Management Accounting Research

This assignment delves into the realm of management accounting research. It examines various contemporary trends and topics within the field, including management accounting's significance in applying new institutional logics, particularly within the non-profit sector. The research also explores the integration of corporate sustainability assessment, control, and reporting practices through management accounting lens. Additionally, the assignment analyzes the impact of digitalization on management accounting and highlights its role in IT governance and data monitoring. Finally, it investigates how management accounting systems are implemented and evaluated within organizations, drawing upon case studies from both for-profit and non-profit sectors.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 : The essential requirement of different type of management accounting system.................1
P2 : Methods use for management accounting reporting............................................................3
TASK 2............................................................................................................................................4
P3 : Income statement on the basis of marginal and absorption cost..........................................4
TASK 3............................................................................................................................................7
P4 : Advantages and disadvantages of different type of planning tools of budgetary control....7
P5 : Evaluation of how organization adapt the management accounting system to deal with
financial problems.....................................................................................................................11
Conclusion.....................................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial data provide an overall scenario of performance within an organization. The
principals of accounting plays very essential role in developing the financial awareness of
owners and managers of an organization. The accounting, principal, techniques and tools can be
use by any organization which want to perform there financial activities more prudently. Institute
of management accounting gives a well definition for management accounting “ Management
accounting is a profession which is involve and integrated with management decision making,
planning and performance management system and by the use of that they provide a expertise in
financial control and reporting for the purpose of implementing and formulating the strategy of
the organization. In order to analyse the management accounting more clearly the UK based
small and medium enterprise “ Portfolio payroll” is selected. The present research will create an
understanding about the management accounting system and associated approaches use in it.
Other than this, appropriate cost analysis techniques also make in use by using marginal and
absorption costs.
TASK 1
P1 : The essential requirement of different type of management accounting system
As a small and medium enterprise portfolio payroll require to use combination of
management accounting system. The main purpose of managerial accounting is to prepare and
provide managers with information to plan for the purpose of handling and managing the
operations of a business. There are several type of management accounting system are use
mostly to making important decision of the small and medium enterprise such as Portfolio
payroll limited (Gibassier and Schaltegger, 2015).
Cost accounting : Cost accounting tool is a requirement of each and every type of
business. The cost accounting system is helpful in recording the actual cost incurred in order to
delivering a product or service, by the comparison of those incurred costs to the standard or
planned costs and figuring out the variance for the purpose of investigation and follow up. In
other word cost accounting analyse the cost structure of a business. It is helps to the organization
for analysis the financial condition where a company earns and loses money, and providing input
into decisions to generates profits in the future.
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Job costing:- Job costing tool is concerned with the finding of the cost particular job or
work order. This method is applied where the work is understood on receiving customer's
demand and each work is for short time period.
Batch costing:- It may represent a number of small orders passed through the plant in
batch. Particular batch has a separate tarted cost. Here cost per unit is determined by dividing the
cost of the batch by the number of unit produced in the batch.
Inventory management system:- this is the ongoing process of moving products or parts
into and out of a company location. Its gives specific information about the inventory, how much
stock available or required for the organization. Successfully managing inventory means hitting a
moving target because supply and demand are not constant.
Price optimisation system:- It is a mathematical programmes that calculate how demand
varies at different price levels, this is helps in improving the profit margin on the per product.
The models can be used to tailor pricing for customer segments by simulating how targeted
customers will response to price changes with data driven scenarios.
Lean accounting : The approach of lean accounting can be very useful for the Portfolio
payroll in order to examining the processes and related results to figure out that hoe to create
more value by using less cost. Lean account manage and eliminate the waste of the resources
(Fullerton, Kennedy and Widener, 2014). It can be considered as a best approach or system in
order to managing the accounting in the small and medium enterprises in order to developing the
firm on a level where they are more financially sound.
