Management Accounting: Systems, Reports, and Techniques

This document provides an overview of management accounting, focusing on systems, reports, and techniques used in organizations. It discusses the benefits and applications of different accounting systems, such as inventory management, cost accounting, and price optimization. The document also explores the concepts of marginal costing and absorption costing. Additionally, it highlights the importance of budgeting in financial planning. The content is relevant for students studying management accounting in various courses and programs.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 ...........................................................................................................................................1
P2 ...........................................................................................................................................3
M1 ..........................................................................................................................................5
D1 ..........................................................................................................................................5
TASK 2............................................................................................................................................6
P3 ...........................................................................................................................................6
M3 ........................................................................................................................................13
D2 ........................................................................................................................................13
TASK 3..........................................................................................................................................14
P4..........................................................................................................................................14
M3 ........................................................................................................................................16
TASK 4..........................................................................................................................................16
P5 .........................................................................................................................................16
M4 ........................................................................................................................................18
D3 ........................................................................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
In today's business environment, management accounting is a continuous procedure
which is concentrated by managers of organisation in respect to analysis actual situation of
company. The main aim of this accounting is to direct internal stakeholders like staff members,
directors etc. to evaluate the real business situation as per the marketing activities which is good
or not. In case of ignoring by an entity so it shows bad impact of producing reports and accounts
on insider activities (Bol, Kramer and Maas, 2016). The organisation which is selected for this
report Alpha Ltd which is a medium sized company. It is situated in UK and specialised into
Pizzas. This report consist of various topics like accounting systems and reports to analysis the
actual performance. Along with to analysis the profit of company apply different costing
techniques like marginal as well as absorption. Furthermore apply various planning tools that
helps to predict and forecast position of company in future and compare selected company with
other company in same sector to analysis their business strategy and system to overcome from
the financial problem which is occur in every organisation.
TASK 1
P1
Management Accounting: Management accounting is linked to rules relating to
reporting information used to make tactical decisions. This is used by executives of any company
that effectively capture, evaluate and track financial details and increase market share. Alpha Ltd
managers often pay more attention to it so that, with the aid of management documents, a greater
level of reliability can be given to inner shareholders.
Management accounting system: It is the structured examination of business
information that organizations use to evaluate and evaluate their operation for organizational
management purposes. It is utilised to react to the organization's issues such as vendors, creditors
and shareholders. Every organisation wants to take effective decisions to conduct their business
operations, for this they are applying different types of system under management accounting
(Caskey and Laux, 2016). To make business decisions, it considers different convections and
accounting rules that are accompanied by companies. In the references of Alpha Ltd, executives
are applying for different kinds of management accounting system that supports to evaluate
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efficiency of business and know actual situation of a business at the market place. There are
mentioned different types of accounting system in details:
Inventory Management system: management of inventories are a process of storing
and ordering and using companies inventory stores. It includes the different types of materials,
and finished product available at warehousing and are in process of such items. There is risk
associated with the inventory present in the warehouse.. The essential requirement of this method
to track records of inventories. Firms uses three major method to have a proper maintain of
inventory levels in the management: FIFO, LIFO and AVCO. FIFO: The first in first out is the inventory management system where goods purchased
first are sold out first. LIFO: The last in first out method is other inventory management system, where last
goods products are sold out first in the stores.
 AVCO : Under such system, inventory is maintain on average basis over a certain period
of time (Dillard, Yuthas and Baudot, 2016).
Alpha limited companies used these methods to maintain the cost and price according to
the product. Changes these method from time to time.
Cost accounting system: It is a framework used by company to evaluated the cost of
product for the inventory control, cost reduction, for profit analysis. To maintain the track of
flow of inventory through the various stages of production, this system is used in the Alpha
company. They keep the track of everything from raw material goes into processing system till
they turns into finished goods. The credit the raw material account and debit the goods in process
account. There are two main accounting system, first is job order costing and second is process
costing. Job order costing is appropriate for the unit production and special orders. They charged
cost manufacturing cost separately for each job. Whereas, under process costing each process
include separate cost for each step. It is useful for the process, where different departments are
involved (Efferin and Hartono, 2015). The essential requirement of this system to analysis cost
of manufacturing of particular product. This provide better cost association with the each of the
process in the production of product.
