Role of Management Accounting and Management Accounting Systems

Part 1
Introduction
This report was created by an accounting clerk at Hawthorn in order to obtain a knowledge of
the company's many divisions and their interrelationships. In order to get a fundamental
understanding of management accounting, this study examines its functions, duties, and
principles. It also explores the management accounting system and various reporting
techniques utilised in this area.
Management Accounting
"Management accounting" may be described as the process by which accountants use their
professional abilities and expertise to effectively prepare accounting information that aids in
formulating policy and decision-making for an organization's operations and planning
control. To put it another way, Professor J.B. batty says management accounting is a phrase
used to describe the systems and processes that are used to aid management in maximizing
benefits and avoiding losses in their operations. Business owners and managers may use the
notion of management accounting to help them make better choices, formulate rules, and
organise and monitor activities in order to increase their company's productivity (Duska et al.,
2018).
Functions of Management Accounting
Management accounting's primary responsibilities include these:
1. Planning and forecasting: It refers to giving the essential data and information to produce
short- and long-term projections and plans for corporate operations (Weetman, 2019).
Analyzing data and creating business strategies requires the application of a wide range of
approaches, including statistics, probability theory, correlation, budgeting, and cash flow
analysis.
2. Organizing: To put it another way, it's the process of determining what resources are
available and how to allocate them in accordance with established plans.
3. Coordinating: It refers to ensuring that policies and procedures are developed and
implemented at all levels of management and departments of the organisation.
4. Controlling performance: Methods like budgetary management, standard costs, costing
ratios, cash flow statements and the assessment of the capital expenditure and return on
investment are all included in this category.
5. Analysis and evaluation: It has to do with how data is interpreted and analysed in order to
arrive at sound conclusions. Managerial accountants examine the company's structure and
operations to verify that the objectives are being met (Weetman, 2019).
6. Reporting: Managerial accountants are expected to generate a variety of reports to convey
the issue's core cause and monitor the progress of changes and operations.
Difference Between Management Accounting and Financial Accounting

Generally, the terms "management accounting" and "financial accounting" are used
interchangeably. Both terminologies, on the other hand, have a substantial distinction.
Basis Management Accounting Financial Accounting
Aim It aims at helping managers
to make informed business
decisions.
It aims at providing financial
information to the business
and external parties.
Standard It can be modifying
according to the needs of the
business (Lal, 2017)
It needs to comply with
specific business and
accounting standards set by
the governing body
Purpose Its purpose is internal
business management
Its purpose is to inform
external party on business
financial status as well as
internal financial decisions.
Compulsion It is not compulsory It is compulsory
Type It involves the use of both
monetary and non-monetary
data.
It involves the use of
monetary data (Lal, 2017)
Focus Its focus is to develop
policies, decisions and
budget for business
operations.
It focuses on preparing
financial statements and
communicating financial
information.
Principles of Management Accounting
Management accounting is based on the idea that better management information may lead to
better business decisions. Management accounting is governed by four universal principles :
1. Influence: This is based on the idea that information may be conveyed more effectively
via conversation. Its goal is to guarantee better strategic choices and their implementation at
all levels of management. This idea is propelled by a combination of perception, data, and
integration (Abednazari et al., 2018). Clearer strategy, better decision-making, and targeted
communication are the main advantages of this philosophy for Hawthorn international.
2. Relevance: This idea has something to do with the usefulness of data. Its goal is to assist
the organisation in formulating tactics and strategy for execution by preparing and locating
the information required. It is based on the analysis of data to produce a long-term business
plan. Effective decision-making is made possible because of this principle's emphasis on
high-quality data.
3. Analyse: The third principle focuses on assessing the value of a product or service. Its goal
is to demonstrate the link between the inputs and the results by simulating various situations
(Abednazari et al., 2018). To help Hawthorn international prioritise efforts and make
educated choices, it may use this tool.
4. Trust: Trust is established via stewardship, according to this idea. Its primary goal is to
safeguard the organization's assets, worth, and reputation by active management of the

relationship and resources. Good habits and morals play a crucial role in this process. Its
advantages When it comes to satisfying responsibility, credibility, and ethics, Hawthorn
International leads the pack.
Role of Management Accounting and Management Accounting Systems
Hawthorn's executives may benefit from improved decision-making via the use of
management accounting. As a key tool for reaching the company's stated objectives, it aids
managers at all levels in locating, analysing, interpreting, and conveying information
(Stockenstrand and Nilsson, 2017). All aspects of accounting, including trends, product costs,
budgeting reports, sales forecasts, constraint analyses, and other aspects of corporate
operations, are included.
Internal control, data analysis, and product introduction are just a few of the functions that
management accounting performs in a variety of businesses. As a result of this, there are a
variety of management accounting systems in use.
1. Cost Accounting System
The cost accounting system includes the procedures used to evaluate the cost of the goods,
projects, and processes, in order to present the exact costs on the financial statements and
assist management in making better business decisions (Dierkes, and Siepelmeyer 2019).
2. Inventory Management System
It's the ways in which the company's products are manufactured, stored, and consumed that it
sells, not the products themselves.
3. Job Costing System
The work costing system is a method for determining the cost of an order. Useful in a
corporation where each project is unique and tailored to the needs of the client (Bottomley
and Bosman, 2018).
4. Price Optimization System
Statistical methods are used in order for the organisations to understand how customers
respond to varied pricing for their goods via different distribution channels.
Methods Used in Management Accounting Reporting
Management accounting relies heavily on reporting. Reports are an important part of how we
do business at Hawthorn because they help us share information and make better decisions.
Based on the facts and information offered in the report, the choices are made (Muller, 2019).
As a result, the following positive traits should be included in the document:
 Reliable: so that decision-makers may put their trust in it.
 Relevant: a report's content should be tailored to the reader's specific needs.
 Updated: The reports should be updated on a frequent basis to avoid erroneous
conclusions based on partial or out-of-date information.
 Accurate: The data and information supplied in the report should be reliable and
error-free in order to prevent any potential dangers. (Muller, 2019).