Project Management Accounting

This report discusses management accounting and its methods used as measurement and planning tools for evaluating performance. It also covers the use of planning tools for budgetary control and how companies can use management accounting to respond to financial issues.

Running head: PROJECT MANAGEMENT ACCOUNTING
Project Management Accounting
3/27/2019

PROJECT MANAGEMENT ACCOUNTING 1
Table of Contents
Introduction................................................................................................................................2
Task 1.........................................................................................................................................2
Management Accounting.......................................................................................................2
Essential Requirements of Diverse Types of Management Accounting System...................2
Job Costing System............................................................................................................2
Price Optimising System....................................................................................................3
Cost Accounting System....................................................................................................3
Inventory Management System..........................................................................................4
Methods of Managerial Accounting Reporting......................................................................4
Benefits of Management Accounting.....................................................................................5
Evaluation of how management accounting systems and management accounting reporting
is integrated within organizational processes.........................................................................7
Management accounting reporting integration with ABC Ltd..........................................7
Management accounting system integration with ABC Ltd..............................................7
Task 2.........................................................................................................................................8
Task 3.......................................................................................................................................10
Advantages and Disadvantages of Planning tools used in Budgetary Control....................10
SCORO............................................................................................................................11
Prophix.............................................................................................................................11
Use of Planning Tools and their application for forecasting and preparing Budgets..........12
How planning tools for accounting respond appropriately for solving financial problems to
lead organizations to sustainable success.............................................................................13
Task 4.......................................................................................................................................14
Comparison of how companies are adopting systems of management accounting to
respond to financial problems..............................................................................................14
Financial Indicators..........................................................................................................15
Non-Financial Indicators..................................................................................................16
Analysis of how reacting to financial problems, management accounting can result in
organizations towards sustainable success...........................................................................17
Evaluate How planning tools for accounting respond appropriately for solving financial
problems to lead organizations to sustainable success.........................................................17
Conclusion................................................................................................................................18

PROJECT MANAGEMENT ACCOUNTING 2
References................................................................................................................................19

PROJECT MANAGEMENT ACCOUNTING 3
Introduction
The aim of the report is to critically discuss the management accounting and its methods that
are used as measurement and planning tools for the company in order to evaluate its
performance. The report also discusses the use of numerous tools for planning for budgetary
control. Analysis has been presented regarding the way companies can make use of
management accounting to respond to financial issues.
Task 1
Management Accounting
Management accounting is the technique of classifying, computing, analysing, understanding,
and communicating data or information to the executives in order to attain the goals of the
organization. The key difference between financial accounting and managerial accounting is
that, financial accounting is focused at presenting information to the parties present outside
the company, whereas, managerial accounting is focused at supporting executives in the
organization in making decisions (Debarshi, 2011).
Essential Requirements of Types of Systems of Management Accounting
Job Costing System
It is one of the systems that are used to allocate manufacturing cost to every product by
maintaining the track on expense monitoring. ABC Ltd. can use this system at the time when
the goods are indistinguishable in order to maintain the track of order expenses. Job costing
accounting process is comprised of:
Receiving Enquiry – The key concern of the consumer is material quality.

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Estimate price of the job – The job costing is majorly done by the company’s auditor by
considering the preference and taste of the consumer (Blocher, 2006).
Receiving order – The order is placed by the consumer if he/she is assured regarding price
constraint.
Production order – It is positioned for initiating the procedure of production.
Cost recording – Each cost aspect in the procedure of production is logged.
Completion of Job – By completing the production, a report is submitted to the accounts
department for the financial costing of the job. The department then compares the data with
the estimated cost (Drury, 2013).
Price Optimising System
Price optimizing system is majorly utilized to manage the resource prices. This system could
be utilized in deciding the multiple products prices at a time. It supports defining how the
demand will alter at different levels of price (Phillips, 2005). ABC Ltd. can make use of this
system for modifying the prices for consumer divisions by pretending their retorts to diverse
levels of price.
ABC Ltd. will make use of this system because it will support the business in defining
structures of the pricing which is comprised of initial promotional pricing, pricing, and
discount pricing.
Cost Accounting System
This scheme supports the business in estimating the cost of the service or product while
investigation could be made regarding cost control, inventory and organizational profitability.
Two essentials of the effective cost accounting system are presented below:

