Management Accounting Systems and Reporting Methods

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
P1 Management accounting requirement of different type of management accounting systems
.....................................................................................................................................................1
P2 Different methods used for management accounting reporting.............................................3
P3 Calculate cost using marginal and absorption costing method..............................................5
P4 Presenting planning tools along with their benefits and drawbacks......................................8
P5 Explaining how management accounting tools help in resolving financial problems.........10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................................13
Table 1Absorption costing method..................................................................................................5
Table 2Marginal costing method.....................................................................................................5

INTRODUCTION
Management accounting implies for the internal financial analysis which in turn provides
managers with input for business decision making. In the recent times, with the motive to reduce
cost and enhance profitability company prepares as well as analyzes financial reports. It assists
firms in assigning resources to the business activities effectually and facilitates better decision
making. The present report is based on ABC which is involved in manufacturing activities and
operations. In this report will provide information about various MA systems which can be
undertaken by ABC. Along with this, report will entail how managerial reports can be
undertaken for better decision making. Report will also develop understanding about costing
system namely marginal and absorption. It also depicts benefits and drawbacks associated with
different planning tools. It also entails how planning tools assist in making forecast about future
in financial terms. Report will also shed light on the way through which MA techniques can be
used for responding monetary problem.
P1 Management accounting requirement of different type of management accounting systems
Management accounting is the discipline where accounting related to cost is done by the
business firm. There are number of methods in the management accounting that are used for cost
evaluation like variance analysis etc. Major benefit of using management accounting is that by
using it managers easily identify areas where improvement in performance is required so that
cost can be kept in control and profitability can be enhanced to maximum possible extent. Time
to time managers receive cost related reports and, on that basis, they take actions in order to
analyse and control current situation (Trucco, 2015). There are number of management
accounting systems that are used by the business firms. Some of them are given below. Cost accounting system: Cost accounting system is the one of the most important
accounting system wherein all product line costing is done altogether and overall firm
performance is evaluated in terms of cost control. Further, cost related data is further
segregated in quarters and by analysing data managers come to know whether they lose
or have tight control over expenses in the business. Thus, it can be said that cost
accounting system play a vital role in providing inputs to the managers for making
business decisions. There are number of merits and demerits of the cost accounting
system. Merit is that it provides facts to make decisions and demerit is that it does not
provide in dept information of multiple product line. Cost accounting system is mostly
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used by the firms having single product line. However, with addition of new product firm
overnight can not change its entire cost accounting system. Hence, by following same
approach firm consistently make cost accounting decisions which lead to making of less
prudent decisions. Thus, cost accounting system must be used only by those firms that
have single product line. Inventory management system: Inventory management system is one under which
information related to inventory is stored. Facts in the inventory management system
provide management information about size of inventory they currently have (Jamil and
et.al., 2015). On basis of this information managers identify quantity of raw item that
they will need to purchase in future time period for production of units. Entire database is
available to the managers and on that basis, they identify trends that were prevailed in
past time period like average quantity of raw item that purchase in a month and quantity
of same which remain unused etc. Availability of such kind of information assist
managers in making prudent decisions which ultimately lead to improvement in
efficiency of business operations. Thus, it can be said that inventory management system
has due importance for the business firm. Job costing system: It is the accounting system where accounting related to multiple
product line is done individually. Thus, manager have information about each product
line individually. Manager know that which product line cost is in control or out of
control. Moreover, they also have information that which sort of cost increase at rapid
pace in overall cost of product line. Thus, if there are multiple product lines operated by
the firm then in that case job costing system is the one of best option. Many times, it
happened that in case of specific product performance is good and in case of other one
same is relatively bad (Malina, 2017). It is the job costing system which assist manager in
deep diving in to cost structure and identify actual areas where lot of work need to be
done so that cost of production can be minimized to maximum possible extent. Price optimization system: Under price optimization system mathematical models are
used because by using them business firm can determine optimum combination of goods
that must be manufacture in order to make best use of resource and to control cost of
production in the business. It also includes mathematical model which do sensitivity
analysis and indicate units that must be produced to achieve minimum possible cost in the
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