Unit 5 – Management Accounting

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Analysing the essential requirement and its types of management accounting ....................3
P2. Determining the methods of management accounting reporting...........................................5
TASK 2 ...........................................................................................................................................5
P3. Calculating the cost techniques of cost analysis using income statement.............................5
TASK 3............................................................................................................................................5
P4. Assessing the advantages and disadvantages of types of planning tool................................5
TASK 4............................................................................................................................................7
P5. Comparing the management accounting and financial management....................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting concern with all activities and functions that focuses on goals by
identifying, measuring, analysing and interpretation of information and helps in communicating
to manager (Abdusalomova, 2019). This is process of preparing reports about the business
operation and useful in taking short term and long term decision and helps in forecasting the
future events.
In this report the company given is Catering Services Ltd. Which is looking to expand the
market in the range of home made pizzas to superstores. In this report the types of management
accounting system is being discussed and analysing the essential requirement of them that is
important for the organisation. Calculating the cost technique for cost analysis and preparing the
income statement using marginal and absorption cost. Apart from that determining the
advantages and disadvantages of different types of planning tools for budgetary control and
comparing the how organisation are adapting management accounting to resolve the financial
problems.
TASK 1
P1. Analysing the essential requirement and its types of management accounting
Management accounting involves presentation of all important financial information that
presents the internal process that is being used by management to take necessary business
decision (Ameen, Ahmed and Abd Hafez, 2018). It is important in many functional operations
as it helps in improving the overall management practices and its quality. In the selected
company, this useful in providing information related to the cost and sales revenue of goods
which is generated by organisation. This gives major help in taking essential decision-making in
the chosen organisation and facilitates them in analysing the profitability, forecasting and stock
valuation.
Management accounting system are internal process that helps the organisation to
properly evaluate the performance and that will help in organising all activities effectively.
Following are the management accounting system are as follows-
 Inventory management system- In this type of system is dealing with the supervision
and regulation of management of stock and assets of the organisation. It uses the every
inventory item such as barcode, labels or asset tags and it provide the provides central

databases and useful in analysing the data, reports and forecasting the future demand. In
the selected organisation, the essential requirement of this system is that it facilitates in
taking management decision in the relation of cost requirement and planning. Some
benefits like reduction in cost and appropriate inventory-management could be achieved
from this system.
 Cost accounting system- This system is very useful in estimating the cost of product and
analysing the probability of the management (Bedford and Speklé, 2018). Proper
identification of cost in business will help in taking further steps and decision in the
company in the relation of cost control and it has two types such as job order costing and
process costing. As cost is key component that need to be control and planned properly
and always try to maximise it in order to achieve it effectively. In the context of
company, the essential requirement of this system is that improves the cooperation and
participation of executive that is required by many departments. This helps in taking
proper decision regarding the ascertainment of cost of product and supports in
development of flexible and easy to understand and execute.
 Price optimising system- This is used to take proper control of the prices of all available
resources and that will have to be managed effectively. It used in deciding the prices of
multiple products at particular time. This system helps in determining the demand that
fluctuate different price levels. This supports the company in taking effective decision
regarding pricing and discount pricing. For the chosen organisation, the essential
requirement is that it help the company in determining the pricing structure for
promotional strategies and other activities (Drury, 2018). This system is also important
in many factors such as category goals and competitors pricing strategies that before
establishing the price of any product that manufactured in the company.
 Job costing system- This system helps in assigning manufacturing cost to each particular
product to monitor and track the expenses and it is also useful in taking decision
regarding multiple products at a time. It supports the organisation in determining the
demand that fluctuate at different price levels. For the selected organisation, the essential
requirement is that company uses this to track that products are identical and keep them
track of order expenses. Apart from that it is useful in determining the accuracy of
organisation' estimating system and able to control the price to achieve the good amount

