Sample Management Accounting - Assignment

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and the essential requirements of types of MA systems................1
P2 Various methods used for management accounting reporting...............................................3
M1 effectiveness of management accounting systems and their application in organisation.....5
D1 integration of management accounting system and management accounting reporting.......5
TASK 2............................................................................................................................................5
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement.....................................................................................................................................5
M2 Apply of range of cost accounting techniques and produce financial reports......................8
D2 financial reports which are accurately applied and interpret data for a range of business....8
TASK 3 ...........................................................................................................................................8
P4 The advantages and disadvantages of different type of planning tools used for budgetary
control.........................................................................................................................................8
M3 Use of different planning tools and their application for preparing and forecasting budgets
...................................................................................................................................................10
D3 Planning tools for accounting respond financial problems to lead association...................10
TASK 4..........................................................................................................................................10
P5 Ways in which organisations are adapting management accounting system.......................10
M4 Evaluate how management accounting helps to respond financial problems....................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is a terminology of managing records, information and
accounting reports are considered in this context. The process of preparing management reports
and maintaining records which provides a clear information regarding the performance of
organisation to managers are considered in management accounting (Bradbard, Alvis and
Morris,2014). Financial information, departmental information, statistical information which
remain essential in terms of determining the performance of organisations are included in
management accounting.
This report is prepared to defined the meaning of management accounting, and
management accounting systems are defined in this context. various methods used for
management accounting reporting are illustrated in this context. Techniques are used subject to
measure the profitability of organisation defined in this context. This is one of the essential
aspect in terms of analysing the profitability and managing the operations of association. Use of
budgetary control and role of planning tools to assist budgetary control process defined in this
context. Ways are compared in terms of adapting the management accounting system with in
organisation are defined in this context. Stubbing group of retail sector is chosen organisation
under which management accounting is illustrated.
TASK 1
P1 Management accounting and the essential requirements of types of MA systems
Management accounting
Management accounting provides a structure to use of type of information and data
related to analyse the day to day transactions and records for better management and control with
in business. It allows managers to evaluate 360 dimensions of business from lower level to upper
level. Different perspective and assumptions are made in terms of managing the operations and
functions of business. Anthers and writers have their own perspective in terms of management
accounting. Management accounting is not only a tool used for effective management and
control but also it is a process of nourishing the organisation's functions and management
operations in more significant manner (Bruynseels and Cardinaels, 2013).
As per IMA (Institute of Management Accounts) “management accounting is a
profession that involves partnering in managerial decisions making, addressing plans,
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performance management system, providing skills and knowledge subject to financial reporting
and control to assist management and formulating and implementing of business policies and
strategies.
As per business environment organisational needs and priorities also gee changed. There
are type of management accounting systems has been formed in terms of providing the path of
effective working and management. There are type of management accounting systems are
defined below which are commonly used by organisation in present organisational environment:
MIS (Management Information System) system: a system based information is
provided in terms of managing the business operations and managements are defined in this
context. System generated information are used to elaborate the context operations and
management of organisation. It is one of the essential aspect in terms of elaborating the
information and system for better used and effective management. In large organisations MIS is
widely used for sorting out the complex business circumstances and challenges. In organisational
context the information and details and information are associated with departmental issues and
problems (Chapman, Kern and Laguecir, 2014).
Cost accounting system: this accounting system Marjory used in large production and
manufacturing industries. To abolish the production and manufacturing issues and conflicts cost
accounting is being used by organisations rapidly. This mainly associated with defining the
budget requirements and preparing cost plans for effective management and plans. This provides
different type of methods and analysis approaches in terms of managing the operations and
functions with optimum use of financial resources.
Inventory management system: this is a system which helps to control and manage the
flow of inventories and stocks with in storage departments and sections. This mainly associated
with identifying the requirement of raw stock to continue the manufacturing and production
process with and resolving the production and manufacturing issues. As the Stubbing group of
retail deals in day to day retail products and the raw stocks materials are the essential aspects
considered in this inventory management system. EOQ, ABC are the methods are used to
manage the flow of inventories with in organisation. FIFO, LIFO, Weighted average methods are
the valuation techniques used for determining the price of inventories.