Inventory accounting : The inventory accounting system is well efficient for Portfolio
payroll in order to planning and tracking the inventory associated activities. Payment portfolio
limited is indulge with employment activities, so here they can use the bar code tracking too
tagged each and every application with bar code. Other than the bar code tracking there is
another is another type of inventory accounting system use by various SME's. RFID system is
more advanced compare to the bar code system (Watts, Yapa and Dellaportas, 2014).
Industry specific accounting : The organization can use the accounting system as per
according to need of their industry. For example retail, legal, advertisement industries are using
different type of accounting system to fulfil the need of their business. The portfolio payroll
limited must use the the accounting system which is useful in tracking and properly reporting of
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the applications markdown. By the use of industry specific accounting system organization can
be more effective and efficient.
Non for profit accounting : The approach of non for profit accounting system has its
own requirements for setting the proper reporting activity within the organization . The funds
and grants which these type of organization are generating need to be tracked carefully, so that
the spent of the fund will be more meaningful for the organization (Padovani, Orelli and Young,
2014).
Transfer pricing : The transfer pricing approach is require to adopt by the organization
by believing that the price of the services and goods are higher at the outside market and in the
subsidiary firm it is lower and because of these the cost of the finished product affect on a great
extent. The companies such as portfolio payroll need to use such kind of accounting system so it
will be easy for them to make changes in the level of cost in order to enhancing profit in the end
of the year.
Budgetary control : Budgetary control is one of the most important task which is
efficiently done by the use of management account tool and techniques. In the budgetary control
system is useful in controlling the cost and expenses as well as identifying that sales and income
increased or not. The enterprise Portfolio payroll limited are handling various services
simultaneously, in order to manage the different expenses to make the business process more
successful they can use the budgetary control management accounting system (Chenhall and
Moers, 2015).
P2 : Methods use for management accounting reporting
Management accounting system are generate various reports on the basis of requirement
of the companies managers and owners. Managerial accounting reports is useful for small
business owners and manager to look upon the performance of the company and on the basis of
that preparing frequently throughout accounting periods as per the requirement. The portfolio
payroll use various methods for managing accounting reporting which usually depends on the
time sensitivity and time of the project. The management accounting reporting may request by
the owners on the basis of quarterly, monthly, weekly or sometime daily (Fullerton, Kennedy
and Widener, 2013). Various type of management accounting method are describe below:
Report for budget : The budget report is useful for the portfolio payroll limited for the
purpose of analysing their department performance and control costs. The organizations
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estimated budget for each period is based on the actual expenses which are occurred in the
previous year. In an small and medium enterprise such as Portfolio payroll limited if the
particular department is over budget in a previous budget and are not able to find any feasible
way to reduce the cost. For the small and medium enterprises it is important in the future
perspective that budget can take to a more higher and accurate level (Quattrone, 2016).
Report for account receivable aging : The account receivable aging report is a useful
tool for the enterprises in accordance to managing the cash flow for the companies. The report is
work in a way where it breaks down the customer balances as per how long they have been
owed. The account receivable aging report consist separate columns for different invoices that
are usually 30, 60 and 90 days late or in some cases more. A manager of portfolio payroll limited
can use the aging report in a way where they use it to find a problem with the overall process of
the company (Murphy, 2016).
Report of payroll : Moreover. The payroll report is concerns with the report which
consist the expenses related to the managers and employees. The payroll report included various
different type of cost and disposals such as: labour rate, salary, allowances, compensation,
monetary hikes, wages, voluntary work and rewards etc. The human resource department is
usually taken care about the people and personnel who are working in Portfolio payroll limited.
In the payroll report the recording of the total sum of money done in profit and the loss account
in the expense side. Higher sum of the report leads to minimizing the net profit in the ending of
the financial year (Youssef and Moustafa, 2014).