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Participation and cooperation of the managers are needed by diverse departments –
This will confirm proper participation and cooperation in the creating of the cost accounting
system that can support organization in precise allocation of product’s cost (Rajasekaran,
2010).
Simple and Flexible – The developed system of cost accounting must be simple that could
support in the execution. It must encounter the necessities of numerous users and familiarize
accounting to the requirement of the company.
Inventory Management System
Inventory Management System is focused towards the direction and management of the
assets that are non-capitalized and company’s stock. Organizational procedure in ABC Ltd.
could be combined with this kind of system in order to attain an effective and efficient
inventory flow in the organization. Few of the essentials of this process are:
Inventory management can be done physically as well as monetarily– Numerous advantages
like appropriate inventory management and decreasing cost are attained through this (Muller,
2011).
Replenishing and forecasting policies – This support the company in advance management
and cost requirements preparation.
Methods of Managerial Accounting Reporting
Managerial accounting is specifically used for decision making, controlling, and planning.
The accountants are based on financial statements comprises balance sheet, income
statement, and cash flow statement. Besides this, they also make use of different kinds of
reports for evaluating the information of the company comprising, performances, cost reports,
and budgets (Adler, 2013).

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Cost Reports – Managerial accounting regulates the item's price. It is completed by
considering the prices of the entire fresh product, labor, overhead, and other prices. The total
cost is then divided by the totals of created items. These types of reports represent complete
data in brief and allow executives the capability to look at the cost of good vs selling costs. It
also supports executives in planning and managing income limits (Zain, 2019).
Budgets – The key constituent of Management accounting is the scheduling of expenditure
plans. Budgets are generally created by making use of financial strategies of earlier plans and
adjusting to upcoming forecasts. The spending of an organization lists all the expenses and
incomes sources. The organization put its efforts to attain its goals by maintaining the
budgeted amount (Johnson, 2013). Executives or managers constantly search for new sellers
in order to use them as the provider of raw resources to spare cash. Similarly, it determines
the methods to enlarge deals while diminishing costs.
Execution Reports – The accountants make use of spending plans in order to compare
honest uses and incomes with deliberate sums. After defining new budgets, the planned
alterations are analysed and complete data is listed on the performance report. Every year
performance reports are computed, in many cases, organizations create them quarterly or
monthly (International Monetary Fund, 2011). These reports allow management to be
prepared for the coming future product demand and cost addition.
Benefits of Management Accounting
The main aim of accounting information is to support decision makers like managers,
government agencies, and investors.
System Advantages
Price Optimizing System ABC Ltd. can define the approach to attract

PROJECT MANAGEMENT ACCOUNTING 7
consumer by different product prices.
It supports consumer segmentation
Support in boosting of operating profit
through best prices (Gustavson, 2010)
Inventory Management System This system can help ABC Ltd in enhancing
the accurateness of its inventory orders.
It will enhance the effectiveness and
efficiency and support in saving money and
time.
Job Costing System ABC Ltd. will get the support of this system,
in estimating all the cost during the
procedure of manufacturing
It will stop duplication
It will ensure quality work
Cost Accounting System ABC Ltd. can evaluate the effectiveness of
its procedures and then contribute to making
enhancements with the help of this system.
Offer required information for planning
It will support in reducing the prices
(Horngren, Bhimani and Horngren, 2002)
Systems of management accounting and reporting of management accounting are
integrated with organizational procedures
Management accounting reporting integration with ABC Ltd
Management of accounting reporting Integration with ABC Ltd.

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Budgeting The organizational procedures of ABC Ltd.
and budgeting reports are integrated as these
reports will provide a direction to the
activities of the company to focus on targeted
outcomes and goals in a superior manner
(Lalli, 2011).
Cost Reports ABC Ltd. Company activities must be
focused on attaining the cost objectives and
cost reports can support company in
simplifying the selection procedure of pricing
policies for the business and decreasing the
product total cost.
Execution Reports ABC Ltd. and Execution reports are
integrated because these reports will support
executives to plan for forthcoming
productions and increased cost can result in
higher profitability.
Management accounting system integration with ABC Ltd
Management accounting system Integration with ABC Ltd.
Price Optimizing System Price Optimization system is integrated with
the objective of ABC Ltd. as it will support
the company in targeting different segments
of the customer with the help of different

PROJECT MANAGEMENT ACCOUNTING 9
price level.
Inventory Management System The inventory Management system will be
integrated with the company has it will
effectively manage them in the stock of the
company which will result in reducing
wastage and price (Stevenson, Hojati and
Cao, 2007).
Job Costing System Job Costing system is integrated with the
procedures of ABC Ltd. as it will reduce the
chances of duplicity and enhance the quality
Cost Accounting System The cost accounting system will be integrated
into the system of the company because it is
focused on providing the required
information for preparing reports which will
eventually support in reducing the manual
efforts and company's cost (Maingi, 2013)
Task 2
Calculation of the production cost per unit
Marginal
Costing
absorption costing
Production cost per unit
Direct materials 10 10 180000
Labours 20 20 360000
Overhead 5 5 90000
35 35
Less: Fixed cost 5.6 100000

