Different Types of Management Accounting Systems and Their Essential Requirements

This report discusses the different types of management accounting systems and their essential requirements. It explores the job costing system, cost accounting system, inventory management system, and price optimization system. The report also assesses various methods of management accounting reports, including accounts receivable aging reports, performance reports, cost accounting reports, and departmental reports. Additionally, it examines different cost techniques, such as absorption costing and marginal costing, and discusses the planning tools used in budgetary control, such as activity-based budgeting and zero-based budgeting.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Identifying the different types of management accounting system and their essential
requirement..................................................................................................................................3
P2. Assessing different methods of management accounting reports .........................................5
TASK 2............................................................................................................................................6
P3. Applying cost techniques in the firm ....................................................................................6
..........................................................................................................................................................9
........................................................................................................................................................11
TASK 3..........................................................................................................................................11
P4. Determining different types of planning tools used in budgetary control...........................11
TASK 4..........................................................................................................................................13
P5. Comparison of organisation that adopt management accounting system to handle financial
problem......................................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting refers to managerial accounting that is used by managers to
make essential decision regarding financial and non-financial. It helps them in understanding the
accounting information to perform better function in the organisation and control them
effectively (Amir and Chaudhry, 2019). In this report, chosen company is Connect Catering
services which is looking to expand their market to retail sector and sell a range of different food
items. In this report, understanding of different management accounting systems and its
essential requirement in the organisation has been studied and different methods used for
management accounting reports. Applying various ranges of cost techniques to analyse income
statement of the selected company. Assessing the advantages and disadvantages of different
types of planning tools used in budgetary control. Apart from that comparing different
organisation that are adapting management accounting system to manage the various financial
problems so that it leads to success in the firm.
TASK 1
P1. Identifying the different types of management accounting system and their essential
requirement
Management accounting refers to the useful information that is concerned with the
accounting system that assist the managers to apply in the organisation to minimize the loss and
maximising the profit. This enabled the firm to work more effectively and support the
management in formulation of policies and planning control. In the context of Connect Catering
Services, this is useful technique that is used for future as it collects and analyse data to plan
about the future. The primary function of management is to decide about future course of action.
Management accounting system refers to the internal system that used in the firm to
accurately measure and evaluate the whole management of the organisation (Amran, 2020). This
deals in many other departments as well such as IT, Human resources, Marketing and operations
and integrate achieve the common goal in the company. In the selected organisation, this
management system facilitates stakeholder, creditors in providing the information and this assist
them in appropriate decision making. Following are the management accounting system are as
follows-

 Job costing system- This cost is evaluated at any stage of job completion and the profit
that is incurred from each job is known as Job costing. Management can estimate the cost
of job on the basis of past records in job costing and on the completion of job, selling
price can be compare with the estimate for the purpose of cost control (Bedford and
Speklé, 2018). It reduces so that profit of each type of job is to be maximised in the job
costing. Due to this, management enable to compared with present job executed and able
to make decisions. In the chosen company, the essential requirement is that it helps in
determining the profitability of each job and provide estimating of cost for future time.
This also helps in detailed analysis of cost of material, labour.
 Cost accounting system- This is method, which assessed company's production cost,
inventory cost and profitability. This is internally focused system and it is much more
flexible and specific as compared to other accounting methods. It facilitates manager to
carefully look into the process of different departments and ease in controlling the cost
that is associated with many activities. This play important role in maintaining the
efficiency and effectiveness of firm' operations and increase the accuracy and
profitability in the organisation. In the context of chosen organisation, this is assist in
regulating and controlling the cost efficiency and assist in management decision. The
essential requirement is that it helps in preparing business budget and managing the cost
in calculating the selling price.
 Inventory-management system- This is very effective way to understand in terms of
earning profits and it is act as process of ordering, storing and managing the inventory of
any organisation is refers as inventory management. This is assist in knowing the dead
stock and overstock in inventory and use effective method in reducing the risk of
uncertainty. In the context of chosen company, the essential requirement is that it helps in
cost saving by determining the actual cost and it enhance the productivity in the
operations and it enables in choosing method for the management to reduce the risk in
inventory management (Bogt and Scapens, 2019). As, it is like software that helps
manually in automate all the data recording and tracking processes and leave no error.
 Price optimisation system- This is mathematical programs that used to calculate the
demand which is varied at different price levels. After, it combine all the data with the
information on cost and inventory levels to recommend price that will help in enhancing

