P1 Management Accounting and its Different Types of System

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
P1. Management accounting and its different types of system....................................................1
P2 Explain different method of management accounting reporting...........................................3
M1. Evaluation of benefits of various management accounting systems....................................4
D1 Management accounting system and management accounting reporting are integrated with
organisation process.....................................................................................................................5
TASK 2............................................................................................................................................5
P3 .Appropriate techniques of cost analysis to prepare an income statement.............................5
M2 Management accounting techniques and financial reporting documents.............................8
D2 Financial reports which applies to interpret many business activities .................................9
TASK 3............................................................................................................................................9
P4. Advantages and disadvantages of different types of planning tools used for budgetary
control..........................................................................................................................................9
M3. Usage of different planning tools for preparing and forecasting budgets..........................11
P5 Organisations are adapting management accounting systems to respond to financial
problems.....................................................................................................................................12
TASK 4..........................................................................................................................................14
P5 Comparison Between Merlin Financial Consultant and Equilibrium Assets Management. 14
M4 Management accounting in response to financial problem can lead organisations to
sustainable success ....................................................................................................................15
D3 Various Planning tool to resolve financial problems...........................................................15
CONCLUSION..............................................................................................................................15
REFRENCES.................................................................................................................................16

INTRODUCTION
Management accounting consists of two words “management” and “accounting”. It is the
study of managerial concepts (Bruynseels and Cardinaels, 2013). This is a kind of system which
is helpful providing monitory and non monitory informations to the companies to make future
decisions and policies for future. Generally these reports are prepared for the internal purpose
and for internal decision-making. Management accounting consists many reports which are
required by management for many purpose to the companies. There is no specific time period to
prepare management accounting reports, these can be prepare according to the organisation need.
To understand the concept and practice of management accounting Merlin Financial Consultancy
company is selected. It was founded in 1988. This company deals in various financial products
and services like fixed deposits, mortgage loan, financial advices etc.
In the project report detailed information about the management accounting, its types,
benefits are described. In addition this report highlight on various planning tools of budgetary
control and their advantage, disadvantage, different costing techniques. It describes the way in
which organisations manage with financial problems with the use of management accounting
techniques to achieve objectives and goals.
LO1
P1. Management accounting and its different types of system.
Accounting is a process of recording financial transactions in a systematic manner which
is helpful for the organisations (Chandar, Collier and Miranti, 2012). This is a systematic process
of recording, analysing and presenting statements of finance. Basically the main objective of
accounting is to provide data for preparation of various financial statements. This is done in a
particular time period which is known by accounting period. Accounting is of many types.
Management accounting is a part of accounting which is described below
Management accounting- Management accounting is a kind of system which is related to
providing important financial and financial information to the management for making future
policies and plans. This accounting system is useful for internal purpose and to make internal
decisions for the organisation. It is not done in a particular accounting period, it is done when it
is needed by the organisation. This accounting system is not compulsory for the companies, it is
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depend on the companies whether they want to do or not. So management accounting system has
its own importance in internal management of organisation.
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Management accounting Financial accounting
Management accounting helps in the internal
management of the business.
This accounting system is crucial for financial
management of the business.
It contains monetary and non monetary
informations.
It includes only financial or monetary
information.
This accounting system is prepared on the
basis of organisation's needs. It is not
mandatory.
Financial accounting is a compulsory for all
kind of companies.
Management accounting is done without any
specific accounting period.
This accounting system is needed to be done
according to the accounting period,
This accounting system includes various kind
of reports which are useful only for internal
parties not for the external users.
Its reports are useful for both the parties
including internal and external parties like
shareholders etc.
Cost Accounting System- Cost accounting system is also known by costing system. It is
a type of system which is related to estimate the cost of all products and services (Granlund and
Lukka, 2017). This is very important for the companies that they should have appropriate idea
about the estimation cost this will help in to check which products are profitable and which ones
are not. Merlin financial consultancy applies this method in checking about the cost of their
various financial products like fixed deposits, bonds etc. In addition they applies it in tracking
the estimation of total cost of services.
Competitors determines their prices by calculating various kind of costs. The Merlin
financial consultancy computes different kind of costs which are followings:
Actual costing- Actual costing is a kind of costing system that calculates those costs
which occurs actually in the production. It includes costs like actual labour cost, material cost,
overhead costs etc.
Normal costing- Normal costing system is an effective way of calculating the production
costs fairly. This includes direct material cost, direct labour cost and overhead cost. The addition
of these costs results as the total production cost.
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Standard costing- This costing system is also known by the target costing. It estimates
the future costs that can be occur in the production. The main aim of this costing system is to
keep control the cost of production.
Job costing- Job costing system is a method of calculating the each units cost. This
method computes the cost by calculating the each job's cost that assigned in the job. It helps in
analysing the each units cost individually.
Process costing- Process costing system is useful in calculating the cost of different
process of production. This costing system is suitable for those organisations which produce
products into different processes. Merlin financial limited use this tool for calculating the cost of
different financial products and services.3
Batch costing- Batch costing system works as the same framework of job costing
system. This costing system divides the products into different batches that helps in calculating
each units cost.
Contract costing- Contract costing system is applied in the large projects and contracts.
This is beneficial for controlling the different cost of projects. Basically it is used by the
companies when they deal a contract or project.
Inventory Management System- Inventory management system is a kind of system
which is related to tracks the movements of services and goods (Ismail and King, 2014). This is
very important tool of management accounting system. It is helpful for the Merlin financial
consultancy in managing their financial products and services. This helps them in tracking the
movement of financial services. Like if company wants to check about the process of a fixed
deposit service then they may apply to this system in checking the documentation, clarification
etc.
Price Optimisation- Price optimisation is method of analysing that how customers will
react on different pricing of products and services. It provides a framework to set the level of
price at which organisation may achieve their goals and objectives. In addition it sets the level of
price which is also suitable for customers. Merlin financial consultancy uses this method of
pricing. Under this method they determine the pricing level of their financial products and
services at which they can gain maximum profit. This pricing method increase the satisfaction
level of their customers.
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