Job order costing system: it is used to maintain the cost involved with a specific batch
of products. This system is useful for the Alpha limited company, because they have different
batches for the different products. They make sure that costs incurred in the product are
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reasonable to its prices for the customers. They maintain a job cost sheet to have proper record of
cost incurred in the production. It is a complex process. It tracks information from various
sources such as supplier invoices, payroll records, overhead allocation. When company has a
outcomes of continuous flow of product, low-cost, then this system is more appropriate. The job
cost is serves as a subsidiary ledger or the documentation for the manufacturer. This system is
required to analysis the job role in the business of each person. To have clear idea about the cost
of production, this system is used as the indicators.
Price optimisation system: It is a process of pricing the product where companies can
have price maximising and customer are will to pay. Companies like Alpha limited, gives right
amount if time for the companies to decide the price of the product and to attract customer from
time to time. It is a process to determine the price of product so that company can make profit in
the long run. It is essential require to understand the relationship between the pricing strategy,
that the competitors and customer willing to pay for the prices in the market. It is place where
price optimization is more more important then the reducing the competitors. It is most important
system that helps to set effective price stature of different products.
P2
Management accounting reporting: A document that produced by executives through
including scheduling, legislation, quality assessment and company choice-making processes
known as management accounting reports. It supports to keep both money and non-cash data
documents and then turn them into valuable business data. This report represents statistics, facts
and information about operations within organization. The main objective for this report is to
analyse the efficiency of the organisation and enhance the profit margins. Alpha Ltd's director
produces accounting documents that support the company community to make better rational
decisions.
Performance Report: This report is mainly produced by the organization to analysis the
performance of overall activities that occur in the organization. In this report track the
performance of each worker as well as organization. On the basis of this report apply appropriate
modification in organization to improve performance of company and staff members achieve
good position and monetary and non monetary benefits. These awards encourage them to make
more effort to achieve organisation objectives and aims in certain period of time. Such as, Alpha
Ltd produce this report to awarded individual for their commitment and completing target.
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Additionally, it is vital document for business in order to analysis business strategy for company
and according to that take appropriately steps (Friis, Hansen and Vámosi, 2015). Through this
report analysing the performance effectively and according to that prepare different strategies
for the business.
Budget Report: It is defining as most important report which is prepared by every
organisation to know actual position in present time and what will be in future. Budget report is
part of the internal report where organisation utilised this to compare budgeted projects with
actual report to track the profitability of an organisation. In this report analysis all the
departments after that set income and expenses for future activities to calculate actual cost. In the
context of Alpha Ltd can set budget that supports to states how much organization need to spend
more. Furthermore, through this report set which employee generate more incentive and maintain
profitability. The main purpose of budget is to provide a model how management should
performance their duties to make best use of available resource and to plan for further process.
Accounts Receivable Report: Every business is relies on credit, so it is important for
them to prepare account receivable report. The particular report support to manage all the
information regarding to creditors and credit period in which they return amount. This report
break down the left over balance in to particular period of time enables managers to recognise
the all the bad debts who did not pay amount with interest in credit period. After that identify
issues regarding to collection and sort out on the time to collect all due amounts. Such as Alpha
Ltd can prepare this report in order to prepare list of the creditors and their credit time. It helps to
collect amount on time and provide more time for collection. The credit time period classified as
30 days, 60 days and 90 days (Gimbar, Hansen and Ozlanski, 2016).
Inventory management Report: The particular report is utilised by the organisation to
collect the information about stock or finished goods which is known as inventory management
report. Through inventory report supervisor can analysis the level of stock and their usage at
every step. As a result they are continuing manufacturing activities and order for more stock for
further activities. Such as, manager of Alpha Ltd can produce this report to understand the stock
level at warehouse. Along with know how many types of ingredients uses for make Pizzas at
different procedure of manufacturing. It helps to track cost of goods sold, avoid overselling and
underselling and create custom reports. Alpha Ltd, use inventory management reports to see how
much cost in involved to produces a single set of product.