the profits in overall management activity. As, pricing plays crucial role in revenue and
profit in the company and it is also influence the certain factors in the management. This
really helps in determining the business of initial pricing, promotional pricing and
discount pricing. This is base of generating the income in management and it is used by
companies in market and enable in taking decision-making regarding the price of
product. In the context of chosen company, the essential requirement are, it helps in
achieving the financial benefits that improve in profit margin of company and will
facilitates in making fast decisions based on data.
P2. Assessing different methods of management accounting reports
Management accounting report refers to the crucial part in estimating the performance of
business and provides complete picture to the manager and it used to produced every quarter in
order to view the business finances (Choi and Byun, 2018). This display the financial status over
specific period of time and compile all financial information. In Connect Catering services,, this
management reports helps the company in taking business decisions and guide the to achieve the
desired goals of organisation and make informed business decision making. Following are the
report are as follows-
 Account Receivable ageing reports- This report is useful for those business which are
heavily depended on the extending credit. This is helps in identifying the defaulters and
find the issues in the process of company and for that they required the tighter credit
policies to control the situation. This facilitates the manager to breaking down the client's
remaining balances in specific period (Christensen and Himme, 2017). So, this method
useful in sorting the receivables by the due date to estimate the bad debts expense. For
the selected company, this report will help in identifying the potential clients ans
analysing its credit policy to control the activities.
 Performance report- This reports are structured to review the performance of company
as whole and also each employee of the organisation. These performance reports are
made according to the departmental performance and mostly made in the big
organisation. Mangers using this report to take important strategic decisions for future
course of action. Individual performance is being determined and being analysed in order
to improve further as everyone in the organisation is playing essential role in completion
task. They provide deep insight into the operational working of company and taking

decision making to take appropriate action. In the context of selected organisation, this
report helps in maintaining the capacity and strategy towards the mission and also helps
in identifying the performance related to the managerial reports. Some necessary
requirement need to be taken by the manager to improve the efficiency and overall
performance capacity of the organisation.
 Cost accounting system- This managerial accounting helps in computing the cost of
articles that were produced and all kinds of raw material cost, overhead, labour cost are
taken into consideration (Collis and Hussey, 2017). This provides the overall summary
of cost involved in the production and it facilitates in knowing the capacity of cost price
of items as compared to the selling price. This is important tool for the manager to
estimate the profit margin and regulate all types of cost went into the production. It is
essential part of managerial accounting reports that provides the exact understanding of
all expenses. In Connect catering services, this report helps in analysing the method to
optimize all resources of all departments and support the management in taking
decisions.
 Departmental reports- This types of reports provides the report according to the
different departments exist in the company. Some key departments are IT, HR, Marketing
and Operations that perform certain activities and functions related to their nature. These
reports of individual departments depicts the overall performance of departments that
helps in analysing the efficiency and effectiveness of organisation (Machado and Alves,
2017). In the context of chosen company, this report helps taking key decisions regarding
the departmental issues and policies as this facilitates in improving the efficiency each
activities. This types of reports useful in the big organisation who has diversity in nature
and that leads to appropriate actions to maintain their performance.
TASK 2
P3. Applying cost techniques in the firm
Cost refers to amount which is spend by producers to manufacture the products. This is
very important form of money that is used by business where an a specific amount is being spend
to acquire or expand to deliver it to the customers. There are certain types of cost incurred by the
company and has their own nature that used to deal by the organisation. In the context of

organisation, this cost is essential part that need to understand by the firm properly and try to
minimise them in order to maximise the profit for long period of time.
Absorption costing- This reflects all kind of manufacturing cost that is assigned to
produce the goods. It required for the external financial reporting and for the income tax
reporting that is required by the accounting standards to create the inventory valuation. This
include the direct material, Direct labour and Fixed manufacturing overhead and variable
manufacturing overhead. In Connect Catering services, this facilitates in making appropriate
decisions regarding the allocation of cost.
Marginal costing- This concern with the increase or decrease in the cost of producing
one or more unit and this also known as the incremental cost (OTLEY, 2019). This based on the
production expense such as labour, material and equipment. In the context of the chosen
organisation, this cost determine the point at which increasing number of item produced will
push the average cost up and the proper understanding product' s marginal costing will help in
asses the probability to make the essential decisions related to the product.

TASK 3
P4. Determining different types of planning tools used in budgetary control
Budgets refers to estimation of all revenue and expenses over specific period of time that
is usually compiled and re-evaluated on periodic basis. This is micro-economic concept that
shows the exchange the goods and services over period of time. In Connect Catering services,
budgets are helps in managing overall activities and functions that used by managers to take the
actions for future period of time. Budgetary control concern with the process of determining
various results with budgeted value for future periods. This supports the management to compare
the figures to calculate the variances that facilitates the managers to take measurable action in pr
proper period of time. In the context of selected organisation, this helps in controlling the

