Management Accounting Techniques and Their Applications

The provided assignment delves into the world of management accounting, focusing on different techniques such as job costing, budget reporting, and account receivable ageing reports. The document highlights the importance of cost accounting systems and balance scorecards in applying management accounting effectively. It also mentions the limitations of absorption costing in utilizing indirect expenses like selling and distribution expenditure.

MANAGEMENT ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
SECTION 1......................................................................................................................................1
1. Explaining importance of management accounting in decision making process for
improving performance of company......................................................................................1
2. Explaining different types of management accounting systems used for management
accounting reporting...............................................................................................................3
3. Critically evaluating benefits of types of management accounting systems and their
application..............................................................................................................................4
4..............................................................................................................................................5
a) Preparing Profit and Loss statements using absorption and variable costing....................5
b) Explaining why profits from both systems are different....................................................8
c) Producing reconciled statements of profits or loss.............................................................8
SECTION 2......................................................................................................................................9
PART A..................................................................................................................................9
Comparison and contrasting the three planning tools that used in management accounting. 9
PART B..........................................................................................................................................12
Different ways in which management accounting will be applied for increasing effectiveness
..............................................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Management Accounting makes the provision of financial data and advice to organisation
for utilisation in the firm and development of it enterprises. The report will be based on the
William performance Tender a medium size firm which produce boat. It also covers the Nero Ltd
for the effective comparison. The report divided into section two sections, the first will help to
understand the significant of management accounting in decision making process for improving
performance of organisations. The various kinds of management accounting system utilised for
report and its advantages with their applications. Further the profit and loss statement with the
absorption and variable costing. On the other section, comparison and different three planning
tools that used in management accounting as well various manner in which the management
accounting will be applied for enhancing effectiveness in the company.
SECTION 1
1. Explaining importance of management accounting in decision making process for improving
performance of company.
There are different sorts of techniques that are utilized by organization at the season of
revealing of bookkeeping data. Every one of these reports are been readied taking critical data
like that of spending plans, cost, stock and loan bosses which are basic piece of administration
bookkeeping frameworks. Management accounting is the important aspect for each and every
business organizations that may use for decision making process. Every decision in the firm
which could be taken for dividing the finance and its affiliated to same procedures. The several
component that could be assists this system to be various way of financial accounting. The
function that this system is performing within William Performance Tender would be based to its
effective role to determine the upcoming situation of the organisations. This will also help in
applying for sales and cash flows determining in which the cash requirement for various action
and cost of production on goods. If the organisation is finding out a specific project and the
return on finance of that project which is also been analysed within structure of production
process of the organisations(da Silva, Linares and Zardini, 2015). These are the roles which
management accounting is playing in application of organisations present for the various
learning in terms of each and every value of it role in decision making process which will help to
change the performance of business of William Performance Tender. It is important for the
organisation such as Small medium size for picking up right decision in terms of profit margin or
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manpower utilisation. The various important of management accounting within the context of
manufacturing organization such as follows: Relevant cost analysis: It is a cost which only related to particular management decision
and which will modified in the upcoming period as a outcome of that decisions. The
relevant cost analysis is highly utile for eliminating extraneous information from a
specific decision making procedure. Each and every cost which are to be incurred by
organisation must be considered within for the procedure. So that owner of the
organisations is having distinct idea about within activity is incurring how much money
respectively. The cost specific refer to that portion of the firm which associate to amount
which invested with the action for how much value to be incurred on every
manufacturing of each unit of goods in which the organisation must analysis the value of
profit which they should be earning in the future. Make and Buy analysis: It is an important use of management accounting data which
provides data for the use manufacturing of products. For example, owner of the
organisation must consider about the whether to make or buy a material for the
manufacturing of company important unit of goods. By closing a make and buy analysis,
the manger can find out the correct decision which will help to earn profits. This system
will assist in different areas and the owner of the firm must be use for the evaluation of
quality component. The another non-budget evaluation which have important to include
that would not be a part of the analysis. Activity based costing: It is a technique of the management accounting which will help to
find out action or decision that firm execute and distribute indirect cost as well goods and
services. This system identifies the state between outlay, activity and commodity, and
with this relationship it will allocate indirect costs to the goods less arbitrarily than old
technique and there are various cost which are challenging allocating with these
techniques of management accounting(Hornstein, 2015). Indirect costs such as
administrator and worker salaries are sometimes hard to distribute to specific goods and
services manufactured. Therefore, these techniques is niche in the manufacturing
industry.
