Management Accounting and Reporting Systems

Management
accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
P1 Management accounting and the essential requirements of various types of management
accounting systems.................................................................................................................3
P2 Different methods of management accounting reporting.................................................5
M1 Benefits of management accounting systems and their application in selected
organisation............................................................................................................................6
D1 Examine how management accounting reporting and management accounting system is
coordinated within organisational processes..........................................................................7
Task 2...............................................................................................................................................7
P3/D2 Use marginal and absorption cost as a suitable techniques cost to analyse and prepare
an income statement...............................................................................................................7
M2 Prepare suitable documents of financial reporting system and accurately apply a range of
management accounting techniques.....................................................................................12
Task 3.............................................................................................................................................13
P4 Examine the different types of planning tools used for budgetary control and also state
benefits and drawbacks for each option...............................................................................13
M3 Examine the use of different planning tools and their application for preparing budgets15
Task 4.............................................................................................................................................16
P5 Explain how organisations are adapting management accounting systems to reduce the
chances of financial problems within an organisation.........................................................16
M4 Analyse how management accounting can lead organisations to sustainable success by
reducing financial problems.................................................................................................18
D3 Examine how planning tools for accounting management respond to handle financial
problems to lead organisations to sustainable success.........................................................18

CONCLUSION..............................................................................................................................19
References:.....................................................................................................................................20
INTRODUCTION
Management accounting can be defined as the process of managing financial activities
within an organisation (Swalih, 2019). It consist of providing useful information related to
finance to make decisions for organisational profit. Management accounting is handled by
internal team of an organisation. It include making budgets for the company, taking decisions to
control the unwanted expanses, making decision plans for future strategies related to finance the
company and many others. Northgate vehicle is an vehicle provider company on rents. This
company was founded in 1897 by its founder Alan Noble. It is headquartered in Darlington,
Country Durham, England, UK. The following report covers management accounting and
essential requirements of different types of management accounting systems, methods used for
management accounting reporting, techniques of cost analysis, advantages and disadvantages of
different types of planning tools used for budgetary control and comparison of two companies on
the basis of management accounting system to respond to financial problems.
Task 1
P1 Management accounting and the essential requirements of various types of management
accounting systems
Management accounting is the process of identifying and taking corrective measures
related to financial information within an company. Management accounting helps in forecasting
the future, forecasting cash flows, taking decisions related to cost control, helps in understanding
performance gaps of a company and many other functions are performed by management
accounting. It also include communication which is provided by the employees to their managers
which further help in taking those decisions for all departments which results in providing
overall benefit for an organisation.
The main aim of management accounting is to provide useful and true information to the
manager about finance so that manager take some decisions to eliminate unexpected expenses
from business (Sariwulan, 2020). Management accountant supervise lower level of financial
accountant who prepare income statements, balance sheets and many other activities, they
supervise that these lower level accountant are performing their activity with full skill and

loyalty or not. A management accountant also analyse opportunities for the company to grow
high in future and it also analysis risk related to business so that company take corrective
measures to overcome with all the risks.
Management accounting systems are those systems which is used to provide essential
information to the management which further used in making decisions in operational
business(Abdullah, 2020). This system is mostly used by manufacturing companies to control
their cost and manage the process perfectly. There are different types of management accounting
systems which is explained below-
Cost accounting system- This accounting system is used by organisation to control their
unwanted expenses, analysis of profitability and many others. It is basically related to
manufacturing cost. It is mostly used in manufacturing businesses because most of the cost is
occurred from manufacturing department. Making budgets for the company also falls in cost
accounting. It consist of providing information to management for the future use of their budget.
Inventory management system- it is related to managing inflows and outflows of
inventory. It is necessary to store bulk manufactured product at a such location which is easily
help in supply chain management of company(Sarchah, Yazdifar and Pifeh, 2019). Hence,
warehouses are used to store these products and regulate it in case of market requirement. To
manage inventory activities fall under inventory management system.
Job costing system- This system is used in construction industry. It is related to
managing cost related to incur for a specific job which is specially related to individual
construction projects of companies. Identifying the requirement of cost incur in a project is
managed so that there is no wastage resources and reduces the unwanted expenses to increase the
efficiency in performing specific job.
Price optimizing system- This system is used to identify how demand varies at different
price levels set by the companies. This system is used by top management system to set a price
for product which meet the customer demand and also provide profit to company.
Difference between Management accounting and finance accounting-
Management accounting Financial accounting
Management accounting is an accounting
system which provide essential information to
managers to make appropriate decisions and
Financial accounting system is an accounting
system which helps in making financial
statements to provide this information to

policies for the company. interested parties.
It is the choice of company whether to have
management accounting in their company or
not (Dang, Le and Pham, 2021).
It is compulsory for every company to have
financial management to manage the inflow
and outflow of cash to save themselves from
financial risks.
Management accounting involves both
monetary as well as non monetary
information.
Financial accounting involves only monetary
informations.
Their main objective is to assist the
management in planning and decision making
process by providing required information.
Their main objective is to provide financial
information to interested people.
There is no fix time to prepare management
accounting. Management accounting managers
can prepare their reports at any time whenever
there is the requirement of preparing reports.
Financial reports are made on a fix period of
time which is at the end of financial year.
Management accounting is useful for internal
management of company.
The users of financial information are from
inside the companies as well as from outside
the companies (Wahyuni and Putra, 2020).
P2 Different methods of management accounting reporting
Management accounting reporting system is the system opted by companies to measure
and manage their performance. Some of the methods of management accounting reports are
explained below-
Job cost reporting- It shows expenses for a specific project which a company opted to
perform in a particular period of time. In this reporting type it is easily identify that which job
must provide more profit to the company and which job is less beneficial for the company so
company will focus more on those jobs only which is beneficial for company. Company invest
on such kind of jobs rather than non-productive jobs. Job cost reports also measure expenses
while the project is in progress to control unexpected expenses.

Inventory and manufacturing reports - This reporting system includes recording and
measuring of inventories at warehouses. It is used to reduce wastage of inventory(Hilorme, and
et. al., 2019). This method include items such as inventory wastage, labour cost per hour and etc.
which affects the management of inventories. This method is further used in comparing different
assembly lines to identify which department need improvement and which department is already
performing best and contributing their best performance in earning profitability of company and
hence provide bonus to best performing employees so other non performing departments will
motivate to put their bests efforts in performing their task.
Performance reports- This is the report which is used to measure performance of every
employees within a company and as well as to measure the performance of company as a whole.
Management provide awarding systems to their employees so that they get motivated and
perform best to get more rewards. This is the best way to control performance of employees.
Performance is measured by the manager in their excel sheets and sometimes manager ask their
employees to prepare their own performance sheets(Shil, Hoque and Akter, 2019).
Types of financial statements- Profit and loss statement- It is also called income statement which is used record
revenues and expenses uncured during a particular period of time which is called
financial year. This statement helps in reducing costs and increasing revenue by focusing
on each aspect. Cash flow statements- This is the type of financial statement in which company record
inflow and outflow of cash for their organisation. It is used to identify how much cash a
company has at their office which is basically called cash in hand. This financial
statement also identify hoe fast the company spend their cash to pay their expenses. Cost of goods sold- It include direct cost of producing the cost of goods. It include cost of
war material, labour cost and etc.
 Balance sheet- It describe the liabilities and assets of business(Dropulić, 2020). It shows
that liabilities must be subtracted from asset to know exact revenue for business.
M1 Benefits of management accounting systems and their application in selected organisation
There are many benefits of management accounting systems which is explained below-