Management Accounting and its Systems

Management
Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1: Explanation of management accounting and its systems..................................................................3
P2: Methods for Management accounting reporting..............................................................................4
TASK 2..........................................................................................................................................................6
P3: Calculation of costs using appropriate techniques............................................................................6
TASK 3........................................................................................................................................................13
P4: Advantages and disadvantages of different types of planning tools...............................................13
TASK 4........................................................................................................................................................14
P5: Comparison of organizations in adoption of management accounting systems to solve financial
problems...............................................................................................................................................14
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................17

INTRODUCTION
Management accounting refers to the provision of financial data and advice to a company
which helps its managers in taking the decisions which are for its benefit (Armitage, Webb and
Glynn, 2016). It helps the managers to better inform themselves before they take decisions on
key matters concerning the company. Thus, overall its purpose is to aid them in decision-making
process. This helps in raising the overall efficiency, effectiveness and productivity in the
organizational context. Thus if the managers of the enterprise use it effectively then it will result
in achievement of short-term and long-term goals and objectives of the organization and will also
help in raising the level of profits. This project is based on Creams Ltd., which specializes in
selling of ice-creams, waffles and doughnuts. In this report, detailed analysis will be made on
types of systems used for management accounting, application of techniques of management
accounting to calculate the costs, use of planning tools. Additionally, the ways in which different
firms make use of management accounting systems will be discussed as a part of this report.
TASK 1
P1: Explanation of management accounting and its systems
Management accounting refers to using financial data and information in such a manner
so that it helps in taking of various decisions pertaining to the organization (Bromwich and
Scapens, 2016). Managers of Creams Ltd. can use this data in order to help them grow the
enterprise and to get ahead of the competitors through effective decision-making.
The various systems in management accounting are explained in the context of Creams
Ltd. as follows-
Cost accounting system- Cost accounting system is very helpful in order to find out and
analyze the costs pertaining to an organization. It can be used the managers of Creams Ltd. to
find out their various types of costs and segregating them according to requirements. Also, this
system helps in analyzing the overheads. Management can make use of this system to analyze
the costs and to find out the excessive costs incurring in the organization. This helps in reducing
these extra costs and maximizing the level of profits.
Essential requirements-
 A good cost accounting system helps in analysis and interpretation of costs.
 A good cost accounting system identified the extra costs in various departments of the
organization and helps in reducing them so that the profits can be maximized.
Inventory management system- Inventory management system helps a lot in proper and
effective management of the inventory level in the organization. Managers of Creams
Ltd. can use it so that they can manage the stock levels effectively and efficiently. It also

identifies the problems pertaining to the inventory in the organization and takes the
essential steps to resolve them. Thus overall it is very much helpful for taking decisions
related to the inventory.
Essential requirements-
 An effective inventory management system must be able to identify the problems and
issues lying with the management of inventory level in the organization.
 An effective inventory management system should be able to properly manage the stock
level in the organization.
Job costing system- Job costing system helps in proper management of orders and other
jobs undertaken in the organization (Bui and De Villiers, 2017). It is very useful for those
enterprises which are indulged in the process of manufacturing. The managers of Creams
Ltd. can make use of this system to properly track and manage their orders. This will help
them in completion of orders on time. Also the costs associated with the jobs in the
organization can be calculated using it and can be segregated across departments. This
helps in finding out the excessive costs incurred while completing the orders which helps
in reducing them and maximizing the level of profits.
Essential requirements-
 An effective job costing system should help in properly maintaining the track of orders
received and given in the organization.
 An effective job costing system should help the managers in reducing the costs associated
with the completion of orders by identifying unnecessary costs associated with the orders.
Price optimization system- Price optimization system helps in choosing a right price by
selecting a right pricing strategy according to the conditions prevalent in the market
(Christ, Burritt and Varsei, 2016). The managers of Creams Ltd. can make use of this
system in order to set a right price which helps them in raising profits and also getting
ahead of the competitors. It ascertains the problems related with the pricing strategy of
the organization and helps in resolving them so as to effectively raise the profits.
Essential requirements-
 A good pricing optimization system should be able to find out the problems and issues
associated with the price set by the organization for its products.
 A good price optimization system must be able to raise the level of profits and must help
the firm in getting ahead of the competition by helping management in framing an
effective strategy for the price.
P2: Methods for Management accounting reporting
Management accounting reports are prepared in order to facilitate the analysis and
interpretation of performance of various departments in the organization (Cooper, Ezzamel and
Qu, 2017). The explanation of these reports in the context of Creams Ltd. is as follows-
Budget report- A budget report is prepared with the help of budgets in the company
such as cash budget, operating budget, master budget etc. They are used to generate the overall