Management Accounting: Principles, Techniques, and Tools

Management Accounting

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................4
TASK 1......................................................................................................................................4
Explaining the principles of management accounting and stating its importance pertaining
to integration within an organisation......................................................................................4
Explaining different techniques and methods used for management accounting reporting. .4
Evaluating the benefits of MA systems and their application within an organisational
context....................................................................................................................................5
TASK 2......................................................................................................................................8
Calculating cost and preparing profitability statements as per absorption & marginal
costing....................................................................................................................................8
TASK 3....................................................................................................................................10
Explaining the advantages and disadvantages of different types of planning tools used for
budgetary control.................................................................................................................10
Analyzing the use of different planning tools and their application for preparing and
forecasting budgets...............................................................................................................12
Comparing how varied MA tools can be used for responding financial problems..............13
Analyzing how management accounting can lead organizations to sustainable success.....14
CONCLUSION........................................................................................................................14
REFERENCES.........................................................................................................................15

INTRODUCTION
In the recent times, every business unit is placing emphasis on employing
management accounting (MA) system with the motive to make optimum utilization of
financial resources. Moreover, such system lay focus on cost control as well as profit
maximization and thereby contributes in organizational success. For this project, NISA has
been selected which offers retail products or services to the customers. In this, report will
shed light on different system that can be used by the firm for evaluation and reporting
purpose. Besides this, report will shed light on the tools that assists in planning as well as
solving monetary problems effectually.
TASK 1
Explaining the principles of management accounting and stating its importance pertaining to
integration within an organisation
Management accounting may be presented as a process of offering financial
information and resources to the managers for decision making aspects (Weetman, 2019).
Principles of management accounting
 Cost reduction
 Presents solution considering both controllable and non-controllable cost
 Optimum utilization of resources
Importance of management accounting
 Helps in setting budgets or financial plans for upcoming time period
 Assists in setting prices for the products or services
 Provides management team with timely information for planning & decision making
purpose (Otley, 2016).
Explaining different techniques and methods used for management accounting reporting
Manger of Nisa prepares managerial reports for providing the team of higher
management with suitable information about internal performance. This in turn helps in
several aspects regarding panning, decision making as well as measuring and evaluating

performance. Reports which can be prepared by Nisa for decision making purpose are
enumerated below:
Job cost report: This report furnishes information about expenditure incurred while
performing specific job. It helps in doing evaluation of existing performance over estimated
revenue and thereby highlights profitability related to each job. Through this, business unit
can make efforts on the profitable areas and thereby improves performance level.
Budget report: It assists manager in doing assessment of departmental performance
and controlling cost. Further, variances found in the actual performance also help in setting
budget for the near future (Types of managerial reports, 2020). In addition to this, owner of
Nisa can also use this report for offering incentives to the employees.
Inventory report: By preparing and using this report manager of Nisa can make
manufacturing process more efficient. It contains information about wastage, cost level and
overhead expenses in relation to inventory usage and management (Cooper, Ezzamel and Qu,
2017). Along with this, inventory report also helps in doing comparison of different assembly
lines and thereby helps in setting bonuses for the best performing areas.
Accounts receivable ageing report: By this, cash flow can be managed and monitored
by Nisa prominently. Moreover, it presents time period from which debtor’s payment is due.
Through this, manager can ascertain customers who are facing difficulty in paying their
balances. In this way, such report helps in assessing problems that take place in company’s
collection process. Referring all these aspects, firm can take decision pertaining to allowing
credit extension to the customers.
Evaluating the benefits of MA systems and their application within an organisational context
Applicability and benefits of varied MA tools in the context of Nisa is enumerated
below:
Job costing
According to this, cost of production is determined referring to the number of
completed jobs. By applying this, manager of Nisa can identify whether production cost
exceeds overheads and price of material. Thus, referring this, resources can be used in the
profitable areas for improving overall performance.