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Fixed cost per unit 5.56
Cost per unit 35.00 40.56
cost of sales
variable costing 490000
Absorption costing 528889
2 Profit and loss statement Marginal Absorption
Sales 800000 800000
Less: Variable cost
Opening Inventory 0 0
Direct materials 160000 160000
Direct Labor 320000 360000
Variable production overhead 80000 90000
Less: Closing Inventory 70000 81111
Contribution 170000 108889
Less: fixed costs 100000 100000
Profit 70000 8889
3 Profit and loss statement Marginal Absorption
Sales 800000 800000
Less: Variable cost
Opening Inventory
Direct materials 160000 160000
Direct Labor 320000 360000
Variable production overhead 80000 90000
Less: Closing Inventory 105000 121667
Contribution 135000 68333
Less: fixed costs 100000 100000
Profit 35000 -31667

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Task 3
Planning tools used in Budgetary Control
Tools of budget planning are utilized to plan, manage, and forecast the budget of the business
that must be managed and executed to attain the targeted goals and outcomes. In recent time,
companies are converting their operations in more advanced systems used for planning
strategies that have lifted the traditional budgeting tools trends towards the tools and software
of cloud-based budgeting (Chen, Weikart and Williams, 2014).
SCORO
This kind of tool for planning support in uniting numerous sorts of budgeting with different
tools in order to track the complete business under a single system and offers a united
proposal for the organization (SCORO, 2019). It offers the ability to handle numerous
expenses and resources accessible with the organization by managing the budget of the
project.
Advantages of SCORO are
 Financial Reports and examination support in the assessment of the planned goals and
definite presentation
 Through this tool, invoices offer an automated revenue stream which supports in
superior planning and forecasting (Crunch Base, 2019).
Disadvantages of SCORO
 Implementation of SCORO budgeting tool will be costly and time consuming for the
company.
 The entire automation system cannot meet the complete requirements which
eventually require team efforts and capabilities to set up everything (Chiuariu, 2016).

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Prophix
Prophix Software is introduced as the solution for organizations to track and improve
performance. This reflects that the tool is comprised of numerous numbers of smaller tools
for resource management that are accessible to the business and planning the budget
(Prophix, 2019a).
Advantages of Prophix are
 Supports in managing, predicting, and planning
 Appropriate financial, constitutional and management reporting that supports in
taking proper judgment and assessment of the performance
 Help in precise scheduling of the cash flows that confirms the liquidity feature of the
business (Prophix, 2019b)
Disadvantages of Prophix
 Many times Prophix is slow in generating reports
 User roles and licensing is unclear for the clients or users (Get App, 2019)
Planning Tools and their application for forecasting and preparing Budgets
Planning Tools Application
SCORO SCORO Budgeting tool will offer multiple
budgets to the ABC Ltd. management team
and in place of utilizing tools for handling
clients, work, and finance it works as a sole
resolution for the budgetary control.
Besides this, it syndicates budgeting with
online project management and CRM, which
support in managing the complete business

PROJECT MANAGEMENT ACCOUNTING 13
under sole solution and get complete
financial database at a single place (Crunch
Base, 2019).
Prophix Prophix tool will provide ABC Ltd. a natural
product that improves that continually work
towards the growth of the business and
projecting becomes very simple as well as
easy due to the compliance and flexibility of
the tool. The process of creating budgets
becomes easy and the allocation of the
resource is assessed and analysed in a proper
way that confirms that the business attains
efficiency in operations (Prophix, 2019b).
How planning tools respond suitably to solve the financial problems to take
organizations towards sustainable success
Numerous tools of planning support the administration of the company in recognition of the
financial issues with the support of tools and methods of management accounting. The data
gathered through these planning tools support in creating strategic guidelines and making
financial judgments that could add in the financial achievement of the company (Calin,
2010). Tools support in controlling and implementing the decisions related to investment.
The investigation and understanding of the financial data will support external reporting that
confirms justifiable development of the business. With the implementation of the tools if
planning company have a key influence on the issues of sustainability.

