Management Accounting Financial Report 2022

MANAGEMENT
ACCOUNTING

TASK 1- REPORT ON ROLE AND FUNCTION OF MANAGEMENT ACCOUNTS
DEPARTMENT
Part 1
A. Management accounting and the essential requirement of different types of
management accounting systems
Management Accounting
Management accounting, also known as the “cost accounting” or the “managerial
accounting” denotes a process of evaluation of the business costs and operations of an entity.
The said analysis aid in the preparation of the internal financial accounts, records and reports
to aid the management of the enterprise in the policy formulation and implementation for the
achievement of the business objectives. Thus, the management accounting enables the
managers of the enterprise to gain a better understanding of the financial and costing data to
translate the same into useful information for management and varied range of stakeholders
within an organization.
Essential requirement of different types of management accounting systems
The essential requirement of different types of the management accounting systems is
provided in the following segment. Inventory management system is aimed at controlling and
overseeing the various aspects of the inventory of an enterprise. This involves the control
over the ordering, use, and storage of constituents of the raw material, consumables, goods
and supplies to be used in the production as well as the units of the finished goods (Drury,
2015). The inventory management is required in an enterprise for maintaining the adequate
inventory levels by the reduction in the overstock and understock situations and gain an
accurate understanding of present inventory levels. The cost accounting system is
necessitated to compute the actual cost of the products by taking into account the inputs costs
at various stages of the operations arising out of the production processes and the fixed costs
of the entity. The analytical tools such as the operating costing, standard costing and marginal
costing enable the better understanding of the cost function. The next accounting system is
that of the job costing by which the manufacturing costs comprised of direct materials, direct
labor, and direct overhead; is allocated to the respective item or batch of the products. Thus,
the significance lies in the ability to quote the price depending on the relevant costs involved.
The last type of accounting system is the Price optimization system. The process of price

optimization is aimed at determining the consumers’ reaction to various prices for the goods
and services by the application of mathematical analysis. Thus, the said accounting system
aids the company in the maximization of the operating profit, quick selling of the products by
fixation of the best price possible (Edmonds and Olds, 2013).
B. Different methods used for types of management accounting reporting
An organisation’s performance can be monitored by the preparation of various accounting
reports on the periodical basis that give useful insights about the internal functioning and
operations of the enterprise. It must be noted that the significance of the information
presented lies in the relevance, reliability, accuracy and the timeliness of the data presented
therein. In addition, the said information must be presented correctly that is free from the
errors and must be understandable by the users of the reports. The information can be
presented in different forms as listed below.
 Budget Reports: The preparation and presentation of the various budgets is one of the
most crucial exercise of the internal managerial function. The preparation of the
budgets is done with the aid of application of data of the budgets of prior years and
the same is further adjusted in accordance with the future forecast of the expected
business environment (Nishimura, 2013).
 Cost Reports: The costs of items manufactured is calculated and presented in the said
reports. The cost is comprised of the price of raw material, costs, labor plus any
additional direct cost. The cost per unit is determined by dividing the total costs by the
units of goods produced and summarized into the cost report. Thus, the costs of
various goods and services is compared to each other as well as against the selling
prices.
 Accounts Receivable Aging Reports: The said report is a crucial aid for the cost
managers for the evaluation of the cash flow position in the company. The report aids
in the identification of the problems with the collections process of the entity.
Accordingly, the credit policy of the company is amended to maintain the flow of the
cash in entity.
 Performance reports: The actual revenues and expenditures of an enterprise are
compared to the budgeted figures for a respective period. The resulting differences are
and the reasons for the differences are recorded in the performance report. The
frequency of the performance report can be quarterly or monthly, depending on the