Management Accounting Systems and Performance

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and its types..................................................................................1
P2. Explaining methods used in management accounting reporting..........................................6
M1. Application and advantages, disadvatages of Management accounting system.................8
D1. Integrating management accounting system within organisation........................................9
TASK 2..........................................................................................................................................10
P3. Income statement using different costing techniques.........................................................10
M2. Applying various management accounting techniques.....................................................11
D2. Interpreting financial reports..............................................................................................12
TASK 3..........................................................................................................................................12
P4. Advantages and disadvantages of budgetary control tools.................................................12
M3. Uses of different planning tools in forecasting budgets....................................................14
D3. Planning tools for solving financial problems...................................................................15
TASK 4..........................................................................................................................................16
P5 Use of management accounting system for responding financial problems........................16
M4. Sustainable organisation through responding financial problems.....................................18
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Management accounting is an essential part of accounting process in any organisation or
business concern. It is also known as managerial accounting. It is a tool for managers to analyse,
assess and evaluate various aspects of managerial accounting within an organisation. Various
techniques and methods used management accounting system facilitates financial information for
financial reporting and also helps in assessing performance of organisation as a whole and its
individual functions. In the present report different types of management accounting systems and
reports are explained along with their uses in the context of Unicorn Grocery store. It is a small
business of retail store based in UK with less than 50 employees. Main purpose of this report is
to explain how different methods, systems and techniques provides aid to managers and small
business owners in achieving their target objectives and goals along with helping them in making
future economic decisions. In order to fulfil purpose of this report, various topics and discussions
comes under its scope such as advantages of management accounting systems and how the
system can be integrated within an organisation. Further, financial statement has been prepared
for cited firm using two different techniques along with explaining difference between both.
Different planning tools that helps managers in forecasting future events that ultimately
facilitates sustainable growth of business are also explained bvelow.
TASK 1
P1. Management accounting and its types
Following are some types of management accounting system that can be used by Unicorn
Store for improving efficiency of its business operations.

Illustration 1: Management accounting system
Source: (AbRahman and et.al., 2016)
Inventory management system:
This project is mainly designed for various companies to manage their:
 Employees
 Customers
 Vendors
 Inventory
 Sales
 Accounting
 Various reports
IMS helps a business be successful because it provides the direct control over the organisation
and keep tracks all of things.

The project scope provide the user with a platform in which user will be to an update exactly
how much inventory is required to avoid shortage and wastage of products to get the better
turnover from the inventory (AbRahman and et.al., 2016). With the in company can:
 Provide employee efficiency
 Have accurate planning of keeping right amount of products.
 Manages the vendors. Which plays a key role in the business
 Keeps sales records, slips and manages the invoices.
 Manages the accounts of company Will manage all amount of reports like invoice or history of customers, vendors and
inventory also.
Cost accounting system
Concepts of cost
Cost is the amount of resource which is given up in exchange of goods and services. The
resource given up is money expressed in monetary terms.
The charted institute of management accountants, London also defines cost as“the amount of
expenditure incurred on to specified thing or activity.
These kinds of activity involves expenditure under various heads, eg material, labour, other
expenses etc. Manufacturing organisation interested in ascertaining cost per unit of product
manufacture while an organisation who is rendering services eg, transport, canteen, electricity
company, municipality etc is interested in ascertain the cost of the services it renders. In simple
form it means the cost per unit is arrived by dividing the total expenditure incurred by the total
units produced (Bertz and Quinn, 2014). If the manufacture produces more than one product it
becomes imperative to split up the total expenditure between the various products so that the cost
of each product can be ascertained separately. For consumer cost means PRICE. For
management cost means EXPENDITURE. The process of ascertaining the cost is known as
costing.

It is necessary to specify the exact meaning of cost. When the term is used specifically it is
modified with terms as prime cost, fixed cost, sunk cost etc. To ascertaining these there are three
basic objectives namely- cost ascertainment, cost control and cost presentation.
General principles of cost accounting:
1. A cost should be related to its cause.
2. A cost should be charged only after it has been incurred.
3. The convention of prudence should be ignored (Bryer, 2013).
4. Abnormal cost should be excluded from cost accounts.
5. Past cost not to be charged to future period.
6. Principles of double entry should be applied wherever necessary.
Objectives of cost accounting
 To analyse all expenditure with reference to the cost products.
 To arrive at the cost of production every unit, job, operations should be analysed
 To provide data’s for profit and loss accounts and balance sheets at regular intervals such
as weekly, monthly, yearly.
 To provide actual cost and figures for estimations the price fixing policy should be
checked.
 To present comparative cost data for different periods. This is also helpful in budgetary
control (Chan, 2015).
 Last but not least, all information should be provided to the management to make the
short term decisions at various level like quotation of prices or make or buy decisions etc.
Importance of costing
 Cost accounting helps in periods of trade depressions and trade competition
 Cost accounting helps in price fixation
 Cost accounting helps in making estimates
 Cost accounting makes comparisons possible