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M1
Management
accounting systems
Benefit and application
Price optimisation
system
It is most important system which is utilised by the company to set
effective price structure and know the reviews of customers regarding
to their products and services. If customer did not satisfy with the price
so apply appropriate modification to attract customer regarding to
product. For Alpha Ltd essential require of this system to apply
effective price strategy as per the market requirement.
Inventory
management system
It is beneficial system which is applied by all the systems in order to
track the stock level from warehouse to production sites. If at any stage
require to more material so it helps to supplied on time. Alpha Ltd
through this system arrange raw material on time and continue the
procedure of manufacturing pizzas (Leitner and Wall, 2015).
Job order costing This system provides different advantages to compute profit generated
on particular job role and supports to allocate manager for particular
job. The implementation of this system described by manager of Alpha
Ltd to categorise cost for the particular department in the
manufacturing procedure to continue work efficiently.
Cost accounting
system
Through this system measure the cost and efficiency of the business to
increase in effective manner. This system can help to maintain cost and
applied by the manager of the Alpha Ltd in order to deduct cost of
material and allocate in different departments as per the requirement.
D1
Management accounting system as well as reports are integrated with each other in the
organisational procedure due to increase profit, market share. Accounting system can applied by
the organisation to recognise the efficiency and reports are utilised to track the records of
different departments. Such as, Alpha Ltd apply accounting system and prepare the reports to
increase performance and smoothly run organisational procedure. When company prepare the
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inventory management report so for this apply inventory management system that helps to
collect every information regarding to raw material that record in the report and present in front
of management. Through cost accounting system set the actual cost of the product that helps to
prepare cost accounting reports and calculate the amount of each material that utilise in the
manufacturing procedure (Manyaeva, Piskunov and Fomin, 2016).
TASK 2
P3
Marginal Costing: It is type of the costing system where organisation analysis the cost of
extra units which is manufactured as per the demand of customers. Through this technique easily
analysis the cost of extra pizzas in the Alpha Ltd.
Absorption Costing: The particular technique applied by the business to calculate actual
cost regarding to production at time. In the context of Alpha Ltd manager utilise it to make sure
about the related pizzas that recover through revenues.
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2b If machine is installed:
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Scenario 2. If machine is installed:
Reconciliation of Profits under the two systems:
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M3
For the costing techniques applied different types of management accounting techniques
which is utilised by the Alpha Ltd such as:
Standard Costing: To control over all expenses required to apply particular method by
Alpha Ltd and it will supports to determine the reason of variation in between actual and
standard expenditure.
Historical costing: The particular technique direct to manager and calculate the actual
cost.
D2
To calculate the profit of the company apply absorption and marginal costing method and
get different outcomes from computation. As per the different scenario get different result from
the both methods and result changed. There are BEP calculating in units as well as revenues then
compute PV ratio which is 30% and contribution margin ratio is 30%.
TASK 3
P4
Budget: It is a document which is based on the estimation of revenues as well as
expenses in certain period of time. Budget is mainly complied and re evaluated on periodic basis.
It presents financial predication the cost of the company. It is also defined as quantitative
statement in which it produced for particular time for further activities. Through budget company
analysis the all section and associated risk and profit regarding to future.
Budgetary Control: The controlling procedure which is related with the particular
procedure that is adopted by manager of various organisation that known as budgetary control.
