Management Accounting Systems and Techniques

Unit 5 – Management
Accounting
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
P1 Different types of management accounting system..........................................................3
P2 Management accounting reporting....................................................................................4
M1 Benefits of management accounting systems..................................................................6
D1 Integration of management accounting system and reporting process.............................6
Task 2...............................................................................................................................................7
P3 Income statements using marginal and absorption costing...............................................7
M2 Application of range of management accounting techniques..........................................8
D2 Financial reports to apply and interpret data for a range of business activities..............11
Task 3.............................................................................................................................................11
P4 Advantages and disadvantages of using planning tools for budgetary controlling.........11
M3 Analysis of use of different planning tools and their application for preparing budgets and
forecasts................................................................................................................................12
Task 4.............................................................................................................................................13
P5 Response of management accounting systems to financial problems.............................13
M4 Analysis of response of management accounting to financial problems lead to sustainable
success..................................................................................................................................14
D3 Evaluation of responses of planning tools to appropriately solve financial problems...15
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
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Introduction
Management accounting is one of the forms of accounting which aims to satisfy the
requirement of only internal users i.e., information in the reports generated in the management
accounting systems are to be used for strategical decision-making by management of the
organisation only. Unlike financial accounting, it considers both financial and non-financial
factors in consideration for final decision-making. Analysis made out of these information serves
as the basis for identification of courses that can lead the organisation to the course of growth
and development (Bedford and Speklé, 2018). Also, they serve as the basis for developing
possible solutions for business problems and their solution.
This report is aimed at assessing and analysing different practices related to management
accounting taking Connect Catering Service as the context. It is a family owned and run catering
service based in Oxfordshire, UK. In the first part of report, management accounting and its
different types are discussed to evaluate the benefits that they bring on-board. Different
management accounting reports are then discussed to evaluate their integration within the
operational processes of the Connect Catering Service. In the next part of report, practical
illustration has been demonstrated to calculate cost and prepare an income statement using
marginal and absorption costing. In the further part, different types of planning tools for
budgetary control and their advantages and disadvantages are discussed to analyse their use in
preparing budgets and forecasts. In the final part of report, management accounting systems and
planning tools are evaluated and compared in two organisational contexts to analyse their
effectiveness in responding to financial problems and lead organisations to sustainable success.
Task 1
P1 Different types of management accounting system
According to studies, management accounting is well known for creating organization
goals by measuring, interpreting, identifying, analysing, conveying information to the managers
is call managerial accounting and management (Maas, Schaltegger and Crutzen, 2016). Connect
catering service uses information associated with cost of product and services purchased by the
company. Connect catering service informs whole management about the operational business
metrics. They use performance reports to note differences between actual results from budgets.
Difference between financial accounting and management accounting is seen as financial
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accounting is which prepares financial statement of an organization to provide the data to the
interested parties whereas management accounting, they provide important information to the
managers to make plans, policies, strategies for running the business effectively. Connect
catering service has many strategies on which it operates in the long run. It also use management
accounting to make strategic management decision or taking decisions which are necessary for
the achievement of goals of the organization (Mazarak and Fomina, 2016). Principles of
accounting management are influence, value and relevance. The implementation of management
accounting can develop decision-making in companies. Influence is described as communication
presents insight which is very important and influential. Relevance is that in which information
is relevant. Value- influence on value is analysed. Management accounting is the process of
measurement, gathering, examination, preparation, and information that could help managers in
decision-making or achieving its goals, this is the procedure of making management reports or
information which are needed by the managers to make day-to -day decisions for the profit of
company. Internal management accounting system is that which gives critical information to
management to be used in operational business decision making. These systems are used by the
companies to help in the managing and coasting their processes. Different management
accounting systems are product costing and valuation it deals with to find total cost which
involved in the production of a good and service, cost is divided into two categories, such as
fixed, variable, direct or indirect costs. Marginal costing is also referred as cost volume profit
analysis, it is the influence on the cost of a product, if one additional unit is added into
production. It is quite useful for short term economic decisions.
P2 Management accounting reporting
According to management accounting, managerial accounting is also known as
management or cost accounting, which emphasizes the internal information or data and achieved
through financial accounting (Quattrone, 2016). The reports are used for decision, regulating,
planning, and measuring performance. Looking at the requirements these reports are constantly
generated throughout the bookkeeping period and accounting, these reports should be carefully
crafted because some critical decisions depend on these reports.
 Budget reports - These reports are created for small business, large organization and
department-wise, they are very critical for evaluating company performance. Even
though overall budget is made by every company to realise the grand scheme of their
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