Unit 5 – Management Accounting L 4 Assignment

Unit 5 – Management
Accounting L-4

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Scenario 1.........................................................................................................................................1
P1 Management accounting and its requirements in different types of management accounting
system..........................................................................................................................................1
P2 Management accounting reporting........................................................................................3
P3 Preparation of income statement using marginal and absorption costing techniques...........5
P 4 Budgetary control system and its planning tools..................................................................9
P5 Comparing the organisation on the basis of different approaches to sustain success..........11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
MA is concerned with a branch of accounting system that leads in using professional
knowledge in order to provide all relevant and material information to the managers as to take
appropriate decision for the company (Otley, 2016). Hargreaves Lansdown Financial advice is a
London based financial advisory company that provides professional services to its customers.
The firm provides services by providing financial advices as to help them in eliminating financial
uncertainties from their businesses. It contains a report of the trainee management accountant of
Hargreaves Lansdown financial advice firm as to provide information about the management
accounting and its various functions along with the requirements of various MAS. The report
also shows the importance of presenting various informations to the internal stakeholders of the
company and need of various planning tools in solving financial problems. In addition, the report
also provides information about different methods of the management accounting reporting and
their use ion the management accounting system along with the advantages and disadvantages of
various planning tools of the budgetary control.
Further, the present study also shows calculations of cost using various techniques of the
cost analysis and preparation of income statements using different techniques. The assignment
also shows the interpretation of financial reporting and a brief comparison of adopting various
techniques of the management accounting system as to respond various financial problems of the
business.
Scenario 1
P1 Management accounting and its requirements in different types of management accounting
system
“MA is a branch of accounting that deals with preparation of financial reports in such a
way so that it can be used by the managers for the purpose of taking their decisions for the
company and formulating their policies and strategies for the purpose of enhancing its efficiency
of working and profitability as well” (Maas, Schaltegger and Crutzen, 2016).
“Management accounting can also be defined as a system that includes various methods
that are required by each business for the purpose of developing effective planning and choosing
the most appropriate action for gaining the best result for the company.”
Types
1

Different types of MAS are required to be included in the business organisation for the
purpose of having an effective control over each activity of the business.
Some major management accounting system are as under: Cost accounting system: Cost accounting system is a basic type of management
accounting system (Bennett and James, 2017). It helps the business organisation in
predicting the total cost of all the business operations. It helps the managers in predicting
the requirement of the funds and having effective control over the cost system of the
company as well.
Requirements: The key requirements of cost accounting system in the business are as under:
▪ It enables the business in predicting future cost of the business and making the
sufficient amount of fund in the business as well.
▪ By comparing the actual cost incurred by the business with the estimated cost, the
managers can determine the productivity and efficiency of the business.
▪ Managers can also easily determine the area of ineffectiveness in the business and
develop appropriate strategies and plans for their elimination as well.
▪ Cost accounting system helps the business in determining the selling price of the
product by adding the set range of profit in the cost analysed through this system. Job costing system: That system of management accounting is used by those business
units that produces their products and services according to the demand of customers. In
this system, the accountant gathers all the information relating of the cost incurred by the
business in producing a specific product. This information is submitted to the customer
along with the selling price of the product or services after adding a range of profit in it.
Requirements The job costing system is required by the business due to following reasons:
▪ For determining cost of each product or services.
▪ This system is required by those manufacturing concerns that provides customised
product or services to their customers.
▪ Job costing system helps the managers in determining the selling price of each job
performed by the business in such a way so that the organisation can achieve its
profit goals in an effective way (Modugno and Di Carlo, 2019).
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