Price optimisation system: this is an accounting system which is used to elaborate the
concept of determining the price of products and services by utilising the cost of resources. This
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system helps to explain the essential aspect which remain associated with analysing the price of
per product and services by compressing the cost of allocated resources. Stubbing group of retail
mainly associated with providing retail products as home appliances, grocery products. This
system would help to centralised the cost of applied resources and allocation of resources with in
the organisation.
P2 Various methods used for management accounting reporting
There are numerous reports which can be readied like monetary and costing reports yet
not at all like administration bookkeeping report they cannot present a correct impression of the
association's money related and administrative position. Administration bookkeeping reports are
the administrative archives which mirror the genuine and reasonable photo of an association's
budgetary position, planning of these administration bookkeeping reports are a vital assignment
to execute as it requires high aptitudes (Goodman and et. Al., 2013).
Stubbing group has procured a group of experts who take care of their administrative
records and reports to ensure that speculators and different gatherings can get to precise reports
and other administrative archives.
Sorts of administration bookkeeping reports
Administration bookkeeping report is an authoritative administration archive which is set
up by the directors for the outsiders with the goal that they can get to a genuine and reasonable
photo of the association, few of those administration bookkeeping reports are:
Accounts receivable report – Bookkeeping receivable report is set up to account the
records of every unpaid purchaser to ensure that all sum is gotten properly, if any unpaid
purchaser neglects to pay the sum than it will be recorded in terrible obligations report
independently or in the area of awful obligations in money due report as it were. Account
receivable report is an archive which contains arrangements of all unpaid client alongside their
sums, dates and bookkeeping periods.
Cash flow report – It incorporates all inflow and outpouring money exchange happened
from working, contributing and financing exercises, Stubbing group plans income articulation
for brief periods which can be valuable for them to get to month to month appraisals of costs and
which can refresh effortlessly. Cash stream articulation or report incorporates all money
exchanges of the association which influences an association's execution (Guthrie and Parker,
2014).
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Financial reports – Monetary reports of an association for the most part incorporates
exchanging record, benefit and misfortune proclamation and accounting report. Usually
monetary reports are incorporated into budgetary bookkeeping however to recognize a precise
administration position of an association. Stubbing group readies their money related report by
including their benefit and misfortune proclamation which demonstrates all incomes and
consumptions of the association and accounting report which is the confirmation of the
advantages and liabilities. It is critical for the managers to incorporate budgetary report while
getting ready administrative bookkeeping report as it reflect figures and correct quantities of the
association's productivity, costs and so on (Myers, 2013).
Job cost report – Occupation cost report enables associations to like Stubbing group to
assesses and recognize the benefit making capacity of different employment exercises, with the
goal that manager can centre around most productive employment movement. Job cost report is
a sort of administration bookkeeping report which decides the costs associated with different
occupations performed in an association.
Performance report – Performance report are set up to check general execution of an
association including each representative of each division, administrators of an association break
down and assesses exhibitions of workers and think about it from different pre settled guidelines
and benchmarks. Stubbing group readies their execution answer to have precise outcomes for
advancement of their systems which can lead them towards accomplishment of their objectives.
Sales report – Sales report incorporates deals done in a money related year which can
help an association breaking down what sources are more beneficial and distinguishes those
business people who produces generally salary. Stubbing group sets up their business report by
deciding all deals made in multi year, and investigations which dispersion channel is producing
more income that is retail appropriation channel or discount dissemination channel.
Stock administration report – This bookkeeping report is vital as associations like
Stubbing group which decent variety in their items and inventories are in much need of a
successful stock administration report framework, with the goal that every single supplied stock
can be utilized proficiently. Inventory administration report is a bookkeeping archive where all
inventories of an association are recorded paying little respect to its tendency like crude material,
merchandise occupied with work in advance or last items.
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M1 effectiveness of management accounting systems and their application in organisation
There are options and mediums defined below that which management accounting
system is suitable for organisations.
Price optimising system: this system is suitable for those organisation which deals in
multiple products and services. Products and services can be divided as per allocation of
resources. Price is calculated on the basis of utilisation of resources at per product.
