Systems of Management Accounting- PDF

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1:-Management accounting and essential requirements of different types of management
accounting system..................................................................................................................3
P2:-Different methods used for management accounting reporting:.....................................5
LO2..................................................................................................................................................6
P3:-Calculation of Costs using techniques of Cost Analysis:-...............................................6
LO3..................................................................................................................................................7
P4:-Different Types of Planning tools of Budgetary Control and their advantages and
disadvantages:-.......................................................................................................................7
LO4 .................................................................................................................................................9
P5:- Organizations are adopting management accounting systems to respond to financial
problems:................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
APPENDIX....................................................................................................................................12

INTRODUCTION
Management accounting can be described as application to manage accounts of business
unit so that firm can take effective funds decision to generate more revenues applying knowledge
and skills for preparing accounting reports. These reports helps management in preparing
strategies and policies to control and plan activities of undertaking. Flour Ltd. is a leading
engineering company offers procurement, project management and maintenance and engineering
services for clients in the UK. This study includes the description of activities like importance of
various systems of management accounting, and their importance for integrating activities of
business with reports of management accounting. It will show calculations of various costing
methods like marginal and absorption. Difference in income statements of the methods are
reconciled by preparing reconciliation statement. In addition, strength and weakness of planning
tools will be explained. Report will cover explanation on different budgetary control planning
tools. Report will give understanding about various concepts of management accounting using
numerical examples.
LO1
P1:-
MA deals with interpreting, analyzing, identifying and presenting accounting information
that is obtained with help of cost and financial accounting. It helps executives of company in
formulating policies, taking decisions and for carrying out daily operations of company. It is
used for preparing management accounts and reports which give timely and accurate financial &
statistical to executives for framing short term & long term decision. Management accounting
tool is used for analyzing the business information and its financial activities. It is useful device
which supports in making sound decision for daily activities. This is the process which makes the
person able to analyses unnecessary cost and find proper solution to handle overcasting issues in
the organization (Ibarrondo-Dávila and et.al., 2015).
types of management accounting system and essential requirements:
Requirements of different management accounting system are explained as below
 Cost accounting : This is used to manage cost and minimize production cost of
company. By using this technique form can control over the cost and can raise profit as
well.

 There is requirements to have great cooperation between several departments. This
helps in utilizing resources in efficient manner.
 Apart from this, there is need to have flexible process so that requirements of
different stakeholders can be met effectively. (Eldenburg and et.al., 2019).
 Inventory management system:- This is another system which ensure effective
controlling and monitoring over stock. Organizational processes of Flour ltd for
achieving effective and efficient flow of stock in organization & at point of sales. By this
way wastage of inventory can be avoided. Firm has to involve only such stock that is
demand of market otherwise it may increase cost of the firm. The essential requirements
in MA are follows:
 Forecasting: It is helpful in preparing proper plan to manage cost so that company’s
requirements can be matched. (Ammar, 2017).
 This is helpful in reducing cost of the organization and effectively managing the
inventory.
 Job Costing System:- It records actual cost of material & labor relating to specific job
and overheads are assigned over a predetermined rate to jobs. It comes in use when
products manufactured are different from one another and are having significant costs. It
pays attention on cost related to specific job, it ensures that no job is there which has over
costing issue. It is the tool which is used to record all cost in effective manner. By this
way order receiving can be managed properly so that correct pricing can be set
(Steccolini, 2019). Manager of company prepare report and estimate cost by looking at
various jobs. Essentials of this costing system includes receiving inquiry, estimate job
costing, receiving order, production order, cost recording and job completion.
 Price Optimizing System:-This is another system which helps in controlling over
resource pricing. It is the beneficial tool which aids in determining the level of prices in
proper manner. By this way company can manage demand and can set prices as per the
requirements of consumers. This also enables company to decide prices of different
products at single point of time. This system is used to determine price levels for
customers by gathering responses over different price level.