Management Accounting: Systems, Reports, and Planning Tools

This article provides an overview of management accounting, including its systems, reports, and planning tools. It discusses the application of accounting systems in Creams Limited, a medium-sized bakery company. The article also explores different types of planning tools and techniques used to solve financial issues. Case studies of Creams Limited and Continental Clothing Limited are included.

Unit 5 – Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Part 1...........................................................................................................................................3
Part 3...........................................................................................................................................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
In the finance, there are ranges of accounting methods which are being implemented by
business entities in their operations. The term Management accounting (MA) can be
demonstrated as a sort of accounting technique under which internal reports are produced by
containing monetary and non monetary information (Johnstone, 2020). This accounting is widely
used by business entities which are involved in manufacturing activities. The report is based on a
medium-sized company which is Creams limited. The company sells bakery products including
creams, waffles etc. The report is separated in two tasks in which first task contain information
about explanation of MA, its systems. Along with second tasks includes information about
various planning tools and role of MA to solve monetary issues.
MAIN BODY
Part 1
Analysis of MA and its systems.
MA- As above explained that, it is a form of accounting under that detailed information about
monetary and non monetary aspects is included in a systematic manner so that internal reports
can be produced by accountants. This is used by companies' managers for taking suitable internal
decisions. In the context of above creams limited, they implements this accounting by help of
below mentioned systems such as:
 Cost accounting system- It is a type of accounting system that make projection of all
kinds of expenses including cost of material, operations and many more. This is not
limited till the estimation of expenses but also it computes and compares actual cost with
budgeted cost (Hutaibat and Alhatabat, 2020). In Creams limited, their finance
department enables this accounting system that helps them in better understanding of
overheads of each individual activity.
Essential requirement- This system is essential for above company in order to identify different
types of cost which occurs in process of providing products to customers.
 Inventory management system- This accounting system is linked with assessing total cost
of inventory including starting to end cost of managing different kinds of stock. It is
aligned with preparation of stock report which includes information about different stock

levels. In the Creams limited, they use key information by this accounting systems
regards to available quantity of finished and sold bakery products.
Essential requirement- It is necessary for companies which are involved in manufacturing
operations. This is so because it provides information about quantity of stored material in the
warehouses which becomes basis for purchasing of new stock level (Zandi, Khalid and Islam,
2019).
 Price optimization system- It can be defined as an accounting system that contributes to
sells department in order to set prices at a level on which companies cannot bear any
kinds of loss. The reason behind this is that it sets prices of products and services in
accordance of recent market trends, customers' feedback. In Creams limited, they set
prices of their bakery products as per market trends and customers' need.
Essential requirement- This accounting system is necessary for companies to collecting and
analysing external factors which leads to better decision making for price setting of different
products.
 Job costing system- The meaning of this accounting system can be understood by
breaking term “Job costing” in two aspects. Basically, under it cost of job that is involved
in operating different activities of a company is computed. In addition, it plays a key role
in order to determining cost of each individual output. In the Creams limited, they
implement this accounting system in order to find out cost of different kinds of tasks and
activities separately.
Essential requirement- It is essential for companies with an aim of computing cost of different
kinds of operations and activities.
Different kinds of MA reports.
MA report- It is defined as a type of written document that covers information about monetary
and non monetary aspects. The information covered in these reports is being used as a
framework for better decision making. In creams limited, they apply different kinds of reports
and some of them are as follows:
 Performance report- This is defined as a form of report that includes information about
performance of each aspect of an organization. It mainly focuses on those aspects
which are related to performance of financial and non financial elements. This report is

not limited to analyse performance of any particular aspect. In the Creams limited, they
use this report with an objective of managing performance of financial aspects such as
cost, profitability etc. As well as non financial aspects includes information about
employees stress level, relation with managers etc.
 Account receivable ageing report- It is defined as a type of report which includes
information about those debtors who will pay back debt amount to company. Under this
information regards to name of debtors, date of transaction, date of repayment etc. is
included in a detailed way (Asiri, Khan and Kend, 2020). In regards to above Creams
limited, their finance department gathers key information from this report that helps
them in order to collect debt amount on right time.
 Inventory report- This can be demonstrated as an accounting report which is prepared
with an aim of providing information about quantity of stored material sold items as
well as remained quantity of stock. In the absence of preparation of this report, it can
become difficult for companies to manage different kinds of inventories in the
warehouses. In the context of above Creams limited, their accountant prepares this
report which helps their sells department to providing information about stored level of
inventories.
Analysis of benefits of different accounting systems.
Name of accounting
system
Benefits
Cost accounting system The key application of this accounting system is aligned to evaluating
cost of different kinds of operations and activities. It makes
comparison of estimated and actual occurred expenses. In Creams
limited, they evaluate cost of making production and selling of overall
goods which they offer to end users.
Inventory management
system
This is associated with computing cost of stock of different segments
of products (Bhimani, 2020). In Creams limited, they use this
accounting system that contributes in order to find out cost of storing

different level of stock as well as it helps managers in taking better
decisions.
Price optimization
system
It is linked with setting prices of products and services at a suitable
level that can generate higher return. The sales manager of Creams
limited apply this accounting system that helps them in determining
prices of different bakery products as per the market needs.
Job costing system This is associated to computing cost of each and every task that is
being performed in a business entity. Such as the production manager
of above Creams limited analyse cost of each produced bakery
product.
Analysis of application of accounting systems with above company's process.
In the accounting systems different types of methods are included such as cost accounting
system, stock management system etc. Each of them is aligned to company's process, as in the
above Creams limited their production department is linked with stock management system. It is
so because by help of this accounting system they take further actions to produce different
bakery products (Horvat and Mojzer, 2019). As well as MA reports are also linked to above
company's process. The reason behind this is that each accounting report contains key
information which helps in better management of different kinds of operations.
Part 3
Different types of planning tools.
Budgetary control- It can be defined as a type of method which is being used in order to set
financial goals along with making comparison of actual output with estimated results. This is
based on different types of planning tools which are described below in such manner:
Rolling budget- This can be defined as a financial plan that is prepared on a similar framework
which is used in past years (Aini, Alwiyah and Putri, 2019). It is just rolled out in the starting
period of accounting when last years' budget has been completed. This is helpful budget because
it covers all financial terms by making proper estimation. In the Creams limited, they use this