Inventory management system: this system will be able to manage the systems related
to Inventory management and control. Organisation which deals in large quantities and
inventories use these inventory management system (Otley, 2016).
Cost accounting system: to evaluate profitability and cost of production and operations
are considered in this system. Manufacturing and production organisations which production
departments remain bifurcated in various sections use this accounting system.
D1 integration of management accounting system and management accounting reporting
Management accounting reports are produced with the help of management accounting
systems. There is a direct relation found in terms of managing accounting systems and the
management accounting reports. Effective business strategies remain based upon accurate
accounting reports and management this is the main aspect in terms of preparing the accounting
reports. As per above analysis it is considered that the management accounting is a process of
containing the records and information in such an manner so that effective management and
process be able to correlate the information in significant manner (Tucker and Lowe, 2014).
TASK 2
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement
Marginal costing – this is one of the cost evaluating and profit measurement technique
which helps to make effective decision making strategies and plans. This costing technique
contains all the variable cost as direct material, direct labour and direct expenses in terms of
evaluating the marginal effect upon evaluating the profitability and maximising the profitability.
All other expenditures and cost as fixed cost are charged on periodic basis. This cost mainly
helps to determine the price and strategies for better understanding and analysis. This mainly
associated with deploying strategies and plans for better understanding of direct cost concepts
and manufacturing cost.
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Evaluation of profit as per marginal costing
Particulars Amount
Sales revenue = (selling price * no. of goods sold = 55 * 600) 33000
Marginal Cost of goods sold: 9600
Production = (units produced * marginal cost per unit = 800 * 16) 12800
closing stock = (closing stock units * marginal cost per unit = 200 *
16) 3200
Contribution 23400
Fixed cost ( 3200+1200+1500 ) 5900
Net profit 17500
Absorption costing- this is one of the costing technique which is used to determine the
profitability of organisation by considering the fixed cost and marginal costing. All the cost
which are related to production, selling and distribution cost, variable or fixed cost are
considered in this costing technique (Zirkler, 2013). All the direct and indirect costs remains the
part of this costing techniques this mainly associated with evaluating the cost and profitability by
considering overall costs. What are the sales and revenues related to production cost and
manufacturing cost are considered in this context. Following formula is used to analyse the profit
Sales revenues – variable cost – selling and distribution expenses - administration
expenses – depreciation = profit
Evaluation of profit as per Absorption costing
Particulars Amount
Sales = (selling price * no. of units sold = 55 * 600) 33000
Cost of goods sold = (total expenses per unit * actual sales = 23.375 * 600) 14025
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Gross profit 18975
Selling & Administrative expenses = (variable sales overhead * actual sales +
selling and administrative cost = 1 * 600 + 2700) 3300
Net profit/ operating income 15675
Break-even: Break-Even mainly indicates towards the constant position of organisation
at which organisation does not gain any profit or any loss. Break even analysis basically defines
the relation between the fixed cost and contribution. This mainly helps to calculate contribution
per product and helps to evaluate the weighted average cost of per unit. Break even analysis is
evaluated in two major forms as break even analysis in monetary form and break even analysis in
units. The main equation mainly associated with profitability for announcement of production
levels needed to define the concept of production levels (Ward, 2012).
a. The number of products to be sold to break even
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
BEP in units 500
b. The break even point in terms of sales revenue
Sales per unit 40
Variable costs VC = DM + DL 28
Contribution 12
Fixed costs 6000
Profit volume ratio PVR = Contribution /
sales * 100 30.00%
BEP in sales 20000
c. The number of products that need to be sold to make profit of 10,000
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Profit 10000
Fixed costs 6000
Contribution 16000
Contribution per unit 12
Sales 1333.33
Margin of safety – this is a concept which defined the relation between the break even
point and actual sales. Margin of safety mainly differentiate the actual sales and break-even
sales.
d. The margin of safety if 800 products are sold
Actual sales in units 800
Break even sales in units 500
Margin of safety 37.5
M2 Apply of range of cost accounting techniques and produce financial reports
Cost analysis techniques are mainly associated related to defining the cost and evaluating
the profit for a specific time duration. There are majorly two cost techniques are evaluated above
in terms of evaluating the cost as fixed, variable, budgeted, manufacturing and sales revenues
related to organisation (Parker, 2012).