 Utilization of data: Management Accounting data provides a substance for effective
development and growth of the organisation which can be occur individually. Budgeting,
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allocation of funding as per the project and balance scorecard are the only several
proceedings of the management accounting in the utilization of data to provide the
information to alter for controlling management for achieving objective of the company.
Therefore, the focus on the utilisation of data by the manager which will fix on choice
that will assist for effective modification and lawful in prospect of broad evaluation of the
firms' data as compared to the premonitions.
2. Explaining different types of management accounting systems used for management
accounting reporting.
Management accounting method in which the organisation will prepare there on as well
the utilisation of internal improvement in the individual part of collection can be shared by any
external stakeholders of the organisations. There are different kinds of techniques utilised by the
firm at the time of reporting of accounting information. Each and every report give the effective
information of particular fields such as budget, cost, inventory and creditor which are important
portion of management accounting system. The system based on the financial statement like
those cash flow and income statement as well balance sheet of the organisations. This framework
significantly rely on money related explanations like those of income, wage proclamations and
accounting reports of organization. Which is a piece of work of bookkeeper of that specific firm
who is additionally dependable to report all applicable data to more elevated amount of
administration. Therefore, this level of administration would assume liability to make spending
plans and future arranging of firm so execution of organization inside market could be resolved.
The report is significantly framed over certain day and age which principally could be one
money related year. Job costing techniques: This is an important method which involve the increment of the
cost of raw material, labour and operating expense for a specific job. This method is a
superior tool for trace particular costs to single job and evaluating them to see if the costs
can be remove in later job. An additional utilise to see if any excess costs incurred can be
billed to a customer. It will use in to accumulate of the costs at small unit level. As we as
a whole realize that assembling firm like that of Williams Performance Tenders which is
making water crafts and after that offering them in showcase they are having different
offices(Kenno and Free, 2017). Which incorporate offering, generation, bundling,
promoting and client benefit so every one of them need isolate spending plans that could
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be as indicated by work costing. What might be the cost that ought to be brought about by
every division so correct productivity of firm is taken out. After this all cost which are
been said will be contrasted and each other and with that of a year ago so income is
produced from that point. This will b helping administration to distinguish which division
or portion isn't making benefit and which isn't getting adequate benefits. In the event that
maybe a couple portions are not giving great measure of benefit or their execution isn't
that much good then issue ought to be recognized and arrangements ought to be taken. Budget Report: Spending plans are the most critical piece of association which will tell
how much sum would be put resources into all activities and frame where assets ought to
be gathered. So reports ought to be made which is containing spending plans and sum put
resources into each sort of office or items. Report will advise about what could be
dispensed to office that are working with in organization. At that point these financial
plans which are for the most part delivered at the beginning stage of year should be
assessed or contrasted with that the real spending on every item or division toward the
finish of that monetary year.
 Accounts Receivable ageing report: As the business is managing different customers and
client like that of leasers, sellers, providers, brokers or borrowers too. So it is essential for
firm to monitor every one of the account holders of firm from which they have to recoup
their sum which is been taken by them all. It will contain data like that of what number of
account holders are there, what are their names, how much sum is pending, the amount
more is to b recuperated and from how long they are pending(Latan, 2018).This report is
particularly vital as will tell about what is the correct measure of organization that is been
inside market and from to what extent.
3. Critically evaluating benefits of types of management accounting systems and their
application.
For each and every organization, The proper use finance as per requirement of the firm.
In small and medium size organisation which are associated with the manufacturing industry
have various advantages of management accounting for implementing effective system for
control over expenditure of the company in various areas. Every accounting report has its own
benefits and limitations with regard to the organisation to experience about what is total budget
is still arrears of all organisations' debtor and up to how much time it will be pending from
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company. From the assistance of this information of the cited firm could he easily come to know
about that whom in the future organization need to stop the selling goods on the credits'
basis(Van der Stede, 2017). On the other hand the job costing methods will help to take action
and attempt of account for whom would be picking out several times and endeavour of account
which can be engaged in making report. It is a challenging for organisation to find out the actual
cost which required to invest in every division or goods. There are various others significant task
of comptroller on which addition focus required apart from that allocating of cost to each
division or task. Further, preparing budget for all the division of enterprises and mixture is a
better statement in which every cost, name and value of debtor must be mentioned. Budget report
will be made to determine how much amount need to invest for all the division so that assume
profits of the organisation can be achieve in effective manner.
