Management Accounting Systems: Methods, Techniques, and Planning Tools

UNIT 5 MANAGEMENT ACCOUNTING.
Contents
INTRODUCTION...........................................................................................................................................1
LO1 Demonstrate an understanding of Management Accounting Systems................................................1
P2 Explain different methods used for management accounting reporting............................................3
LO2 Apply a range of Management Accounting Techniques.......................................................................4
LO3 Explain the use of Planning tools used in Management Accounting....................................................9
P4 Explain the advantages and disadvantages of different types of planning tools used for budgetary
control.........................................................................................................................................................9
LO4 Compare ways in which organizations could use Management Accounting to respond to Financial
Problems...................................................................................................................................................11
P5 Compare how organization are adapting management accounting systems to respond to financial
problems...................................................................................................................................................12
Conclusion.................................................................................................................................................14
References.................................................................................................................................................14
INTRODUCTION.
The management accounting various of things ranging from comprehending and interpreting data on
finance, different methods of management accounting as well as use of management application tools.
The unit can assist solving array of accounting problems and sharpening more knowledge on it. The
planning tools can assist solving calculations involving budgets, costs and performance.
LO1 Demonstrate an understanding of Management Accounting
Systems.
P1 Explain management accounting and give the essential requirements of
different types of management accounting systems.

It is the system that involves measurement, identification, interpretation as well as passing financial data
in line with the goals of the organization. It is the same as cost accounting. The core variation between
financial accountant and management accounting is where data on management accounting concerns
with helping managers in the company to formulate decisions while financial accounting is focusing at
providing data for the outside entities of the business. The system of making management accounts as
well as reports are which provide on time and correct statistical and financial data required by managers
to develop daily. (Appelbaum and Kogan, 2017). It entails the reports which are developed to achieve
the needs of the management.
Accounting is the steps of measurement, identification, as well as communication of information on
economics to permit informed agreement by the data users in line with the American Accounting
Association. (Blocher, 2016).
Management accounting systems are of several types, include.
Cost accounting system.
It is tools used by the company to estimate the price of its goods and services for inventory valuation,
analyzing profit as well as controlling costs. Here, allocating costs is done depending on the system of
activity-based or system of traditional costing. Estimating the exact cost of goods and services which is
very important for the proper functions. (Blocher, 2016). It is the type of accounting system that focuses
on capturing production cost of the organization by measurement of the inputs costs of all the steps of
production as well as the fixed costs. It measures as well as recording the cost individually then doing
comparison of the inputs and results to the actual outcome or to help management of the business in
performing performance of the financials. Pearl Chartered Accountant depends on the accounting
information generally and specific on costs because any role of organization can be described through its
costs.
Inventory management.
This is the process of controlling as well as supervising the ordering, usage and keeping of components
that the pearl Chartered Accountant can use in the manufacturing of the products it sales. This system
involves using barcode scanners, software for desktop, devices such as mobile and barcode printers to
control the inventory management that includes products and supplies. (Drury, 2015). Again, it is the
practices that involves managing and supervising of quantities of the manufactured products for sale. It
has an objective of exactly comprehending current levels of inventory as well as reducing overstocking
and understocking scenario.
The following are some of the roles of the inventory management system: Developing buying orders,
receiving, relocating, adjustments as well as disposal of inventory. Nevertheless, it does orders for sale,
packaging, and product's shipping (Drury, 2015).

The importance of inventory management systems to the business are:
Raising the company's bottom line, encouraging accuracy for the inventory as well as increasing
workflow of the business.
Job costing system
Job costing is defined as process of assigning production costs to the single item. It is used when the
finished goods are differing from each other. It includes the practices where the information are
accumulated based on the costs, relating to the specific service. The data is required to send cost data to
the customer having contract where costs should be refunded. The information can also be used to
determine the accuracy level of the estimating process of the organization which have ability to quote
prices that is allowed for sensible income. (Drury, 2015) The data can be used to control the inventory
cost to finished products.
Price optimization systems
Price optimization is defined as use of mathematical analysis to the company for overseeing the way
client feels towards different prices for products through various ways. (Edmonds and Olds, 2013).
Again, it is used to determine the prices that a business thinks can meet their objectives such as
achieving their operational profit. Finding an option through the best fulfilling performance under given
challenges via meeting needed aspects and reducing the unwanted ones. (Edmonds and Olds, 2013).
P2 Explain different methods used for management accounting reporting.
Managerial accounting checks on data from within gotten through financial accounting. It is applied in
supervising, organizing, and making decisions. Managerial accountant is based on statements of
financials consisting of income statement, balance sheet and money flow statement (Edmonds and Olds,
2013). Moreover, Other kinds of accounting reports in evaluation of company's data.
They include the following.
Cost reports.
It calculates price of products processed. It is performed via having all the unfinished items, overhead,
costs labor and other cost to be considered. The division of sums is done in line with number of items
manufactured. (Edmonds and Olds, 2013). Every information is simplified into this report. The report

allows managers the ability to show the cost value of products against selling price. It assists in
controlling and planning of the revenue margins.
Budgets.
The main feature of management accounting is preparing budget. Budgets are developed via application
of budget of previous years and pushing it to future forecast. The budgets of pearl Chartered Accountant
arrange all expenditure and sources of income. The company try to meet the targets and goals while
remaining in the amount which are budgeted. (Edmonds, 2013).
Performance reports.
It is used by accountant to compare exact revenues and expenses to the value which is budgeted. The
variances done are performed when planning new budgets as well as all data pertaining to the values is
arranged on the performance reports (Horngren, 2013). Reports are done annually though other
companies do it quarterly.
LO2 Apply a range of Management Accounting Techniques.
P3 Calculate costs using appropriate techniques of cost analysis
to prepare an income statement using marginal and absorption
costs.
Calculating cost:
1. Preparation of income statements:
Cost per unit under absorption costing-
Activity April May