Standard costing – this costing technique mainly helps to determine the difference
between the standard cost and the actual cost. Accounting techniques which assist managers to
forecast the cost plans and framing the pricing strategies. There is an analysis done on the basis
of estimated income and expenditure.
Marginal costing - this costing technique plays vital role in terms of making the
strategies and plans by considering the marginal cost and fixed cost. This method helps to
analyse the cost which varies by variations in production units.
D2 financial reports which are accurately applied and interpret data for a range of business
As per above analysis of profit statements which are calculated on the basis of marginal
costing method and absorption costing methods the profit are estimated as follows; profit by
marginal costing was calculated as 17500 and the profit by evaluating the profit as 15675 for that
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period (Quinn, Strauss and Kristandl, 2014). As per the break-even analysis it is calculated that if
organisation produce at least 500 units that it would be able to maintain the constant position of
no profit and no loss. The margin of safety was calculated as 37.5.
TASK 3
P4 The advantages and disadvantages of different type of planning tools used for budgetary
control
Budgetary control is considered as a process of analysing the information and details for
future forecast and analysing the related aspects to performance and growth of organisation. In
legal terms management and departments of organisation keep align in making financial forecast
and preparing information to assist the budgeting process. There are type of information related
to sales budget, cash budget and fixed budgets are prepared in terms of effective control and
management.
There are type of planning tools are used in organisational context to assist the decision
making process which are discussed as follows;
Contingency tool
Possibility arranging incorporates noting the inquiries concerning what will happen, how
administration will manage it and what steps ought to be taken to manage such crises.
Contingency is an arranging device which empowers an association to be set up for future
vulnerabilities and crises, possibility arranging incorporates propel basic leadership about the
money related assets and stock administration (Van der Stede, 2011).
Merits: Contingency design goes about as a go down arrangement which is enacted when
there is any crisis circumstances which decreases misfortune.
Demerits: Contingency design is a move down arrangement for future crises, yet in the
event that none of the crisis circumstances happen than all the cash and assets utilized as a part of
readiness of alternate course of action is resultant to be squandered.
Forecasting tool
It encourages administration to find out the vulnerabilities without bounds by considering
past encounters and pattern investigation. Forecasting is an arranging instrument that ventures
future occasions and conditions.
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Merits: Forecasting is the way toward learning future occasions which causes an
association to accomplish their goal of consumer loyalty. As it foresee clients' prerequisites and
requests, determining additionally helps in lessening staffing costs by anticipating what number
of workers are expected to complete a particular employment.
Demerits: Forecasting depends on past occasions, which can not give an exact genuine
and reasonable projection of future occasions, anticipating includes drift examinations which is
certifiably not a proof or confirmation of solid projections.
Situational tool
Scenario is an arranging instrument where director builds up every conceivable situation
which may can happen in not so distant future, this arrangement catches all potential outcomes
by distinguishing patterns and conceivable vulnerabilities.
Merits: It enables supervisor to look forward and diminish the hazard included
administrative exercises, situation arranging centres around collective endeavours which likewise
expands the nature of correspondence.
Demerits: Primary reason for situation arranging is compelling basic leadership which
requires high talented staff because of which it winds up troublesome for little scale
organizations to include such high expenses and adequate of time during the time spent
arranging.
M3 Use of different planning tools and their application for preparing and forecasting budgets
There are type of planning tools are discussed above in terms of assisting the budgetary
process. With the help of budgetary control planning process become more fluent and easy and
the process of preparing the financial statements also become more convenient to frame the
business plans (Renz and Herman, 2016). Cash flow statement and budgeting are the main part
of forecasting and analysing the financial problems in effective manner.
D3 Planning tools for accounting respond financial problems to lead association
These arranging devices are base for readiness of spending plans and income
proclamations which are considered as relatively precise appraisals for future expenses and
incomes. Arranging devices like anticipating arranging and situation arranging encourages an
association to appraise every single conceivable situation for future which can lead an
organization to construct a successful avoidance get ready for all the future vulnerabilities and
crises (Shah, Malik and Malik, 2011).
