Management Accounting and Key Criteria

UNIT 5 MANAGEMENT ACCOUNTING

Executive summary
The study begins with a brief introduction of management accounting. The description on the
diversity of the various management systems is provided in the initial part. The main
requirements of the management accounting are provided with the various criteria based on the
scenario. The study further proceeds with highlighting the techniques involved in the system and
an income statement is produced by using the cost analysis strategies. Making proper use of the
tools helps to make the analysis of the cost incurred in the organization better thereby identifying
their profit margin. In the later part of the study, the advantages and the drawbacks of the
planning tools and techniques is explained based on the budget management method and finally
concludes focusing the evaluation of the several sectors of management accounting, which is to
be presented to the general manager. As a management Accounting officer, it is therefore a key
role to manage the entire accounting process within the organization better. Understanding the
benefits of using the proper tools in turn has helped to control the budgeting process effectively.
Adopting the accounting systems has further helped to carry out the various monetary issues
related to the organization followed by recommendations for a better accounting of the
management.

Table of Contents
Introduction......................................................................................................................................4
TASK 1............................................................................................................................................4
P1 An explanation of management accounting and the key criteria for the different categories of
management accounting according to the scenarios .......................................................................4
P2 Demonstration of the several methods used in management accounting and stating the
relevant methods that can be utilized in the scenario......................................................................8
TASK 2............................................................................................................................................9
P3 Calculation of the cost by using the strategies of cost analysis in order to generate a statement
of profit............................................................................................................................................9
TASK 3..........................................................................................................................................14
P4 The benefits and limitations of the several types of planning tools that can be utilized to
control budget for the company.....................................................................................................14
P5 A brief comparison of the adoption of accounting systems to control monetary issues..........16
Conclusion.....................................................................................................................................17
Reference List................................................................................................................................18

Introduction
The management accounting is a significant segment in today’s business. It has several strands
and is used to improvise on the strategies involved in the betterment of organizations. The
management accounting deals with the daily management in appropriate planning detailed
decision making, patterning and improving performance strategic systems. In this scenario, an
organization of the United Kingdom, the RR Aldens is selected and is further inclined to the
effective features present in the management accounting system. The company has a limited set
of employees but known for providing quality services related to meat and butchery products in
the United Kingdom. The company also holds a complex set of channels and supply chains
including pubs, restaurants and poultries.
TASK 1
P1 An explanation of management accounting and the key criteria for the
different categories of management accounting according to the scenarios
In the opinion of Fullerton et al. (2014, p.414), the procedure of business consists of several
complex methods, terminologies and techniques irrespective of the types of sectors. It requires
specific capability to get an in depth understanding of the activities and occurrences. There are
several kinds of accounting in the business field such as, financial accounting, managerial
accounting, management accounting. In this scenario, the method of the management accounting
is involved in enhancing the professional skillets to detect the upcoming requirements,
advantages and limitations of the company. The management accounting system works as a
tactful tool and is necessary for business situations today to cope up with the rapid situational
changes in business and figure out the solutions to the issues by maintaining a smooth graph.
The categories of management accounting system include mainly eight key points, which are
follows:
Cost accounting: They are involved with recording all the data followed by an effective
allocation of all the expenditures that are involved in determining the costs of the products and
services associated with the management of the organization. All the data are properly arranged
to control and carry out the decision making processes by the collected information for a better
management. The investments that are made for the organization aim at identifying the actual
costs thereby determining the final costs of the goods and services. This helps to carry out the

analysis of the costs incurred for the organization’s development effectively by adopting several
effectively planned strategies to meet their desired goals. Alden has taken up the initiative to
carry out the entire financial process of the organization effectively by maintain a record of all
the information and investments and how that has helped to meet the customer needs.
Job costing: They involve carrying out an effective method of recording all the costs that are
incurred in the manufacturing job. The project manager of Alden has taken the help of job
costing to keep a track on all the costs that are involved in each particular job thereby
maintaining a record of the data and identifying their abilities to meet their customer’s
specifications.
Inventory: They refer to the effective usage of raw materials to provide the customers with the
best products and goods as part of the organizations’ assets to make them ready for sale in the
market. Inventory acts as one of the most important assets of an organization as they act as the
primary sources for generation of revenue thereby providing subsequent earnings for the
shareholders involved in the company.
Price optimization: They involve using an effective analysis of the mathematical aspects which
help to determine the customer response thereby regulating the prices of the goods and services
to fulfil their desired goals thereby maximising their profit margin. Alden has succeeded to a
great extent in analysing the prices effectively thereby focusing on their company goals.
The traditional method of cost accounting
As stated by Suomala et al. (2014, p.304), though the method of activity based costing is mostly
utilized in today’s time, the traditional technique of cost accounting is known to be effective for
a long time, aiding in the costing system. The traditional cost accounting helps the managers to
evaluate the pricing on direct manufacturing. The approach helps to make assumptions on the
upfront or direct labor cost, manpower cost, and cost calculations incurring the work timing and
hours and more. The assumptions are performed straight up by the managers and often lack
accuracy. The RR Aldens, also takes up the activity based costing approach in complex
situations, to which most modern business is inclined to. The reason being, the method includes
the manufacturing cost and cost of the supporting factors which makes it more accurate.

Figure 1: The traditional approach to cost accounting
(Source: Fullerton et al. 2014, p.50)
Throughput accounting
On the other hand, the throughput accounting approach is more of information and data based
which includes crucial principles surrounding eminent decision making for the managers. The
managers often need to understand key criteria that are to be met, consequential influences, post
decision effects on the company and even more. As per Messner et al. (2016, p.1), the
throughput accounting (TA) process is known to be one of the simplest approaches in
management accounting or managerial accounting that helps in mainly decision making. It
contains several set of data that helps in separating and specifying the goals in the particular area
of accounting. Some of the effective factors behind this type of accounting are,
● Enforcing rapid reporting and evaluating the entire managerial figure in terms of real
timing
● Educating the employees in the functioning and operations about managerial accounting
fundamentals
● Helping managers to take decision that shall be company goal oriented in a precise way
The Aldens is a company working with a large number of supply chains. The significance of this
accounting tool shall help in driving the organisation towards meeting decisional targets, while
on the verge of expansion.