Management Accounting and Cost Analysis

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Meaning of management accounting with essential need of types of management
accounting systems. ....................................................................................................................1
P2 Various methods utilised in management accounting reporting............................................4
TASK 2............................................................................................................................................5
P3 Figuring costs with the usage of appropriate methods of cost analysis and preparing an
income statement by using marginal and absorption costs..........................................................5
TASK3...........................................................................................................................................10
P4 The benefits and disadvantages of various kinds of planning tools in budgetary control. . 10
TASK 4..........................................................................................................................................13
P5 Adaption of management accounting systems by different organisations in solving
financial problems......................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is the process of using the financial information of the company
to prepare management accounts and reports to make budget related decisions (Ali and Zhang,
2015). It prepares monthly and weekly reports for the management of the businesses. It is one of
the important element useful for running the organisation. It helps in assisting management to
achieve better control and efficient planning in the organization. It is applicable in every kind of
organization like not-for-profit administration, government organisation or sole proprietorship.
Management accounting is considered as an significant decision-making procedure utilised by
the internal management. For gaining insights about management accounting, considered entity
is Galway Plc which is engaged in manufacturing of steel products in UK.
This study alludes the meaning of accounting system, explanation of need management
accounting system in enterprises, management accounting report methods. It also describes the
usage of techniques of cost analysis for preparation of income statement, merits and demerits of
various types of planning processes for controlling the budget. In the final part of the report the
comparison between different organisation's way of utilising this accounting system to solve
financial problems is discussed.
TASK 1
P1 Meaning of management accounting with essential need of types of management accounting
systems.
Management accounting- It make the necessary use of the data of the firm and make
valuation of the inflows and outflows (Arnaboldi, Lapsley and Steccolini, 2015). This
information can be used by the management to take important decisions about the product
manufactured, whether to make any changes in it or not , the applied strategies are improving the
sales, the estimated profit is earned or not. Management can conduct the planning for the future
and evaluate the overall performance of the concern. Within Galway Plc, management
accounting helps in identifying the risks associated in various fields. Hence, through this the
company can take better investment decisions. Key management accounting principles that
financial analysts of Galway Plc follows are defined below:
1

Principle of causality: It illustrates relation among managerial objective's quantitative
output as well as input quantities that are consumers in attaining output. The principle enables
analysts of Galway Plc to deal with strong relations and maintaining integrity.
Principle of analogy: It describes about utilisation of casual insights for inferring
outcomes related to historical or future information. The principle governs managerial ability of
Galway Plc to execute insights that are achieved from casual relationship modeled.
Management accounting system- It involves the internal systems which the enterprise
utilises to figure out the processes for the organisational management. There are various types of
accounting system which different organisation uses in its operations. Galway Plc make use of
this system in valuing assets, revenues and expenses. It helps in selecting finite alternatives for
the formulation of better decisions.
Types of Management accounting system:-
Cost accounting system- Manufacturers use this system to keep record of the production
exercise by using a everlasting inventory system. It helps in tracking the flow of stock during the
different stages of manufacturing (Ashraf and Uddin, 2015). This cost accounting system can be
applicable in all types of businesses like manufacturing, trading products and delivering services.
It needs five basic things for valuation. They are input measurement base, an inventory method
of valuation, cost assemblage methodology and recording of inventory cost cycle at particular
period. It selects any from among the pure historical costing, standard costing and orderly
historical costing. It is not possible for any business to perform without the usage of cost
accounting and it will cause in making of incorrect decision and thereby result in suffering
losses. Essential requirement associated with cost accounting system in Galway Plc is to
minimize the business operation cost by controlling and distinguishing them whenever required.
Hence, the profits will be increased. Galway Plc exercises cost accounting system in verifying
the products manufactured by it are profitable or it requires some modification. It manages the
costs and keeps balance between the cash inflow and outflow.
Job accounting system- This system assigns the costs to specific job in which the
company is engaged. It is used majorly by the industries like construction where the costs are
allocated according to the various projects held by the business. Job accounting system is the
process of collecting subject matter about the various costs related with a particular production of
commodity and service job (Bedford, 2015). This data may be essential for submitting the
2