Management Of Cost Accounting : Assignment

Management
Accounting Systems
&
Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Explain management accounting and essential requirements of various types of
management accounting systems................................................................................................3
P2. Explain different methods used for management accounting reporting...............................6
TASK 2............................................................................................................................................7
P3. Calculate costs using appropriate techniques of cost analysis to prepare and income
statement using marginal and absorption costs...........................................................................7
TASK 3..........................................................................................................................................11
P4 Advantages and disadvantages of different types of planning tools used for budgetary
control ......................................................................................................................................11
TASK 4..........................................................................................................................................14
P5. Compare how organisations are adapting management accounting systems to respond to
financial problems.....................................................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
.......................................................................................................................................................17

INTRODUCTION
Management accounting is concerned with the process of assessing costs incurred in
business operations to prepare internal financial report, accounts and records for making
informed decision to accomplish organizational goals (DRURY, 2013). It is also known as
managerial or cost accounting. UK Financial Consultants Ltd. Has been chosen for this report.
Further, it covers meaning of management accounting along with its essential requirements and
different methods used for management accounting reporting. Furthermore, calculation of costs
through appropriate techniques of cost analysis and advantages and disadvantages of different
types of planing tools for budgetary control. Lastly, comparison of organizations opting
management accounting system to address financial problems.
TASK 1
P1. Explain management accounting and essential requirements of various types of management
accounting systems
The Institute of Cost and Management Accountants, London, has defined
Management Accounting as “The application of professional knowledge and skill in the
preparation of accounting information in such a way as to assist management in the formulation
of policies and in the planning and control of the operation of the undertakings.” In simple
words, it involves business activities of planning, organising, staffing, directing and controlling
the day-to-day activities for achieving goals and objectives of an entity. Policies are a major part
of this accounting by following which decisions are made (Hilton, and Platt, 2013).
Management Accounting System comprise of actions and framework which are applied
to each departments functioning in an organization. It forms a co-ordination between internal
parties. The scope of this system is vast as it takes into both financial as well as non-financial
data. Johnson and Kaplan defined that management accounting system should effective enough
to provide accurate, reliable and timely information so that costs can be controlled, measured in
order to improve productivity by implementing better production processes.
Managerial accounting can provide numerous benefits to an entity which can have
significant impact on its operations. Further, it is importance to make a part in as internal parties
use qualitative and quantitative information to make decisions. This encourages continuous

improvement, effective management of cost, management of quality etc. Further, it helps in
measuring costs in order to reduce unnecessary costs. It has four basic principles viz. Influence,
relevance, value and trust. Management Accounting undertakes number of tasks and activities
for managing business through strategic planning. It has its roots from stewardship role in
European merchant trading venture. It evolved during industrial revolution and emerged after
financial accounting.
Basis Management Accounting Financial Accounting
Meaning It provides qualitative and
quantitative information to managers
for making decisions, strategies,
plans and policies for smooth
functioning of business.
It refers to preparation of financial
statements on the basis of historical
and current financial information in
order to provide report to outside
parties whose decisions can be
influenced by such information.
Inherent It help in making fruitful decisions by
applying which organizational goals
can be achieved.
It classifies, analyses, records and
summarizes financial data into a
report form.
Application It improves the capabilities of
management to make strategies, plans
and policies to be applicable within
the organization (Hiebl, 2014).
The financial data is used to disclose
true picture of viability of financial
affairs.
Scope It has wider scope as it consists both
financial and non-financial
information.
It is not as wider as management
accounting.
Dependence It depends on financial accounting to
make right and accurate decisions.
It is independent of management
accounting.
Basis of
decision-
making
It takes into account past as well as
forecasted information to make
decisions.
Only previous financial data form the
basis for decisions that will be
implemented in future.
Statutory There is no legal requirements or It is legally compulsory for companies