of profit. It contain large number of specialised rules that might not be applicable to all
job and useful in compiling whole information and deliver major support to the
management in taking operational decision for the organisation.
P2. Determining the methods of management accounting reporting
Management accounting reports are quite useful for the organizations because they can
help them a lot in ensuring a proper analysis & interpretation (Efendi and Kusuma, 2021). These
type of reports can be useful because they can lead towards helping in the attainment of the
overall goals and objectives. For the management of the organizations, it is quite important that
these particular reports are used which will help a lot in ensuring that the overall goals and
objectives can be attained and the due analysis and interpretation can be made. For a company
like Connect Catering Services, it is important that the use of following reports can be made-
 Job costing reports- These type of reports can help a lot in ensuring that the overall
analysis of the job costs can be made in the right manner. Thus this can help a lot for the
companies in ensuring that they can assess their overall job costs and are able to find out
the appropriate techniques and methods through which they can reduce the job costs. This
will help a company like Connect Catering Services to be able to ensure that they are able
to assess and reduce their costs effectively and efficiently.
 Inventory management reports- In these reports, there is a detailed assessment of the
different levels of inventory. Movement of the goods can be assessed when the use of
these particular reports is made so that the appropriate decisions are made for raising the
overall bar of efficiency and effectiveness in the organization's processes. Thus here, the
inwards and outwards movement of the various stock items can be assessed which will
help a lot in ensuring that the overall goals and objectives can be attained (Ertl and et. al.
2020). Thus, In the context of a company like Connect Catering Services it becomes
highly important that the management of the stock level can be done in a right manner
which will help in maximizing the overall level of output.
 Departmental reports- There are different departments which are present within an
organization. These are Production, Finance, HR, Marketing etc. A firm like Connect
Catering Services can make sure that by making the use of these particular reports they
are able to make sure that they are able to maximize the overall level of efficiency and

effectiveness. In this way they will ensure that problems and issues in the departments
can be resolved.
 Performance reports- These are the reports which can help the organizations a lot in
ensuring that they are able to assess the performance in the right manner. Thus they can
help in ensuring that the assessment of the overall deviations and variations can be made.
Actions can be taken for ensuring that these particular deviations and variations can be
removed .(Makarenko, 2018). For a company like Connect Catering Services it is quite
important that they are able to ensure that by using appropriate methods and techniques
the overall performance level can be enhanced which will help a lot in ensuring that the
overall goals and objectives.
TASK 2
P3. Calculating the cost techniques of cost analysis using income statement
Cost refers to the monetary value that is spent or invest by an organisation in order to
produce or gain something. This is also states that it is amount charged for the product by
producer or seller and this involves the cost to produce product and mark- up cost is included by
seller to make profit. Cost analysis is process of business that analyse important decision and this
is essential methodology of how company should go for better and potential projects and
carefully determined the cost benefit analysis (Pedroso and Gomes, 2020). In the context of
Connect catering services, the cost is key component that facilitates the company in taking
evenness steps and actions for future events in terms of deciding the pricing of product and
always try to minimise the cost for the organisation.
Marginal Costing- This is relevant sources that helps in taking the decision regarding
the variable cost that is allocated to cost units. This is simple method for analysis of cost
information by the management and it effect the probability due to variability in the level of
production.
Absorption costing- This concept consider all resources and expenses that is related to
the cost of production and also refer all cost of production as product cost. This involves direct
material, direct labour and overhead costing. In selected company, this helps in identifying
information easily for decision making process.
Calculation of income statement through using marginal costing and absorption costing

TASK 3
P4. Assessing the advantages and disadvantages of types of planning tool
Budget is micro concept that depicts trade-off where one good is exchanges for another
and also it is estimation of revenue and expenses for specific period of time. Budgetary control
refers to process of determining the various results with budgeted value for future period. This
also leads to comparison of figures to calculate the variances and that enable them to find the
discrepancies and need to take measurable action in proper time. In the context of selected
company this supports in planning and controlling all aspect to produce or sell the commodities.
 Master budget- This is combination of many budgets such as purchase, sales and future
expenses (Pelz, 2019). It contains all types of financial budget in business and also
inclusive of income statement and balance sheet and aggregation of divisional budget

give rise to master budget. This provides the important information on the management's
strategic plan for future events. It cover entire fiscal year, and often presented in monthly
or quarterly format. This budget helps the selected organisation in planning tool for top
management team and act as essential part of budgeting. This facilitates the organisation
to take corrective actions to accomplish the goals for the organisation and also helps in
strategic decision.
Advantages-
 This helpful in allocating and utilisation of resources that support in drafting the various
decisions. This used as comparing the actual performance and budgeted performance and
helps in ascertain the areas that require more effort to increase the results.
 This tells all problems and challenges in advance and helps in detect that. In the context
of selected company, this helps in knowing in advance about the future challenges and
facilitates the organisation.
Disadvantages-
 This is requires many budgets while preparing the master budget so that could be difficult
to make master budget (Zyznarska-Dworczak, 2018). For the chosen organisation, this
will be difficult to operate and maintained.
 This is highly rigid in nature and through combining all kinds of budget it create lots of
problem and confusion and that impact the performance of company. In the context of
selected company this will build the lengthy and detailed charts and that could br difficult
to understand.
 Activity- based budget- This budget is kind of traditional budgeting method that adjust
the previous cost based on inflation and changes in business activity and more
importantly it looking for the cost. Every cost in business in looking at closely to
determine effectively and efficiency and reduced the cost. It aims to analyse the cost
driver and that make the business more profitable and remove unnecessary activities. In
the context of selected company, this works as planning tool for the organisation in
identification of cost drivers of many activities and also helps in deciding the labour
hours and wages paid to employees (Rahaman and Aktar, 2021). This help in analyse the
goals and requirement when there is no historical costing data and then this system is
used.