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Management Accounting is supporting in diverse planning and strategic decisions that are
explained below:
Planning and Controlling – Planning and controlling is the main management accounting
element and ABC Ltd. have to place planning to set the directions for the company and
control system to confirm that each operation is implemented as per planning.
Implementing Planning – Executives with the help of methods of management accounting
gathers much information comprising product cost, budgets, and performance reports
constantly for the execution of strategies set within the procedure of budgeting (Kasurinen,
2002). This supports the ABC Ltd. administration in resource allocation as per the different
department and division requirements comprising every specific procedure.
Competitive Edge – It could be noticed that well-organized businesses line their objectives
and strategies towards attaining competitive advantage (Kozak and Baloglu, 2010). Hence,
the strategies of the organizations by using the techniques of management accounting are
attentive on attaining competitive advantage within the industry, by concentrating on brand
image and low cost.
Task 4
Comparison of how companies are adopting systems of management accounting to react
to financial problems
New situations of the business have changed in past some years where the information has
been taken as the considered as the key resource for evaluating important resource for
assessing the organization's performance, recognizing the financial issues concerned with the
variances identified in the standardized standard of the indicators of the performance. This
has led to the use of numerous practices of management accounting that establish the

PROJECT MANAGEMENT ACCOUNTING 15
benchmarks, uses non-financial and financial key pointers of the performance in order to
analyse the company's enactment imitating the way it inclines to emphasis on lasting
sustainability phase (Maskell, Baggaley and Grasso, 2016). The use of the budgetary control
in the planning and implementing numerous actions of ABC Ltd. will support the company to
concentrate on attaining the set criterions for the targeted consequences directing to meeting
the anticipated goals of the organization.
Financial Indicators
Basis Key performance
indicators
Respond to financial
problems
Revenue Ratio Sales Growth
Sales
Analysis of trends in sales
and growth
Offering to track of the
portion of the sales equation
with the help of the CRM
system (Coad and Rao, 2010)
Profitability ratio Gross Profit Margin
Percentage of selling cost
Administrative percentage
Sales percentage that a
business has left in order to
pay the operating cost and
earn a profit (Saleem and
Rehman, 2011)
Utilized in budgeting,
benchmarking and setting
goals
Utilized in budgeting,
benchmarking and setting

PROJECT MANAGEMENT ACCOUNTING 16
goals
Solvency, debt, and
liquidity ratio
Quick Ratio
Working Capital
Current Ratio
Adequacy of liquid assets in
terms of short-term debt
The capability of the
company to stay solvent
utilized for the accessibility
of daily requirements.
Highlights the capability of
the company to pay debts
(Babalola and Abiola, 2013)
Non-Financial Indicators
Human Resource Management In the present business scenario, companies
have started considering their staff as the key
asset and the key factor for attaining business
success.
Service and Product Quality It has been noticed that issues identified in
the service or product quality of the business
influence the long-run sustainability and
results in customer dissatisfaction. Hence, it
must be compared with the competitors’
product quality (Kugler and Verhoogen,
2011).
Company profile and Brand awareness The evaluation of the brand and the profile of

PROJECT MANAGEMENT ACCOUNTING 17
the company can highlight its future
development and growth.
Examination of reacting to financial problems can result in organizations sustainable
success
The executives of the company need to provision the sustainable and strategic objectives with
the developed dogmas and approaches
Techniques and tools of management accounting like standard costing, breakeven analysis,
and marginal costing, etc. support in the incorporation of sustainable substances into
numerous procedures of policymaking.
Management accounting support in the report production that comprises information
regarding sustainability that will increase the understanding of the pricing, strategic planning,
and budgeting (Damodaran, 2010).
Supports in the creation of the reporting strategy that will incorporate problems related to
sustainability which will permit reporting of financial and non-financial information.
How planning tools respond suitably to solve the financial problems to take
organizations towards sustainable success
From the above analysis, it has been evaluated that numerous planning tools support the
management of the company in recognition of the financial problems with the support of
tools and techniques of management accounting. The information gathered from these tools
of planning support in creating strategic directions and taking financial decisions that could
add to the financial achievement of the business (Calin, 2010). The inspection and
understanding of financial data will support external reporting that confirms the sustainable

PROJECT MANAGEMENT ACCOUNTING 18
development of the company. Management Accounting is helping at different planning and
strategic decisions levels:
Planning and Controlling – It is one of the main management accounting element and ABC
Ltd. have to place planning in the place in order to set the directions for the business and
control system.
Implementing Planning – Executives with the help of methods of management accounting
gathers much information comprising product cost, budgets, and performance reports
constantly for the execution of plans set in the procedure of budgeting (Kasurinen, 2002).
Conclusion
The above report has represented different aspects and importance of Management
accounting and its tools that are utilized by the accountants in order to manage their
operations of the business. From the above analysis, it has been identified that Management
Accounting is the procedure of classifying, calculating, analyzing, understanding, and
communicating data or information to the executives in order to attain the goals of the
organization. There are different methods of management accounting reporting some of them
are job costing system, cost accounting system, inventory management system, and price
optimizing system. ABC Ltd. has to apply and execute all the strategies and tools discussed
above for its successful survival and development in the sector of manufacturing. As it offers
the data-driven input to the executives in order to make a decision and help in enhancing the
decision-making quality.

PROJECT MANAGEMENT ACCOUNTING 19
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