Job cost report : Job cost reports are concerned with showing the expenses for a
particular project. By the use of the job cost report Portfolio payroll limited can easily evaluate
the job profitability by doing the matching work with an estimate of revenue. The stated report
will help the firm in evaluating the areas of higher earning of the business so company can be
focus on their efforts other then waste the money and time on the job which are having low profit
margin. The job cost reports are also help enterprises in analysing the expenses at the time of
particular project is in the process where managers are able to rectify the error before the cost
escalate (Järvinen, 2016).
Sales and revenue report : The portfolio payroll limited is used to keep different avenue
records from where the firm is generating the revenue. The sales of the organization is
considered as turnover for the organization which can be use as the base for calculating the
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income statement of the organization. So the sales and revenue report will be very useful for the
Portfolio payroll limited in order to evaluating revenue along with the net yield at the end of year
(Efferin, Efferinand Hartanto, 2016).
TASK 2
P3 : Income statement on the basis of marginal and absorption cost
The income statement is refer to direct result of the data and information which is
collected and recorded in the ledgers and journals, and then make the record information in a
way where it will look more compiled, concise. The income statement is usually prepared on the
basis of monthly closing of the books, where it provides adequate picture of the expenses and
revenue of the business for a particular period of time. The income statement tool can be use by
the management of Portfolio payroll limited and also the investors and creditors of the company
can also evaluate the profitability of the organization (Lavia López and Hiebl, 2014). For the
preparation of income statement there are various methods used by the finance managers,
absorption and marginal are two most important method among them. On the basis of absorption
and marginal costing, income statement is prepared as below:
Statement of profit and loss as per the marginal or variable costing:
Statement of profit and loss as per the absorption costing:
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From both of the above table, it can be understand that use of different type of profit and loss
statement provide different amount of the net profit in the end. Absorption and marginal
approaches indulge with different time of expenses incurred in the operation and production. The
tables are clearly indicating that marginal method is using all the direct expenses and the variable
overhead cost of production. On the contrary of these the other statement is showing that direct,
variable and fixed expenses are using to determine the net profit. So , it can be clearly understand
that the amount of net income differ as per using the different system or approaches. According
to the marginal and absorption approaches net yield of the enterprise is £12600 and £9300.
Mostly entrepreneurs prefer the absorption method of costing to achieve the net profit because it
relies that all the expenses which incurred in the process needed to covered in the same period
from the sales. The above tables are clearly indicating that the net profit differ and the reason is
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the total amount of expenses are lower in the absorption method, whereas it is higher in the
marginal method.
Difference between the absorption and marginal method:
Marginal costing Absorption costing
The marginal costing is consider as a decision
making tool and technique for determining the
total cost of production for the organization
The absorption costing method is considered as
allocation of total cost to the cost center for the
purpose of determining the total cost of the
production in the organization
The cost recognition procedure in marginal
costing technique done in two different
manner, the variable cost is refers as product
and on the other hand the fixed cost is refers as
period cost
The cost recognition process in absorption
costing done in a single manner which is, both
the cost fixed and variable are refer as product
cost.
