Management Accounting: Types, Techniques, and Budgetary Control

Management Accounting

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Explanation of management accounting and essential requirements of different types of
management accounting systems.................................................................................................1
TASK 2............................................................................................................................................2
P2 Explanations of different methods used for management accounting reporting..................2
TASK 3............................................................................................................................................2
P3 Preparation of income statement by suing managerial accounting technique........................2
TASK 4..........................................................................................................................................10
P4Evolution of benefits and drawbacks of different types of planning tools used for budgetary
control........................................................................................................................................10
P5Evaluation of how organisations are adapting management accounting systems to respond
to financial problems.................................................................................................................15
CONCLUSION..............................................................................................................................17
REFRENCES.................................................................................................................................17

INTRODUCTION
Management accounting is a process of identifying, collecting, summarizing and presenting
accounting data in an effective way through which business organization implement effect
policies. It will help in decision making process. In order to understand the concept of
managerial accounting, UKC FURNITUR has been taken. In this report importance of
various managerial accounting system has been defined and used of various managerial
accounting techniques for calculation of cost had been analysis. This report also considers
how manger use managerial accounting tools for solving financial problem has been define
briefly.
TASK 1
P1 Explanation of management accounting and essential requirements of different types of
management accounting systems
Management Accounting: Management accounting consists of internal systems that an
organization uses to generate measure and evaluate quantitative and financial information for the
management of the organization. Managers of the UCK furniture use this data to analyze the
operational processes of the entity and make necessary decisions to assist its day to day
activities. In other words, management accounting helps the UCK furniture’s management to
perform all its functions including planning, staffing, implementing and monitoring.
There are various types of management accounting system which are as follows:
 Cost accounting system: This method is used by the companies engaged in manufactur-
ing processes. UCK furniture can use this method to estimate the price of the products
for profitability analysis and cost control. Cost accounting system also assist an organi-
zation in calculating the value of closing material, work in progress for proper financial
accounting (Nielsen, Mitchell, and Nørreklit,2015, March).
 Inventory management systems: This method is used to keep the track of inventories
of an organization on various levels i.e. raw material level, sales, deliveries. This method
helps to prevent the overstocking and under stocking of inventories.
 Job costing system: This method involves the process of accumulation of information of
cost related to specific jobs which are to be undertaken in organization. This method will
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help the managers to identify the jobs which are of less value or which are not important
and incurring major part of cost.
 Price optimizing system: This system depicts the relationship between supply-demand
and how it varies at different level of prices. This method helps in maximizing profits
and customer retention.
TASK 2
P2 Explanations of different methods used for management accounting reporting.
Business organizations use following types of accounting reports:
Cost reporting: This type of report is prepared for identifying cost summery incurred during in
particular time period. It will help in formulating cost management strategies to reduce cost of
business activites
Stock report: This report is prepared for verifying stock level of the company. It will help in
managing stock level of the company
Accounts receivable report: This report is formulated for the purpose of identifying activites of
debtors, with the use of this report manger built policies so that they can easily collect money
from customers and formulate attractive offer policies to increase cash sales.
Budget report: This report is prepared for summery of income and expense of future time
period it will help in implementation of effective polices (Dekker, 2016).
TASK 3
P3 Preparation of income statement by suing managerial accounting technique
Management accounting technique: These are the tools and methods used for calculating
value of cost incurred during the business operational activities process. Followings are the
techniques used by the mangers for identify cost through which they can implement
policies:
Cost amylases technique: This technique is used for identified special cost incurred
during manufacturing process. Job costing and process costing and standard costing are
part of this technique.
Product costing: This tool is implement by managers to identified cost of each product of
the company. It is also use for controlling additional cost incurred during production
procedure
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Cost of inventory: This technique is used for calculating the cost incurred during maintain
developing and stocking the inventory within the organization. For this purpose manger
use various method EOQ, LIFO. FIFO, average stock etc. It also use for identifying
maximum, minimum and average stock need for organization for this purpose they use
VED, ABC analyses technique it will help in managing and controlling over all stock of
business organization.
Marginal analysis: This is essential technique of management accounting. It is most
useful tool, it will help in identifying the effect of additional units on profit and cost
incurred on manufacturing product. In this technique mangers analysis the relationship of
profit with other factors.
Absorption costing: It is also an essential part of managerial accounting tools. This will
help in calculating cost and profit for a particular time period. It will use all the factors of
production (Jamil, Zuriana, Mohamed, Muhammad, and Ali, 2015).
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