Management Accounting and its Types of Systems

Unit 5- Management
Accounting

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
P1 Management accounting and its many types of system.....................................................................3
P2 Explanation of different methods in management accounting reporting.............................................6
TASK 2.......................................................................................................................................................7
P3 Calculation of costs by use of techniques of cost analysis in order to make the income statements by
use of the absorption and marginal costs.................................................................................................7
TASK 3.......................................................................................................................................................9
P4 Pros and cons of types of planning tools that are used for the budgetary control..............................9
TASK 4.....................................................................................................................................................10
P5 Comparison as to how firms are adapting systems of management accounting for responding to
financial problem...................................................................................................................................10
CONCLUSION.........................................................................................................................................12
REFERENCES..........................................................................................................................................13

INTRODUCTION
The accounting may be referred to as the keeping of the record of money or the expenses
which incurred during the functioning of business. Every business is required to keep the record
of its monetary transaction and present it to the income tax department. The accounting helps in
calculating the profits and losses of the firm so that the member of business is known about the
financial performance of the firm. It is generally of two types, financial wherein it displays
money related transaction in order to identify the financial position of the company and other is
management accounting which system of accountancy which helps in providing the insight of
the management team of company which helps in making decisions. It supports the decision
making of company by giving wealth of statistical and financial information which is assisted by
the powerful tool of accounting (Amirbeyki Langroudi, Kordestani and Reazei, 2020). The
organization chosen for this report is ABC Ltd which a medium sized company that deals in
manufacturing. This report shall cover the understanding of management accounting and its
techniques, usage of planning tools in the management accounting and lastly the ways in which
companies can use it to respond to the financial problems.
TASK 1
P1 Management accounting and its many types of system.
Management accounting is referred to as the distinct kind of accounting from
that of the financial. It is more related and concerned with providing the financial information
which helps the managers in making decisions. This simply means that it beyond the recording
of day to day transactions of finance rather it focuses on forecasting and long terms decision
making of business. The key role in the management accounting is that it helps the managers in
deciding the price of the offering by stating all information which relates to the cost, profitability
and market factors. The management accountant also helps in determining lifecycle of the
products and the viability of new offering too.
The management accounting is involved in taking the financial data and information of
the undertaking and establishes the report for the confidential internal usage by the managers.
These report aids in the decision making and also identifies different ways in which the company

can be run in an effective manner. There are different management accounting systems which
reaches to all departments of firm such as marketing, information technology, human resource,
sales and operations. Management accounting systems mainly varies in their usage and each is
designed to give the management with various information that is based on their needs in order
aide in decision- making (ten Rouwelaar, Schaepkens and Widener, 2020). The basic types of
management accounting system are discussed below which can be opted by ABC Ltd-
Cost-accounting systems-
This is also known as costing or product costing system. It is the framework which is
used by businesses in order to estimate the cost of product in order to make analysis of
profitability, cost control and inventory valuation. It is mainly of two types which includes firstly
the job order costing and second is process costing. In this type of system, the allocation of cost
is mainly carried out which is based on either the traditional costing system or on the basis of
activity based system of costing (Finau, 2020).
Essentials of cost accounting-
 It involves estimating the cost of product.
 It is used for analyzing the profitability, inventory valuation and helps in cost control.
 It involves allocating th cost either by traditional or by activity based cost system.
Inventory management systems
Inventory is something which represents the stock of goods and materials of the business.
This system is a mixture of using of the desktop software, barcode printer and scanner and the
mobile devises so that the streamline organization of the inventory can be done. The stock
control is worked by tracking two essential functions of the warehouse and also the stock room
which involves taking which means incoming and delivering which is outgoing. Aim of this
control is to know accurately current level of stock and automatic minimization of the overstock
and under-stock situations (Almagtome, 2021).
Essentials
 It is used to represent the stock of the company.