Unit 5 – Management Accounting Level-4

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Different types of systems of management accounting and their application..................1
P2. Methods for preparing accounting reports.......................................................................2
M1. Benefits of systems with their applicability....................................................................4
D1 Management accounting systems and reporting are integrated with process of
organisations...........................................................................................................................4
TASK 2............................................................................................................................................5
P3. Calculation of cost with distinct costing techniques........................................................5
M2. Diverse management accounting techniques................................................................12
D2. Financial reports that accurately apply and interpret data.............................................12
TASK 3..........................................................................................................................................12
P4 Advantages and disadvantages of different types of planning tools...............................12
M3 Use of planning tools and its application for preparing and forecasting budgets..........14
TASK 4..........................................................................................................................................14
P5 Organizations are adopting management accounting system to respond financial problems
..............................................................................................................................................14
M4 Management accounting can lead to sustainable success..............................................18
D3 Planning tools for accounting respond by solving financial problems...........................18
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Management accounting is the procedure of evaluating the cost of enterprises and their
operations to produce internal financial report, records and account to aid manager's decision
making process in accomplishing business goals. It plays significant role to concentrate on all
business information and arrange effectively to make decision (Abdel-Maksoud, Cheffi and
Ghoudi, 2016). Without management accounting organisation can not produce accurately reports
and keep records to present in front of internal management. This report based upon Alpha
limited, which is a manufacturing organisation. It is established in UK and specialise for Pizzas.
This report will be covered different topics such as various kind of management accounting
system to analysis actual position of the organisation, different method of report to know detailed
information about company. Along with compute BEP analysis, net profit through costing
technique such as marginal and absorption. Apart from the report to forecast and preparing
budget apply different planning tools as per the company position and related risk to prepare
effective strategy, identify all the financial problem through management tool and apply
effective solution through system.
TASK 1
P1. Different types of systems of management accounting and their application
Management accounting is defined as technique that applied by the organisation to
collect all the financial information and record in the reports. The higher authorities can
determine the efforts for the modification of organization that provides result in positive as well
as negative way. The manager of Alpha Ltd can apply it to present all the accurate information to
the management.
Management accounting system is internal part of the company that apply by the
management to evaluate actual position of the company. Top level executives of Alpha Ltd
direct to manager to apply the system to collect all financial data (Arunruangsirilert and
Chonglerttham, 2017). There are analysed underneath:
Price optimization system: This system is play essential role to set price of different
products after conduct market research and know different views of the customer. So after
research company set effective prices all the products to attract customers regarding to business.
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Such as manager of Alpha Ltd usage this system to set price of the products. This system guides
to manager how to set effective price.
Inventory management system: this system is mainly applied in the production
companies where follow the particular procedure to monitor and record all the information which
is related to stock to bring out all the operations in known as inventory management system.
Such as Alpha ltd apply this system to analysis the position of raw material at each level of
manufacturing. So it helps to collect all detailed information about stock and how to utilised in
different stages. The manager will require to analysis these activities or not (Banham and He,
2014). A company can select one appropriate method from these such as: AVCO (Average cost method): As per the method all the stock is calculated by the
business at average cost basis and conduct activities according to it. FIFO (First in first out): In this method manager can set price and sell out those
products that come first in the organisation specially in food manufacturing companies.
 LIFO (Last in last out): This method defines that those products sell out which was
coming in last in the company.
Job costing system: Different types of companies perform several operations for
bringing out all the activities and keep all the detailed information which is collecting through
particular system. The management of Alpha Ltd can use it to predict and assign manufacturing
costs from various units that are produced it. It is important for the business for the segregate
expenditure that present as per the requirement.
Cost accounting system: The particular framework is focused on the business and help
to evaluate the cost with the help of different items that produced. The manager of Alpha Ltd are
applying it to predict the right cost that have taken place due to produce pizzas so that most
profitable activities could be determined. It is essential for the business to predicting future
expenses that could be performed (Guffey and Harp, 2016).
P2. Methods for preparing accounting reports.
Management accounting reports: Management accounting reports are used in the
planning, regulating, decision making and measuring performance. It provide more inside
information through the financial accounting. Alpha limited, generates these reports through the
accounting and bookkeeping information. Manager analyse these reports and convert them into
useful information for the company. These reports are made so that manager can make informed
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business decisions to reach its goal on time and in efficient ways. It provide standard
information to make good decision in the long run.
Inventory management report: Inventory management report provide the trends in the
market, identifies the strength and weakness of the company. It provide useful information so
that manager can fill the gap and inefficiency in the production process. This helps Alpha limited
company to see the real time movement of the stock in the process. It provide the track record of
cost of good sold. It helps in avoiding the under and over evaluation of the stock in the process.
It makes up a large part of the total assets of the company. In the companies, these inventory
may be defined as the goods held for the sale in the ordinary course of action. it also include
goods that are used in manufacturing of the product and services. The main objective of
inventory management is to maintain the balance between stock and customer service (Harrison
and Lock, 2017).
Performance report: Performance report provide the outcome of the activity. It is
detailed statement which measure actual performance of the individual or the result of the
activities over the specific period of time. Alpha limited company prepare this report to evaluate
the performance of its employees well as of the outcomes of the activities. The accurate action
are taken to correct the unfavourable variance so that performance can be increased and goals are
achieved on the time. It provide manager annual performance report which shows the actual
activities versus original planned activities.
Budget reports: Budget report is a report used by the management to compare the
estimated, budgeted outcomes with the actual outcomes to measure the performances of the
company. In other words, budget report are prepared to evaluate the budgeted performance with
the actual performance during an accounting period. Alpha limited company prepare such reports
to correct the problems occurring in the organisation by taking correct action. This also provide
how accurate there are in their predictions and take realistic action to achieve its goals on time.
There are both variance such as favourable and unfavourable in the organisation, favourable
variances occur when the actual outcomes are better than the budgeted and unfavourable
variable occur when actual outcomes are not in accordance with the budgeted outcomes.
Accounts receivable reports: Account receivable reports is a report that list the unpaid
customer invoice and maintain the credit invoice by the date wise in the system. It reports
provide the collection of overdue of the payments from the customer to prevent in bad debts.
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Alpha limited company maintain the complete information about the customer so that there is
proper collection of money on time. This report is also used by management to determine the
effectiveness of the credit and collection function in the organisation (Hiebl and Mayrleitner,
2017).
M1. Benefits of systems with their applicability
Management
accounting systems
Benefit and application
Price optimisation
system
The management of Alpha Limited apply this system which is
beneficial for them to set accurate price of different food products that
provide by the company. Through accurate price consumer attract for
this and increase profit and market share.
Inventory
management system
This system apply in the Alpha Ltd to manage goods in appropriate
manner and analysis that in which stage use more goods. So main
purpose of this system to observe each activities at every level and
roper utilise all the resources to decrease wastages.
Job order costing It is applied in the Alpha Ltd in order to predict and collected cost as
per the job performance within organisation. It is advantageous for
business to collect all the segregated expenditure as per the nature.
Cost accounting
system
Most of the company use this system because it provide cost of
manufacturing and collect all the information about the raw materials,
labour and overhead. It is beneficial because it provides estimate cost
or most profitable products.
D1 Management accounting systems and reporting are integrated with process of organisations
Different types of organisation apply the different accounting system as well as reports to
smoothly run organisation procedure and increase profit. Both are important to analysis all the
activities and business procedure in systematic way. To achieve their long term goals required to
follow inventory management system to track the record of material then record in the inventory
management report that helps to know actual position of stock and flow at different level (Kieso,
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