4.
a) Preparing Profit and Loss statements using absorption and variable costing.
Absorption costing: It is a management accounting cost technique of expenditure all the
costs associated with the manufacturing a particular goods and is need for general accepted
accounting principles which is in short as GAAP for the external report(Angle and Halloran,
iRobot, 2018). The cretin direct expenditure include the salary and wages of the employees
tangible goods' production, the raw material utilised in producing a good, and each of the
overhead cost including all the utility costs.
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Quarter 1
Quarter 2
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Variable costing: It is used to bring out cost which can be utilised in the production of goods
and the overhead that will be take into the consideration only in the account of the organisation
the cost will be variable in nature included the direct labour, material and manufacturing cost.
Quarter 2
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b) Explaining why profits from both systems are different
The calculation of the profits as per the statement in both the techniques which is
implemented such as absorption and variable techniques of picking out for the revenue. In the
previous one as both the direct and indirect overhead expenses would be utilised and in
subsequent only one of the direct cost will be utilised. Due to this fundamental profits of
identical time period will not be coming same. In the absorption costing the indirect expenses
like that of selling and distribution expenditure can not be utilised.
c) Producing reconciled statements of profits or loss.
Statement under the variable costing:
Statement under the absorption costing method:
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SECTION 2
PART A
Comparison and contrasting the three planning tools that used in management accounting
For achieving effective outcomes, there are certain operation and action required to
establish by manager to implement it. The various tools and methods will help out to maintain
financial accounting information in the organisations of Nero Ltd. If the chosen firm will use this
planning tool which bring out the effective outcome in various way:
Budgetary-control: This can be the most important tool which required to use in management
accounting. The budgetary control is the process of find out different exact outcome within
budge amount for the business in the future period and effective set then comparison of budget n
umbers with the exact performance for calculating deviation, if any. The first step is to preparing
the budget and after that exact outcomes will be measure. The comparison of budgeted and
actual number will allot the management to search about the discrepancies and pick up extra
measures in effective time. Therefore, the budgetary control involve the objective which are fix
by forming budgets. The enterprises are dividing into different responsibility centre for form the
different budgets. The main objective of budgetary control is to eliminate the waste and enhance
in profitability. For instance in the chosen enterprise these methods utilised to comparison
regulation with the actual performance.
Budget: This is also an effective tool which assists to bring out better outcomes in an
organisation by assuming the cost. The signifiant constant in the task that utilised by manager of
the enterprises. The inflow and outflow of the cash in a business which can be included to
operate various actions. Budget assist to enhancing profits and performance in effective way.
Sales budget: It is an important technique which will assist to fix up and form the statement that
assume cost and manufacturing outcomes in the firm. The sales budge plays a vital function to
enhance sales and revenue of an organization(Commerford, Hatfield and Houston, 2018).
Therefore, it will assist the manger of Nero Ltd to search better situation of the economy in the
company.
Cash budget: It is a tool which will assists to find out expenditure that are occurring in taking
action with the help of proper management action for raising the profit and develop Nero Ltd by
utilise the resource limited manner that could be assist and enchaining financial result at the
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place of work in an enterprise. Therefore, the cash budget will help to take the important
decision, dividing cost and management of cash etc.
Zero base budgeting: This can be the most important tool in which the management of the
chosen enterprises required to form a budget session on the basis of zero based budgeting. In this
context, budgeting will improve on the basis of zero and new budget will be form in the
organisations. The outcomes get the actual number enhancing management action for the further
planing and removing addition cost incurred in the firm.
Fixed budgeting: In an effective budget planning, modification are find out with the actual and
standard basis. Therefore, plan of action applied on the base of actual performance as well. It
will assist in circumstance to target the client of chosen enterprises. The fixed budgeting will
evaluate firms performance with various resource and plan of action implementing by the
manager.
Calculation of sales budget
Interpretation: From the above calculation it can be easily interpreted that sales budget bring
the pressure to form an outcome in effective way. In this context, revenue is measuring which
will assists to earn additional profits through find out certain role and operation. In the current
circumstances, it must be stated that revenue of the firm also enhancing which will help to make
an instance pressure in effective manner on the Nero Ltd.
Production budget: it is also an effective tool which will develop by extra unit are producing in
the organisations. It will assist to develop an innovative outcome, production performance with
the additional role and operation to enhance effective outcomes in the firm. The selected
business can utilise it to form an idea for goods and service in the enterprises.