In the marginal costing approach the
classification of the overheads is done in two
different ways as like: Fixed and Variable
In the absorption costing technique the
classification of overheads is done by:
Production, selling and distribution and
administration
In the the marginal costing approach the
variances in the opening and closing stock has
no impact on the cost per unit of output
In the absorption costing technique the
variances of the opening stock and closing
stock has impact on the cost per unit of output
The marginal costing approach is useful in
highlighting the contribution per unit
The absorption costing approach is useful in
highlighting the net profit per unit
In the marginal costing approach the cost data
is presented in outlining the total contribution
of each unit
In the absorption costing the cost data is
presented in very conventional way
By the use of marginal costing method entity
will be able to analyse whole internal system
By the use of absorption costing approach
entity will be able to analyse overall external
system
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TASK 3
P4 : Advantages and disadvantages of different type of planning tools of budgetary control
The budget is play very significant role in itemized the summary of overall income and
expenses for a particular period of time. The budget in itself a valuable tool which is useful for
an organization to prioritize the expenses and managing the money. For the preparation of
budget various enterprises use different type of budgetary control tool in order to implementing
the budget (Hopper and Bui, 2016). There are different techniques and tools used by the
Portfolio payroll limited which are discussed as below:
Financial ratio analysis : Financial ratios are concerned with numerical representations
of the performance of business. The financial ratios refers as tool and techniques to measurement
of the business performance by analysing and interpreting the financial statement of the
enterprise. Portfolio payroll limited can use various different type of ratios in order to
determining the profit and revenue (Passarini, Pereira and Santana, 2014). Financial ratio
analysis use various different financial accounts such as: Profit and loss, cash flow statement,
balance sheet and so on. Below table is describing example of the profitability ratio :
Advantages
 Financial ratios can be useful for the managers of Portfolio payroll limited in order to
figure out the performance of the business and in which direction business is heading and
generating revenue for the enterprises
 Financial ratios make company able to assess the liquidity position which means
understanding that how much assets and liabilities of the enterprise is able to convert in
cash
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 Financial ratios provide the information to the organization so that they can be able to
provide maximum returns to their shareholders on the basis of their investment
 By the use of financial ratios Portfolio payroll will be able to make comparison their
previous financial years as well as condition of the competitors
Disadvantages
 Financial ratio can only generate fair result when all the financial statement and
information are available but in various cases it is not necessary that all the required data
is available and therefore the problem may arises in the use of the financial ratios
 Financial ratio not use any kind of qualitative data so the reliability of the collected data
is not fully reliable
Investment appraisal tools : Investment appraisal tool is also very frequent use tool in
the process of budgetary planning process. It concerned with measure whether the benefits of a
particular project exceeded the investment cost. Discounted and non-discounted are some
investment appraisal tools which can be use by an enterprise (Hall, 2016). Other than these
various other type of tools and techniques can be use such as: NPV, rate of return, profitability
index etc. Below table describe the example of the tools:
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The above tables are clearly indicating that the enterprise is having option of purchasing
two different machines and they have to choose one among them which is more profitable for
them. AS per the NPV and ARR machine B is looking more profitable as compare to machine A.
Advantages
 It is helpful in reducing the confusion of making an investment into two different criteria
by providing the outcome as which one is more profitable
 The managers of portfolio payroll limited can make the long term investment decision It is helpful for the firm in order to choosing one project among two or more
Disadvantage
 The long term decision can be influence badly from fluctuation in the overall economy
 The investment appraisal tool requires handling by someone who has expertise in these
area, which sometime cost to much from the perspective of the enterprise
Budget : Other than the financial ratios and investment appraisal tools budget itself
consider as an tool over budgetary planning. With the help of the budget Portfolio payroll
limited can make prudent financial statement for the by taking past year as a base. If the
performance of the previous year is better and profitable then it can be assumed that the future
performance will be as good according to the budget approach (Maas, Schaltegger and Crutzen,
2016). The budget can be prepare by the use of various tools and techniques such as: Zero based,
incremental, modem etc.
Advantages
 It is helpful for the management in taking the effective decision by assessing the future
information and various financial data or transactions By the use of budget Portfolio payroll will be able to manage the collection of the cash
and make appropriate strategies
Disadvantages
 The preparation of the budget is taking place on the basis of the past performance , so it is
not necessary that the all circumstances will remain same in the coming year as well
 The time taken in the preparation of the budget in very much which leads to reduce the
efficiency of the enterprise
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 Sometime budget can demotivate the employees because of there lack of participation as
the budget preparation work is done by the top level managers
Pricing:- Pricing is the method whereby the organization sets the price at which it will
sell its products and service. It is the part of marketing where the company used to determine
which types of goods and service produced and who purchase them. Basically pricing is the key
element of generating revenue from the market with customer satisfaction and needs or wants.
Various pricing approaches:-
1. Operation- orientation pricing.
2. Revenue orientation pricing
3. Customer orientation pricing
4. Social orientation pricing
Advantages
 It allows customer to decide on which price they want to buy. It is helpful for deciding the price of the product before manufacturing the product as per
the market demands or customer preferences.