operational activities to meet the requirements of the firm. Following are the budgets are as
follows-
 Activity-based budget- This types of budgets is carried out to develop the efficiency in
the functions of organisation (Saeidi and Othman, 2017). This is activity based and not
function oriented as it evaluates each and every cost driver. This helps in reducing the
irrelevant activities and were eliminated that increases the profitability in the
organisation. In the context of the chosen organisation, this budget helps in planning the
appropriate activities that include minimal cost and useful in removing unnecessary
activities.
Advantages-
 This helps manager to view the business as single unit and in the form of departments.
This gives the proper knowledge to the top management about the activities and useful in
deep research and analysis.
 This also helps in eliminating the bottleneck and carried out the activities smoothly by
removing the all sort of unnecessary activities (Wu and Wang, 2020). In the context of
the company, this will help them in achieving the efficiency in the management by
reducing irrelevant functions.
Disadvantages
 To conduct this budgeting tool it require proper understanding of the budget rules and
method and it is little bit complex in the structure. In Connect Catering services, this
need proper knowledge of budget as it has some complexity in the formation of this type
of budget.
 Zero based budgeting- This budgetary tool states that preparing the budget from the
scratch with zero-base. It also include re-evaluating every line items of cash flow
statement and justifying expenditure that used to incurred by the management
(Zadorozhnyi, Muravskyi and Shevchuk, 2018). This method concern with the
calculating on the basis of actual expenses that to be incurred and not on the differential
basis. This method involves that every activity need to be justified properly. In the
context of chosen organisation, this budget helps in planning the arbitrary changes to the
previous year's budget and makes every department re-look each item of the cash flow
and helps in computing the operations cost.

Advantages
 This promotes the effective allocation of resources as it does not look at the historical
numbers and focuses on the actual numbers.
 This reduces in redundant activities and helps in removing unnecessary activities. In the
context of company, this is useful in taking appropriate decisions to reduce the cost for
the organisation.
Disadvantages
 This is time consuming and it require intense exercise for the company and it also require
the huge manpower as it needs to make entire budget from the scratch. In the chosen
company, it is quite difficult for the company to execute this budget as it nor easy to
explain each line of item.
TASK 4
P5. Comparison of organisation that adopt management accounting system to handle financial
problem
Financial problem refers to the issues relates to the money when any individual or
business organisation unable to pay its expenses and debts (Vailatti, Da Rosa and Vicente,
2017). This create the problem for the company where they do not have much money to fulfil
their requirements as through that they face certain issues. In the context of the organisation, this
problem reduces the capacity of the company in investing in potential project and behind this
problem there might be many reasons. Some of the financial problem are as follows-
 Insufficiency in the working capital- This is important part of company and it is main
source where management uses this capital for regular or day to day activities. This is
necessary to maintain the efficiency in the working capital to carry out all functions to
smooth functioning. In Connect Catering services, this create the problem for the
company to manage their daily which need to be maintained properly.
 Late payment by client- This refers to the delayed in the payment as it create the
financial problem for the company to carry out further activities and functions. These are
revenue for the organisation and it create the big problem to do further activities. In the
context of company, this problem hinders the growth of the organisation as thir overall
efficiency will negatively impact.

 Benchmark- This useful tool that is used to measure the performance of company and it
is one of the element of six sigma black belt. In the context of selected organisation, they
use this method to against the portfolio and facilitates in taking measurable action from
the point of view of investment strategy and reduces the error.
 KPI (Key performance indicator)- This is used to monitor the activities regarding the
key areas that used to determine the essential strategy for long term performance and act
as key success in the organisation. In the chosen company, this tool will be useful in
knowing the growth progress and it also focuses in financial and non- financial matrices.
Comparison between two organisation and uses of financial techniques
Basis Tesco Asda
Financial problem Company is facing the
problem of late payments by
clients. As, this reduces the
probability and efficiency in
the management and unable to
operate other activities due to
lack of revenue.
As, this organisation is big
retail company and facing the
issue regarding the
inefficiency in the working
capital. This impact the day to
day activities in the
operational department.
Identification of problem To analyse this organisation
can use benchmark techniques
in order to detect the problem
of late payment by clients. As,
this will help in monitoring
internal process (van der Kolk,
2019).
To evaluate the issue in the
company, KPI could be use to
identify the key areas where
this problem occur and helps
in maintaining overall
efficiency.
CONCLUSION
From the above report it is concluded that Management accounting states the process of
identifying, measuring, analysing, interpreting the information to managers and it focuses on all
operational business metrics. In this report, the management accounting system concern with the
internal evaluation of management that helps the company to take appropriate actions and has

essential requirement for the company. Accounting reports are helps in identification of
estimated performance of the organisation. Cost is amount invest by producers and has its
techniques. Analysing the budget and has its importance in the organisation is important for the
management to execute the policies. Apart from identification of financial problems and its tool
to measure the effectiveness is being formulated and comparison has been done.

REFERENCES
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