Management Accounting and Reporting Methods

MANGEMENT ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
P1 Management accounting and essential requirements of different management accounting systems...3
P2 Identification of different methods that are used for management accounting reporting....................6
P3Profitability computation by using marginal and absorption costing method......................................7
P4 Advantage and disadvantage of different planning tools used for budgetary control..........................9
P5 Way in which firms are using management accounting systems to respond to financial problems. .11
CONCLUSION.........................................................................................................................................12
REFERENCES..........................................................................................................................................14

INTRODUCTION
Management accounting is commonly used by the firms to deal with related transaction and to manage same at the workplace.
In the current report varied systems of management accounting are explained and there essential requirements are defined. Apart from
this, in middle section of the report, marginal and absorption costing methods are differentiated and relevant calculations are
performed. Different planning tools are define and discussed in detail. At end of the report, way in which management accounting
systems are used to respond to financial problems are also explained in the report.
TASK 1
P1 Management accounting and essential requirements of different management accounting systems
From: Budgeting officer
To General manager of White elephant restaurant
Subject: Management accounting system
Management accounting branch of accounting which deals with costs and expenditures that are made in the business.
Management accounting is used to do accounting related cost and expenses as well as it are used to keep track of expenses
that are made in the business. In this way effective control is made on expenses in firm. In discussed discipline there are
many approaches like variance analysis that can be used in the business (Sánchez-Rodríguez and Spraakman, 2012).
Under variance analysis method there are some of predetermined goals and objectives and against these objectives
comparison is made in order to identify performance of the business firm which may be positive or negative. If there is
good performance on some points then there is no problem but if it is identified that on some point performance is not
good then in that case action can be taken to work on the area where performance is not good and efficiency of the
business firm can be improved. Apart from variance analysis, there are many other methods that can be used to analyze

firm business performance. Many firms in order to get more better overview of profitability make use of marginal and
absorption costing method. There is difference between both methods as they give overview of the firm profitability but
there is difference in same. In case of other approach merely unstable expenditures are considered but in respect to other
approach all sort of expenditure are cosidered. Both methods compute firm profitability in different manner and it can be
said that management accounting reveal the profit if only variable expenses are taken in to account and when both sort of
expenses are considered (Busco and Scapens, 2011). Some of MA systems are explained below.
Cost accounting system: Cost accounting system have significance for the companies and it is used by White elephant
restaurant as under this cost of entire departments is done and on basis of same per unit cost is computed. It can be
observed that under this accounting system in White elephant restaurant at each department level expenses are recorded
and then summed up to identify entire cost that is incurred in the business. This is the one of the common accounting
system that is observed in case of all sort of firms whether it is small or big in nature. This is because while doing cost it is
necessary to take in to account entire cost of departments so that actual cost can be computed. Different department heads
need to collect data related to expenses that they are made in the business during entire month. These details need to be
submitted to the chief accountant of an organization.