Role of Management Accounting in Businesses

MANAGEMENT
ACCOUNTING

Table of content

INTRODUCTION
Accounting is a key aspect for business entities for recording the financial transactions in
an effective manner. The MA is one of the main part of accounting (Siverbo, 2014). It is related
to process of collecting monetary and non monetary information with an aim of preparing
internal reports when needed by managers. These reports are presented only to the internal
stakeholders. The objective of project report is to analysing role of this accounting in context of
businesses. In the report Alpha limited company has been chosen that is located in United
Kingdom and operates in manufacturing of Pizzas. The report covers detailed information about
different MAS, MA reports and planning tools etc. In addition, role of different MAS in the
aspect of sorting financial issue is also mentioned in report.
MAIN BODY
TASK 1
P1. MA and its types.
MA- It is defined as a type of accounting which operates in the process of collecting quantitative
and qualitative information so that accountant can prepare internal reports. These reports provide
a detailed framework to the managers in order to take crucial internal decisions. Below some
types of MA are demonstrated such as:
 Cost accounting system- It is integrated to finance department of businesses with an aim
of making projection of futuristic expenses (Granlund and Lukka, 2017). By help of
making projection of further cost, it becomes easier for managers to take suitable action
in order to allocate funds as accordance of need so that cost can be minimised. It is
essential for businesses to track the usage of funds and total cost occurred in process of
operating different operations. In Alpha limited company, they are using this accounting
system for keeping cost lower from the estimations.
 Inventory management system – It is associated to process of tracking daily consumption
of stock value in order to produce new items. It is completely based on the stock
valuation methods such as Last and first method, First in first out method and many
more. It is essential for companies for reducing cost of storage lower as well as for
gathering information about usage of stock in completing activities regards to production.

In the aspect of above Alpha limited company, they are using this accounting system that
is helping them in order to assessing consumption of raw material, finished goods and
many more.
 Price optimisation system – This is defined as a type of accounting system which is
linked to process of setting price of products and services in an effective manner. This
becomes possible because in this sales department utilise key information regards to
customers' perception, feedback as well as market demand. On the basis of it, they set
prices of various products in relation to different market and customer segments. It is
essential for companies in order to setting prices of products in accordance of market
analysis. In Alpha limited company, their sales department set the prices of Pizzas as per
the market position and customers need.
 Job order costing system – This is a type of costing system which computes cost of each
activity in accordance of assigned number of jobs (Kastberg and Siverbo, 2016). It is
essential for companies in order to analyse and keep cost job lower as much as possible.
In Alpha limited company, they are using this costing system to provide important
information to their finance department about cost of each activity and job assigned in
completing different volume of operations.
Difference between MA and financial accounting:
Basis MA Financial accounting
Purpose This applied with an aim of internal
management of companies
This accounting is applied for
assessing monetary performance and
for publishing reports for external
stakeholders.
Information Under it, quantitative and qualitative
information is included.
While in this only monetary
information is included.
Essential This is not compulsory to apply in
organizational context.
It is essential for those companies
which are listed to prepare financial
statements.