Through budgetary control analysis actual efficiency of business and intensify effectively
because it supports managers to search reason which are resulting in variance between actual and
budgeted plans. In the context of Alpha Ltd, a manager concentrate on this control in order to
preparing, coordinating and controlling the procedure for the circulation of budgets
(Seethamraju, 2015). There are defined different planning tools that is utilised by management of
the organisation which is defined below:
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Variance Analysis: It is defined through difference between actual amount and predict
amount and it comes when budgeted amount are different from the actual amount. These
variances occur when condition of market change so results is wrongly predicted etc. It is utilised
by the Alpha Ltd for the reason of difference between actual and budgeted figure. There is
mentioned advantages and disadvantages in detailed such as:
Advantages: It is most essential tool for the manager of Alpha Ltd in order to measure the
efficiency through differences between planned and actual performance. Variance analysis
motivate to management for efficiency by deducting the differences between actual and planned
amount. It supports to understand the movement in the variances and assess the performance of
managers.
Disadvantages: The main disadvantage of this analysis that it take long time to analysis
the effect of the variance. It take time for correct actions by management due to broad research.
Standard Costing: It is defined as comparison tool where analysis the actual cost with
the planned cost to search difference. It helps to management to take effective decision to reduce
the variances in amount. When actual cost is greater than standard cost so that time variances are
unfavourable and when actual cost are less than so variances is favourable (Luft, Shields and
Thomas, 2016).
Advantages: It offers formation of approaches easily for the manager, it also support to
reduce mistake and improve the entire production in respect to deducting cost effectively.
Disadvantage: It consist of high levels of technical skills which will increase their cost of
manufacturing but due to changes climate regarding to business so impact on the standard cost.
Flexible Budget: The particular budget presents and forecast changes as business activity
changes. It is more reliable as its changes according to levels of activities changes in the
management.
Advantages: It supports to business to predict accurate amount of results and to be
produced to accomplish predetermined profit level.
Disadvantages: Due to Alpha Ltd have lack skilled work forces as per the business
environment. Along with some times book of accounts provide wrong amount that mention in
the flexible budget (Masoud, 2016).
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Capital budgeting tools: It is a procedure where analysing various options that available
for making investment and then choosing one of them for make investment. There are discussed
several types of techniques which are used in it. All of them are mentioned underneath:
NPV (Net Present Value): It is a technique of capital budgeting where an organisation
able to analysis the actual value which could be acquired by the business due to sale out assets in
potential period of time.
ARR (Average rate of return): This technique is applied by the organisation in order to
analysis the average rate of return which is acquired by them to make more investment by the
company.
Advantage: This rate helps the manager to choose good investment for the organisation so that
profits can be achieved in time.
Disadvantages: This rate calculation method leads to difficult for manager to study the project
from the start.
IRR (Internal rate of return): According to this technique of capital budgeting a
business can determine the attractiveness of various options which are available to make
investments. It is the interest rate where net present value of all cash flows whether they are
positive are positive or negative become zero.
Advantage: It is the most trusted method for forming capital structure of the organisation so that
manager make better decision.
Disadvantages: This rate make difficult for the manager to choose the investment present in the,
market.
Payback period: This method applied by the organisation in case of evaluate the value of
time when the investment cost will be recovered by them. If through any project get good return
in short period of time that is known as most effective investment.
Advantages: The capital budgeting tool can help to meet with the long term business
goals as it help to search best suitable investment alternatives. It is advantageous for the business
as it helps to stakeholders interest in the business could be improved by providing them with
attractive investment alternatives (Mouritsen and Kreiner, 2016).
Disadvantages: To apply these types of budget required to have professional knowledge
and get effective outcomes. These results get on higher cost of company. Due to uncertainty
provide result in losses due to not apply effectively which is depended on forecasting.
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M3
Planning tools can plays significant role in any organisation that support to business
make future plan for the investment ad explore the business activities at large level. Different
types of planning tool such as variance analysis, standard costing, flexible budget and different
capital budgeting techniques such as NPV, ARR, IRR etc. to generate more profit. Such as,
Alpha Ltd can apply these tools to set effective future goals and accomplishing them in shorter
period of time. The main aim of these tools that maintain profit by controlling over cost and
expenses that occur due to moving business operations (Serrano-Cinca and Gutiérrez-Nieto,
2016).
