Study on Management Accounting

MANAGEMENT ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management Accounting Systems.........................................................................................1
P2 Methods Used for Management Accounting Reporting........................................................3
TASK 2............................................................................................................................................4
P3 Calculation of Costs and Difference between Marginal and Absorption Costing.................4
TASK 3............................................................................................................................................9
P4 Advantages and Disadvantages of Budgets which is used for Budgetary Control................9
M3 Planning Tools & Forecasting Techniques used in Budget................................................12
P5 Ways Management Accounting can be used to respond to Financial Problems ................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INDEX OF TABLES
Table 1: Calculation of cost of production.....................................................................................6
Table 2: Income Statement As per Marginal Costing......................................................................7
Table 3: Income Statement As per Absorption Costing..................................................................8
Table 4: Sales Budget....................................................................................................................12

ILLUSTRATION INDEX
Illustration 1: Cash budget for organisation...................................................................................11

INTRODUCTION
Management accounting is key in developing a business as a whole. When it is talked
about management accounting, there also some discussions about cost and financial accounting
because they both are the part of management accounting(Bryer, 2013). Managers need to
evaluate the performance of the particular plant considering the performance of various costs
into it then here comes the role of cost accounting in which various costs helps a mangers to
make decisions on the working of the plant. In management accounting recording, classification,
evaluation and interpretation of data take place.
Same is in the case of financial accounting as well here financial matters are discussed so
that managers can strategically use those data and then can make necessary decisions in order to
make fruitful decisions which can impact the company in a positive way. In this report various
management techniques and its implication plus how a management accounting is carried out in
the retail sector is undertaken with point of view of providing an insight on management
accounting practices in an organization(A. Hammad, Jusoh and Ghozali, 2013). The company
taken here is M & S Ltd. which is doing business in retail sector.
TASK 1
P1 Management Accounting Systems
For the purpose of study abc company here is undertaken because as world is moving fast
retail sector is developing too and thus the increase in retail industry practices in the recent times
it is important to take an analysis of the retail management techniques and how they handle the
pressure of decision making and controlling. Since they have to deal every day with lots of
inventory in order to keep attracting customers towards their retail outlets. Thus, different
aspects of management accounting for decision making regarding effective business operations
can understand through this report.
This approach is nothing but the process of evaluating the operations of business of
different departments(A. Hammad, Jusoh and Ghozali, 2013). However, it is considered as a
process for analysing, interpreting and sharing information related to business operations for
used by the managers in due course of the organizational workings. Management accounting is
combination of financial accounting and cost accounting. Though it is some what different from
both of the said accounting. That's why management accounting is more preferred over different
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types of accounting. Management accounting has wider coverage area of the organization. This
accounting technique is beneficial to generate ideas for optimum utilization of organizational
resources to support managers in their task and through it the managers wants to enhance both
the customer and shareholder value. Their are different objectives and benefits of management
accounting and they are:
 It facilitates Organizational Planning in which selection of best alternatives take place.
 M.A used to keep a monitoring and control over the organizational activities.
 Performance Measurement is the key towards achieving the vision and mission of the
organization and thus M.A helps in that(Myrelid and Olhager, 2015).
 Through management accounting a manager is able to make sound strategies and
decisions.
Management accounting Systems is kind of an information system which facilitate a
manager in making sound decisions and create value for the company. The information provided
in this is based on ad hoc and fulfill both the short-term as well long-term needs of management.
There are different systems which managers take into account for better understanding and they
are:1. Cost Accounting System: abc company have a practice of using this system very often
because in this system the cost of goods and services as well as the cost of different
departments is taken into consideration to know actually how much the expenses are.
This accounting system provides a detailed cost data which helps the management of abc
to control its operations and plan for the future(Du and Taylor, 2013). It is one of the
most effective system to creating balance between production and distribution system of
the organization adequately.2. Inventory Management System: It is one of the main source to manage inventories of the
entity and improving its liquidity position. In this regard, managers analyses all
inventories and further make decisions for its effectiveness. Including this, it also employ
and undertakes this type of system into recording to implement all action plans in proper
time.
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