Calculation of the production budge
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Interpretation: Production budget is different from the sale. Hence, it will indicate to
manufacturing goods and services in effective way. In this context, outcome are performed and
create that pressure on the business activities. Therefore, it will also find out the sales enhancing
to focus on the certain innovative actions.
Capital budgeting: This will help to evaluating and find out the expenditure of the firm. The
investment required the planning to included huge value to brings out the corrective outcomes in
better manner. In a practical period, manufacturing system will assist to implement new plan and
equipment used in the process of production.
Payback period: It is a length of the time need to be collect the cost of an investment. The
payback period of particular finance and task is a significant finding of whether to take on the
position or project.
= 3+40000/100000
= 3+.04
= 3.4 years
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Interpretation: In this context the outcomes of investment in a various task. It includes certain
aspect which required to form and protect in three years and four months of time. Therefore, it
can be easily interpreted that it is not an effective situation for an organization.
PART B
Different ways in which management accounting will be applied for increasing effectiveness
In the chosen firm, there are various action had been performed to operate various
activities and work in effective way. With the assistance of the management accounting system.
It would be understood that is encouraged various outcomes in the organisations. There are
different manner which is available in accounting system in Nero Ltd will be develop such as
follows: Cost accounting system: This can be important aspect of the management accounting
which will applied for increasing the profits of the firm effectively. The cost Accounting
system is also known as the product costing techniques or it is a structure which utilised
by the organisation to assume the cost or value of their goods for the analysis of profits,
valuation of the inventor and cost control. For the organisation assuming the right cost of
goods is a difficult task and it is important for the profitable operation. The company only
get to know which goods are increasing earning and which one are not, for that cost
accounting system is the effective process for the organisations which will only possible
when the firm is able to estimate its effective cost of goods(Ahmetshina, Kaspina and
Molotov, 2018). As far, a product costing system will assist in assuming the closing value
of raw materiel or inventory, (WIP) or work in progress and compete products (finished
goods) to accomplish the main agenda of financial statement preparation. There are
mainly tow types of cost accounting system, job order costing and Process costing. In the
job order costing system of accounting is increase the overall production costs separately
for each job. While the process costing will increase the overall products costs separately
for every process. Ratio analysis: It is a form of financial statement evaluation which can be utilised to find
out a rapid indication of an organisation financial performance in certain key field. Ratio
analysis a instrument possesses certain significant attribute in which the business to find
out the finance positions. The various ratio that exist which could be utilised to asses the
correct business performance. The different idea and action help to bring up effective
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target and objective of the organisation. Therefore, the increasing profits with the
application of ratio analysis can be easily determine for the organisations. Bench marking: It is an effective tool which assist to make the comparison and attain
competitive outcome in the organisations. By adding on this, action are also required
which can be find out through various plan of action to bring the effective impact achieve
the outcomes for the organisation. The proper strategies also shows a right approach in
getting outcomes and execution in effective way. The important outcomes occurred in the
Nero Ltd with the help of benchmarking. Key performance indicators This can be the most important tool which will help to form
an innovative outcome in the firm. But the right management action are required to plan
which help to bring out high growth and increasing profitability of the firm and extra
revenue in the organisation can be easily maximise(Abernethy and Wallis, 2018).
 Balance scorecards: it is an important tool which will help to applied for the increase the
probability of the firm effective manner. The balance score card will help to measure the
performance of the organisation and find out as well improve different internal role of
enterprises and their external result. It can be utilised for providing review to the firm.
The data collection is an important aspect for the company and give numerical outcomes
as the information collected for evaluation by management which can be utilised to take
effective decision for the company. Therefore, the main purpose of the balance score cars
is to reinforce better environment in the firm by dividing into focus key area that required
to be evaluating.
CONCLUSION
From then report management accounting it can be inferred that William Performance
Tender and Nero Ltd required to focus on controlling the budget and need to invest as per the
quarterly profit on the basis of absorption costing and Variable costing. There are different kinds
of techniques utilised by the firm at the time of reporting of accounting information that can be
Job costing techniques, Budget report and Account receivable ageing report. The cost accounting
system and balance scorecard will be the main ways in which management accounting will be
applied for increasing effectiveness. But due to this fundamental profits of identical time period
will not be coming same. In the absorption costing the indirect expenses like that of selling and
distribution expenditure can not be utilised.
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