Advantages-
 It determine that which cost is associated with the operational activity and also it further
breads down these cost to check which is declining the profitability of company. Fpr the
selected company this supports in evaluating different business activities unit and which
is more profitable.
Disadvantages-
 The main disadvantages is it is time consuming to implement as compared to other
budgeting method and create cost for the business. In the Connect catering services, this
is not feasible to use as this needs time and money.
 Production budget- This is plan that estimate the quantum of products that required for
the production by the company over specific period of time. It estimate the sales forecast
that how much organisation will going to earn the revenue (Vultur, 2018). For the
chosen company, this will act as planning tool as it consider the inventory level that
company wants to maintain to meet the contingencies. This also helps in developing the
cost budget and also decides how much manpower need to be employed.
Advantages-
 This will help in planning the future production process ans indicate specific number that
need to make and ensure proper scheduling of whole process. For the chosen company,
this is will help in taking appropriate managerial decision and it act as the key purchase
budget for the management.
Disadvantages-
 This is based on estimated values of sales and revenue and create the lots of chances of
variation in the management operations. It can also lead to wrong prediction about future
circumstances such as demand and supply. In the selected organisation, this is also leads
to improper planning of company that create many problems for the management.
TASK 4
P5. Comparing the management accounting and financial management
Financial problem refers to inability to pay its basic needs on time and unable to afford
the necessary requirements. In the selected company, this problem could arises anytime in the
company and might some reasons. This situation is arises in the form of many ways in the

company and impact majorly on the functioning of organisation. Some of the financial problem
in the company are as follows-
 Excessive in debt- This problem concern with the problem of increasing in the level of
debt amount in the company and that create big problem that how they will repay it in
short period of time (Ramachandran, and Kakani, 2020). In the context of selected
company, they might face this problem due to many reason and that will reduce the
amount of profit as they need some amount to repat that money.
 Poor cash flow management- This problem concern with the failure due to inadequacy
in cash flow and in this cash is going out excessively and reducing in the cash inflow. In
chosen organisation, this problem will impact the cash position and liquidity in the
company and this will decrease efficiency in the management.
 Benchmark- This is standard against through which performance of company is
measured and it is element of Sigma Six black belt. This helps the Selected company, to
use the benchmark against the portfolio and helps in making right decision regarding
investment strategy and facilitates in reducing error.
 KPI (Key performance indicator)- This is leading high-level measure of revenue,
expenses and profit and other financial outcomes (Swanepoel, 2019). This helps in
determining the company strategy for long term performance and act as key success
indicator. In the selected company, this technique will help in determining the
performance and growth and helps in focuses the financial and non-financial metrics.
Comparison between two organisation and uses of financial techniques
Basis Marks and spencer Asda
Financial problem Company is facing the
problem of poor cash flow
management in the
organisation (Schaltegger,
2018). This has occurred due
to lack of control over many
financial activities and
functions. Through this
problem company is not able
Company has facing the
financial problems related to
the excessive in debt. This
problem will reduce the
investment capacity in various
project. This will occur as
main problem for the company
and will decline the

to pay its expenses and cannot
fulfilled some requirements
due to improper cash
management.
profitability.
Identification of problem To analyse this problem the
financial techniques which is
helpful is KPI, as this will
monitor all types of financial
transaction and facilitates in
taking measurable steps.
To evaluate this problem the
method that could use is
benchmark. This is help in
understanding the performance
metrics and this will give
useful suggestion to the
management.
CONCLUSION
From the above report it is concluded that Management accounting is the method that
used in the planning and measuring the performance of the organisation and include certain
activities such as interpretation, analysis and identification of accounting information.
Management accounting system are playing essential requirement in the operational process of
company and some systems are Inventory system, Job costing, Cost system and Price
optimisation system. Cost key part that has essential place in the company and has two
techniques such as Marginal costing and Absorption costing. Budgetary control helps in
evaluating the budgeted values to actual ones and some of budgets are useful in planning tool in
the company such as Master budget, Production budget and Activity based budget. In
organisation there is financial problem that is faced and used certain techniques to identify them
to reduce the problems.

REFERENCES
Books and journal
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