Disadvantages
 The major disadvantage of pricing system is that people accepts or not the price set by the
company for a particular product or service in the market.
 The company inter with low pricing strategy in the market then earn lower gross profit
margin or increase the when their customer switching to another companies products. It is
the major problems of pricing.
P5 : Evaluation of how organization adapt the management accounting system to deal with
financial problems
Enterprises face various different type of problems which may arise because of financial
and non financial issues. As per according to the management accounting system companies can
use various different type of tools and techniques for overcoming such problems (Morales and
Lambert, 2013). The portfolio payroll can manage such problem by using below describes
management accounting system approaches:
Transfer pricing : The transfer pricing approach is already discussed above as it is the
price on which the parent companies sells services and goods to their subsidiary organization.
The cost related problems arise frequently in any organization. Manufacturing services cost can
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be higher if the available raw material is very expensive, in these case if company will purchase
the required raw material from the parent company the cost will be low comparatively.
Lean accounting : Lean accounting is very useful tool in term of managing , controlling
and reducing the waste. By the use of lean accounting the production cost is reduces and
enterprises become able to attain the position where they can save more money in term of cost
and expenditure. If these type of cost related issues will not arises in front of the Portfolio payroll
limited then surely the amount of financial problems face by them will be reduced (Gibassier
and Schaltegger, 2015).
Process costing : By the use of process costing tool Portfolio payroll will be able to
evaluate the cost and expenses of each and every activity which is taking place within the
enterprises. The operational level expenses can be determined and company can use various
approach to reduce the unnecessary cost. Through the use of the process costing technique
enterprise will be able to figure out the stage where production process expenses are arising and
then take appropriate actions (Fullerton, Kennedy and Widener, 2014).
Key performance indicator:- it is tool of measuring effectiveness of a function of a
company. It is very important for a core structural area of finance and accounting. It is helps in
analysis can spot long term trends and short term problems. An accounting payables department
creates a merchandiser accounts and pays their invoices. Example of KPIs the company include
all transactions from invoice receipts or payments.
Bench marking:- In this accounting system the organization comparing companies
accounting activity processes and performance level to solving the accounting problems of the
organization. Example adopting this strategy then the company find-out where stand in the
market and where the need of improvement in the financial sector.
Budgetary target or control:- It is well acknowledged that an organizational should
managed effectively and efficiently. It provides a financial carbon copy that evaluate a
organization coordination all its activities. Its estimates the carried work of the individuals to
further, helps the management in controlling any necessary area to be improved.
Financial governance:- Company concern as increasing more focus on the social issues
with the local commodity and geographical areas people, then make sure in resolving to
increasing economic conditions in magnitude to full-fill shareholders needs and corporate social
responsibility mode beneficial for the company and society.
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ERP software : Enterprise resource planning are computerised software are handled by
the employees in the organization. ERP software are work in a way so that it will be helpful for
the organization to manage the expenses by recording the previous and current year financial
transactions. If the all past data is available then the managers of the portfolio payroll limited
will be able to analyse the income and expenditure of the enterprise. The analysis will help in
the decision making process to making the firm more prudent in term of financial position
(Watts, Yapa and Dellaportas, 2014).
Conclusion
On the basis of the above collected information it can be summarised that various type of
management accounting reporting techniques and tools transfer pricing, transfer pricing, cost
accounting etc. are very useful approaches for the Portfolio payroll limited in context of
achieving the greater financial position. For the purpose of reporting to the management
accounting payroll, income, sales, manufacturing, expenses and so on will be helpful in
determining that how and on what context enterprise in responding towards the industry in the
context of finance. In the end it can be concluded that the techniques of marginal costing and
absorption are well method for the costing but they derive different outcome or results. ERP can
be effective tool for the portfolio payroll limited in order to determining that which management
accounting technique need to be adopt.
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