of management accounting which are discuss below.
Principle of casualty: It enables modelling the cost by establishes the relationship between the
input and output involved in the production (Butterfield, 2016).
Principle of analogy: It governs the user of management accounting information with the ability
reply the knowledge and skills which are gained from the casual relationship like in planning,
what if analysis. It uses inductive and deductive reasoning with future outcomes.
Role and functions of management accounting
Planning: MA helps in establishing Future Plans by providing relevant accounting
information which can be used for or better decision making (Järvinen, J. T., 2016). For

example, which product to be sold and at what price. It also helps in evaluating capital
expenditure.
Controlling: In this comparison is drawn by comparing the actual performance with the
budgeted ones (Biondi and et.al, 2017). It helps in evaluating and warning the manager about the
activities which are not according to the plan.
Organizing: Management Accounting performs various functions which helps the
manager for properly coordinating and regulating the different business activities in an
organization.
Various types of management accounting (MA) system and its essentials
MA refers to the accounting system which is deployed by the organization with the
objective to systematically manage the business information which will be helpful to the
management in making better and improved decisions. Different types of Management
Accounting system (MA) stated below.
Cost accounting system
In this MA system, various aspects of costs are considered. Generally this method is
adopted in the organizations which are required to ascertain the inventory cost startup cost along
with the measures to control it (Weetman, 2019). This framework works by following the
material when it experiences various phases of production process. For instance, when the raw
material moves from one phase to second phase, the cost accounting framework tracks the
advancement and updates the equivalent on the mechanized framework. The essential
requirement of this system is to manage the cost structure of the business.
Benefits:
 Cost accounting system assists in recognizing the productive and non - beneficial
exercises of the business.
 The information furnished about the expense related with various procedures aids future
arranging.
 This framework likewise helps in deciding the benefit or loss of the item occasionally.
 Cost bookkeeping framework helps in practicing power over the material and different
business supplies.
Inventory management system