budget with an aim of proper management of their financial resources in an effective manner. It
has some advantages and disadvantages such as:
Advantages- It is helpful for companies because this is less costly and time consuming. They
don't need to make planning for preparation of this budget because it is rolled out in a similar
manner as per the previous year.
Disadvantages- The major drawback of this financial plan is that it is not suitable for companies
in order to take crucial decision making. As well as this budget is failed when there is any huge
change in an accounting period.
 Flexible budget- This budget is also named as variable budget. As per its name, this
budget behaves in same manner. It can be characterized as a type of budget in which
included financial activities can be changed as per the need of users. This is prepared by
those companies in which major changes are done in their activities and operations. In
Creams limited, they produce this budget for those financial activities which are expected
to change in upcoming financial year.
Advantages- The key advantage of this budget is that it allows users to make change as per their
suitability (Phornlaphatrachakorn, 2019). For instance, in a particular financial year a company's
sales revenue drop out by huge difference then they can make modifications in their flexible
budget.
Disadvantages- The main problem in this budget is that it can become complex to understand
due to daily changes in financial data. As well as this budget enables to cheating and fraud
because employees can hide their actual financial performance by making changes as per own
need.
 Fixed budget- It can be defined as a type of budget that is associated to remain unchanged
during entire accounting period. This budget is prepared by those entities who expect that
their financial activities will remain same. In Creams limited, they prepare this budget for
those activities which are constant such as fixed cost.
Advantages- The key benefit of this budget is that, it is simple to use because under this users do
not need to make modifications in financial data.
Disadvantages- The main issue under this budget is that it brings lot of difficulties for companies
in the case when there is huge change in financial activities.

Planning tools for preparation of budgets.
In the planning tools of budgetary control, there are different types of budgets are
included and each of them plays a key role (Hamidova, 2019). Some common tools are fixed
budget, flexible budget and many more. In regards to above creams limited, their finance
department take crucial decisions as per the projection of income and expenses by help of
different kinds of budgets.
Different accounting systems to solve financial issues.
Financial problem- It can be defined as a type of issue that can be occur in any kinds of business
due to lack of proper management of available funds. Due to these financial issues, companies
face many other problems such as unable to perform different kinds of business activities.
Herein, below some types of financial problems are mentioned in such manner:
 Higher storage cost- This can be defined as a type of financial issue that occurs to
companies due to lack of effective management of stored inventories (Steccolini, 2019).
As a result, companies fail to minimize cost of their operations and activities. In the
Creams limited, they face this issue of higher storage cost which leads to
mismanagement of stock levels.
 Lower sales- As name assists; it can be defined as a type of financial issue which occurs
due to lower sales. The reason of this issue cannot be defined in a proper manner because
it can occur due to higher expenses or poor management of stored material, lower
production and many more.
Techniques:
 Key performance indicator- This can be defined as a type of method in which key aspects
are highlighted. In other words, it emphasis on those elements that leads to extreme poor
performance or excellent performance. Under these both, financial and non financial
indicators are included such as profitability, return, employees’ relation and many more.
 Benchmarking- It is defined as a type of technique that is linked to making comparison of
a company's financial and non financial aspects with another company of similar

industry. Due to which, company can become able to know about the areas which are
needed to be improve in an effective manner.
Financial governance- It is defined as a type of method in which financial data for a particular
time period is recorded in a systematic manner that can be used to solve financial issues (PHAM,
DAO and BUI, 2020). This method acts as tracking strategy for companies in order to find out
those elements which are resulting in lower performance.
Comparison:
Basis Creams limited Continental clothing limited
Financial issue They faced financial issue of higher
storage cost which resulted as negative
impact on produced products and
services. This is so because if cost of
stock will be higher than total cost of
production will also increase.
Their financial problem was related
to lower sales. The reason of their
financial issue was wrong
determination of pricing of their
products.
Technique They have used KPI method in order to
find out actual cause of issue. It was
done by focusing on those financial
aspects which are resulting in higher
cost of stock.
They used benchmarking tool in
order to make comparison of
financial performance with an ideal
company. Due to which they became
able to know actual cause of issue.
Accounting
system
They applied inventory management
system in order to track actual cost of
stock. By help of this accounting
system, they became able to know about
effective management of inventories so
that cost can reduce.
They have implemented price
optimization system in order to set
price of their cloths at a level by
which they can attract more number
of customers.
Accounting systems to solve financial issues.
There are different kinds of accounting systems which are being applied by companies in
order to manage various kinds of aspects (Lebedev, 2019). In the context of above Creams

limited, they have applied stock management system in order to solve their financial issue of
higher storage cost. As well as in Continental clothing limited, they applied price optimization
system to solve issue of lower sales. It indicates that accounting systems are useful to solve
financial issues.
CONCLUSION
On the behalf of above report, this can be concluded that MA is beneficial accounting
approach which leads to better management of internal aspects. In this a range of accounting
systems are included which contributes in different aspects as well as in solving financial issues
also. Along with, accounting reports are also useful for managers in order to take better
decisions. The further part of report articulates about various kinds of planning tools of
budgetary control and their importance for preparation and projection of budgets.

REFERENCES
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