Management Accounting and Systems: A Comprehensive Guide

Management
Accounting

INTRODUCTION
Management accounting is a way of analysing business performance with the help of
different reports that are generated by managers. In order to keep the company growing it is very
important for all the organisations to make sure that detailed information of all the internal
activities so that stakeholders such as managers, employees etc. can analyse it (Management
accounting, 2019). If an enterprise is not able to generate management report then it will be very
difficult for it to sustain in the market due to lack of internal details. The organisation which is
selected for this report is Alpha Ltd. It is a medium sized manufacturing company mainly
established in UK. It is specialised in producing pizzas. This assignment covers various topics
such as evaluation of management accounting systems and reports, application of cost analysis
techniques, budgetary control and planning tools used in it. Additionally, the way in which
companies are using management accounting to respond financial challenges is also covered in
this project.
TASK 1
P1 Description of management accounting and different systems of it with essential requirements
of them to the company
Management accounting is a technique of creating internal reports so that the
stakeholders can gather detailed information of actual position of organisation so that they can
formulate future decisions for betterment of business. If companies are not able to perform it on
regular basis then it may affect interest of employees and other members of entity in their jobs as
they will not have appropriate information regarding the company (Ax and Greve, 2017). In
Alpha Ltd. managers also focus upon it for the purpose of carrying out all the executional
activities in systematic manner. There are various systems which are followed by them for same
purpose. These are described underneath:
Inventory management system: All the companies which are involved in manufacturing
activities should keep record of all the goods so that availability of them could be analysed. In
order to reach all the operational goals it is very important to use this system. In Alpha Ltd.
managers are focusing upon the utilisation of it as they want to keep track record of material
used for producing pizzas. One of the major essential requirement of it for the company is that it
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facilitate the management to main the lower and higher level of inventory for appropriate
execution of business operations. There are various types of it which are discussed below:
 First in First Out (FIFO): In this method the inventory which was purchased firstly is
used to execute operations for future.
 Last in First Out (LIFO): While using this type of system managers use the goods
which are purchased recently to carry out operational activities.
 Average Cost (AVCO): When this system is used by management the stock is used on
the basis of average cost for production activities.
From all the above described systems the mangers in Alpha Ltd are using FIFO method
as it help them to utilise available resources properly. It is essentially required for the
organisation because the company is operating business in food sector so it is not possible for it
to keep stock such as vegetables for long period (Bromwich and Scapens, 2016).
Price optimisation system: Main purpose of most of the companies is to satisfy
customers by meeting their expectations regarding pricing. For the same purpose managers in
Alpha Ltd are applying this system on the reporting of organisation. With the help of it they
determine that clients will adopt the prices which are going to be decided by them for all the
pizzas which are sold by enterprise to them. The essential requirement of it for the entity is that
is that it facilitate to reach goals such as customers satisfaction by offering them items on the
cost which is affordable for them.
Job order costing system: All the organisations are performing different types of jobs
now a days. These are selling, advertising, promotions and marketing therefore it is vital for
them to allocate costs to all of them according to their requirements. Alpha Ltd is selling pizzas
in the market and perform different operational activities so the mangers use job order costing
system to make sure that all the jobs have sufficient funds to be executed properly in future. It is
highly required for the company as it facilitate to make sure that all the activities performed
smoothly or not by assigning costs to them on the basis of their requirements (Bui and De
Villiers, 2017).
Cost accounting system: In order to execute operations properly it is very important for
all the companies to keep detailed information of costs which are related to them so that
decisions for future development could be formulated. Managers in Alpha Ltd are using it for the
purpose of managing the costs which are faced by the organisation while producing pizzas. It is
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very important for the enterprise to use this system so that expenses which are related to different
business activities could be determined and then funds could be allocated to them accordingly.
P2 Discussion of different types of methods used in preparing management accounting reports
Management Reports: All the management reports are produced by the manager where
consisting of preparing, measure the efficiency and take effective decision. It is helpful to
arrange all the records which is related to cash and non cash activities after that record in the
reports as per the category. In these reports record all the facts, statistics and available
information of the Alpha Ltd. The main aim of this report to understand the actual position in
current market and how to conduct different activities into critical time (Christ and Burritt,
2017). The manager of the Alpha limited to evaluate the performance of the organisation prepare
different types of report such as:
Performance report: This report create by the manager to analysis the performance of
company as well as employees regarding to task. On the basis of this report company take
effective decisions and provide reward for the good performance. Through the reward employee
encourage for their work and make more effort to complete task on time and present good
performance. The manager of the Alpha limited produce performance report to evaluate different
business activities to make strategic decision to get success in company.
Accounts Receivable report: Each business depends on financing, so preparing accounts
receivable reports is essential for everyone. Through particular report collect all the relevant
information about creditors and their credit period. It helps to maintain the accounting report and
on time collect all the due money on time. In this report consist of break down the spare balances
for certain period of time where a manager of Alpha limited enables to recognise the defaulters
and search all the related problems for collection procedure.
Inventory management Report: This report developed by the mainly manufacturing
organisation to keep detail information about the inventory at the different level. This report
helpful to manager of Alpha limited to understand the stock level in warehouse. Such as this
report produce by Alpha limited to know about the utilisation of the raw material at different
process of production.
Budget Report: It is essential report that prepare by the different types of organisation in
order to get financial success. It is part of the internal report that utilised by the manager of the
Alpha limited for the budgeted projects to apply for the actual projects. In this report define
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about the all the expenses and incomes that occur in the Alpha limited. The manager set budget
on the basis of estimation then compare results with actual and control the cost activities which is
more than to budgeted project (Collis and Hussey, 2017).
M1 Application and benefits of management accounting systems and reporting in the
organisational context
There are various types of management accounting systems which are used by Alpha Ltd
for the purpose of executing business in systematic manner. Description of application and
benefits of all of them is as follows in context of the organisation:
 Inventory management system: It is applied by managers of Alpha Ltd as it results in
accurate information of actual status of stock so that the issues such as lack of goods for
executing business activities could be ignored (Cooper, Ezzamel and Qu, 2017).
 Price optimisation system: Management in Alpha Ltd is using it for to set right price for
all the items which are sold by it as it will be beneficial for enterprise to attract large
number of customers.
 Job order costing system: In order to acquire the benefit of allocation of accurate funds
to all the specific jobs of the organisation it is applied by managers of Alpha Ltd within
the company (Hall, 2016).
 Cost accounting system: In Alpha Ltd it is applied by management as it helps them to
keep detailed information of causes of all the expenses which are taking place while
performing business operations.
D1 Evaluation of the way in which management accounting systems and reporting are integrated
within organisational processes in critical manner
There are various types of management accounting systems and reports which are used
by managers of Alpha Ltd for keeping detailed information of operations. Inventory management
reports and system is used by them to make sure that the enterprise is having sufficient amount
of material to operating activities. Performance report is generated to formulate effective
strategies for future according to current situation of business. Job order costing system is
applied at workplace to assign appropriate cost to all the specific cost of the organisation. With
the help of all of them the managers in the entity decide to take further steps for improvement
which shows integration of all of them with organisational processes.
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