Unit 5 – Management Accounting - Assignment

Unit 5 – Management
Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
SCENARIO 1...................................................................................................................................1
Explaining management accounting and various types of management accounting system along
with their requirements....................................................................................................................1
Explaining different methods of management accounting reporting...............................................3
Showing preparation of income statement using marginal and absorption costing techniques.....5
Explaining different types of planning tools of budgetary control system.................................8
Comparing the adoption of various management accounting systems as to respond to various
financial problems..........................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting can be defined as the branch of management that concerns with
the analysis of cost related activities of the business organisation (Otley, 2016). In this branch,
the professional knowledge and skills are used for preparation of a statement showing all the
accounting informations for helping the managers in their decision making activities. Capco is a
medium sized company in UK. The company was founded in 1998 for providing financial
consultancy services to its customers. The present study shows a report of junior accountant of
Capco which includes a brief introduction about the management accounting system along with
its various types management accounting and their requirements in the company. The study also
provides information about various methods of management accounting reporting and various
budgetary control planning tools. It also shows a comparison about the responding of various
management accounting systems for the purpose of responding various financial problems.
Further, the study also shows various calculations for the purpose of showing the use of various
management accounting techniques.
SCENARIO 1
Explaining management accounting and various types of management accounting system along
with their requirements
Management accounting
“ Management accounting can be defined as a process of applying professional
knowledge and skills for the purpose of preparing various accounting statements. These
statements are being prepared for the purpose of providing accounting informations to the
managers (Maas, Schaltegger and Crutzen, 2016). It is a process through which each accounting
information is being provided in such an efficient way so that it could help managers in
developing strategies for enhancing the financial performance of the business.”
management accounting system
Management accounting system is a set system that provides a set procedure through
which various financial statements and other financial reports are prepared in such a way so that
they can determine the financial performance of the business for the purpose of using it in their
decision making and strategic development procedure.
Types of management accounting system:
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There are numerous types of management accounting systems which helps the managers
in determining various financial activities. The major types of management accounting systems
are as under:
Inventory management system:
It is the type of management accounting system that concerns with the measurement of
inventories of the company. The inventory management system helps the business in measuring
and monitoring the flow of inventories in the business (Cooper, Ezzamel and Qu, 2017). This
system is useful in all those businesses that keeps the stock in their business for the purpose of
using them in further processing or for further selling them in the market like, manufacturing
concerns, construction companies, retail industries, etc..
Requirements
 This system is required for monitoring each movement of the inventory within or outside
the business.
 The system helps in tracking the flow of inventory.
 For the purpose of determining the minimum requirement of inventory, the managers
need to involve this system within the organisation.
 It helps the managers in elimination of under or over maintenance of inventories in the
firm.
Cost accounting system:
In the cost accounting system, the management performs their managerial functions by
predicting the future cost of the company as per its efficiency and also analysing business' actual
performance and identify its actual performance through comparing actual cost related activities
with the estimated activities. For this purpose, the cost accounting system provides numerous
methods like budgetary control system, standard costing techniques, etc.
Requirements
 It is required by the company for having effective control over various costs of the
company.
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