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TASK 4
P5 Ways in which organisations are adapting management accounting system
Organisations like Stubbing group and Unicorn staple restricted has adjusted
administration bookkeeping frameworks like cost advancement framework and stock
administration framework to expand the believability of their organizations and to handle the
money related issues exhibit in their association (Storey, 2014). Administration bookkeeping
frameworks are strategies or systems which are utilized to get ready administration bookkeeping
reports and serve dependable and precise information which can be additionally used by chiefs
for basic leadership process. Money related issues from which these associations handle are
examined as follows:
Compliance and Regulations: Standards and directions are diverse for each sort of
association relying upon its inclination, and changes in these guidelines makes it troublesome for
associations to adapt up to these progressions. Every organization is required to be enrolled and
for that they need to satisfy every one of the prerequisites of enlistment, all reports are
fundamentally to be arranged alongside following of all directions settled by experts.
Legitimate issues: Legal issues like changing laws and enactments about organizations
makes it troublesome for the associations like Unicorn staple and Stubbing group to deal with
their fund, unbending nature in budgetary laws of joined Kingdom and settled legislative
approaches are the significant issues looked by the association while dealing with their accounts.
Financial management: In an association which has assorted variety in its exercises, its
hard to deal with all the budgetary exercises. Organizations like Unicorn basic supplies and
Stubbing group has adjusted income administration bookkeeping framework and movement
based cost framework to deal with their everything budgetary exercises, these administration
bookkeeping systems helps in handle every monetary issue happen over the span of business
(Soin and Collier, 2013).
Indeterminate future – Every business faces issues while anticipating money related
future occasions, however with the assistance of administrative bookkeeping frameworks like
budgetary control and estimating examinations this issues can be limited, Unicorn foodstuffs has
procured a group of expert who are specialists in determining future through breaking down past
occasions and market patterns.
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Innovation – Organizations like Unicorn basic supplies are little scale organizations and
its troublesome for them to change their mechanical apparatuses much of the time as they don't
have such spending plans for their hardware. According to the present situation innovation is
quickly changing for the improvement of the world, yet because of this constant change in
innovation, business associations confront genuine fund issues.
Maintaining notoriety – Building a brand picture and keeping up notoriety in the market
is turning into a test for the association particularly for Stubbing group where there is enormous
number of contenders introduce in the market. these issues Stubbing group has adjusted
possibility and situation arranging devices to deal with all the budgetary issues which happen
because of building a notoriety in the market.
Unicorn groceries limited Stubbing group
Unicorn goods constrained is a retail basic
supplies organization which utilizes process
costing to decide costs associated with
specific division or process.
Though Stubbing group is a retail
organization which utilizes work arrange
costing for deciding the cost of specific units.
Unicorn goods bargains in conveying
different basic supplies and other item and to
deal with each one of those exercises, they
have adjusted stock administration
framework.
Stubbing group is a retail garments
organization, and each item's value assurance
is a urgent errand to perform, and to handle
this issue, supervisors of this organization
utilizes value streamlining framework to
decide and assess the costs.
M4 Evaluate how management accounting helps to respond financial problems
Administration bookkeeping includes different strategies and methods which can assist
an association with achieving maintainable accomplishment regardless of every single money
related issue as administration bookkeeping frameworks has procedures like income
investigations and minor costing which helps in deciding all expenses of an association which
can settle monetary issues (Sjögrén, Syrjä and Puumalainen, 2014). Administration bookkeeping
is a procedure of getting ready administrative bookkeeping records and reports to serve
important data about association's actual position.
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CONCLUSION
Accounting which is done in respect of effective management and control considered as
managerial accounting. As per above prepared report it can be understood that management
accounting has a crucial role in organisation to manage and control day to day transactions and
records. Concept of management accounting and various type of management accounting
systems are defined in this context. Type of management accounting reports produced for
managerial decisions and making explained properly. Use of cost accounting techniques to
determine profit and loss also explained in this report. Different type of planning tools which are
used to assist the budgetary control process in organisational context also elaborated. Role of
management accounting in terms of handling financial issues and conflicts also defined in above
report.
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