TASK 4
P5
Financial issues are main issues which is occurred in different types of organisation due
to expand business activities and present in market. So for the manager it is required to
concentrate on financial issues that arise in Alpha Ltd then find effective solution to sort out
these financial problem. There are mentioned problems of Alpha Ltd such as: Errors in accounting records: When accountant did not focus on every transaction and
did not record in the accounting books so occur many errors on yearly basis.
 Inadequate protection of assets: When all the assets are utilised by organization so
formulate transaction are not secured effectively so outcomes comes as lack of funds for
organisation. The organisation is handling the situation with management affiliated
problems and it show impact on operations (Shiau, Chen and Tsai, 2015).
To bring out all the operations in effective manner it is essential for manager of the
company to recognise and handle both financial problems. With the reason recognisance by these
tools such as:
KPI: It is a technique which is applied by the organisation to measure financial and non
financial efficiency. These tools consist of internal and external performance of business which
supports to know which activity impact as financial issues. KPI guide to manager of Alpha
Limited to determine the difficulty of in adequate security of assets. Financial KPI is
advantageous that helps to know reason of the particular problem.
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Benchmarking: This procedure used by the business to compare the efficiency with
other company and know their financial strategy and which system applied effectively to reduce
the financial problem. Many experts of accounting determine the mistake which are made by
them due to record transactions in accounting books. So through this tool recognise
mismanagement in accounting records.
In order to tackle these problems apply the financial governance by the Alpha Ltd which is:
Financial Governance: In this activity of controlling, perceptive as well as assembling
all numerical information through accounting convections. Most of the organization can path all
the business transaction to arrange execution. Selected company follow all principles to analysis
all the problems effectively.
Activity based costing: It is a type of cost accounting technique which is focused on the
reason of allocating costs through business activities like promotion, marketing, manufacturing
and promotion as per the demand. Alpha Ltd adopt it and provide response of Inadequate
protection of assets.
Balance scorecard: It is performance metric based tool which is applied by the business
for the strategic management as well as recognise and amend all the inner activities as per the
gain effective external results. Alpha Ltd can reply to particular financial problem of errors in
accounting records after analysis the performance of accountant and guide how to record every
transactions.
Comparison between both organisation
Management
accounting
techniques
Sainsbury Tesco
Activity based
costing and
inventory
management system
The manage of the company applied
particular technique to sort out the
problem of the Inadequate protection
of assets (Friis, Hansen and Vámosi,
2015).
This company depended on the
costing which is recognised
different business operations to sort
out the problem of shortage of
fund.
Key performance
indicators and cost
Through Financial KPIs by manager
can resolve the issue of errors in
The particular technique is utilised
by the manager in order to track all
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accounting system accounting book. For this required to
apply the cost accounting system to
analysis the records effectively.
the expenses that could not faced
and impact on the operation of
organisation (Zalaghi and Khazaei,
2016).
M4
In the context of the company it is essential for any business organisation to face all the
financial issues. It is applied by the organisation to arrange all the records in proper manner to
maintain productivity as well as profitability of the business. The main reason of the
management accounting that through management tool identify the financial problem then
through accounting system sort out these problems to get better result for future.
D3
Standard costing, flexible budget, variance analysis and capital budgeting techniques
such as NPV, IRR, ARR etc. are the planning tools which are using by Alpha Ltd to identify
actual situation as well as financial issues. Such as, manager of Alpha Ltd can invest money in
different things so for this require to apply planning tools that helps in accurate estimation.
Manager of such organization has decided to use the planning tools which provide all relevant
financial information in order to solve financial errors. By solving such problems organization
can make profits effectively and maintain the productivity also.
CONCLUSION
As per the above discussion it is concluded that management accounting important part
of the business which is applied different systems and report to present accurate and actual
position of the company in front of internal management. It supports to maintain profit and
enhanced the performance at large level. With the help of different planning tools analysis the
performance of the business regarding to future and related risk. To calculate the profit for the
business use different techniques like marginal and absorption costing method effectively. To
recognise the financial problem apply KPI, Benchmarking and financial governance and
compare with same industry to know other company systems and activities.
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REFERENCES
Books and Journal
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