Unit 5. Management Accounting Assignment

Unit 5
Management Accounting
Learners Declaration: I certify that the work
submitted for this unit is my own and the
research sources are fully acknowledged.
Learners Signature: Date:

Table Of Content
INTRODUCTION...........................................................................................................................3
Scenario 1.........................................................................................................................................3
Explaining meaning of management accounting and essential requirement of different MA
systems in the business...........................................................................................................3
P 2 Different methods used for management accounting reports...........................................6
LO 2.................................................................................................................................................7
P 3 Calculation of Net profit or loss under Marginal Costing and Absorption Costing for
Digittera Ltd...........................................................................................................................7
LO 3...............................................................................................................................................14
P4 Explaining advantages and disadvantages of different types of planning tools which can be
used for budgetary control....................................................................................................14
LO 4...............................................................................................................................................16
P5 Comparing ways in which organization is using management accounting system for
dealing with financial problems...........................................................................................16
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Management accounting is a financial term that defines a set of process starting from
analysis of the each financial transaction of the company and ends with development of effective
strategies for the business in order to help the firm in achieving its set goals and objective
(Kaplan and Atkinson, 2015) . In simple terms, the MA can be defined as a process of analysing
and summarising all the financial transactions of the company, evaluation of company's planned
or estimated performance. In addition, the process also includes comparing of actual and planned
performance of the company in order to analysing the efficiency of the business and developing
plans and strategies of the business accordingly so that managers can help the company in
achieving its set goals and objectives. Digittera group is financial consultancy firm based on UK.
It provides financial consultancy services to various businesses relating to manufacturing, retail
industry etc. The present assignment contains a report developed by a trainee management
accountant of the company that explains MA system, MA reporting and their essential
requirement within the business organisation. Furthermore, the study shows use of several
budgetary control tools in order to formulate plans for the company. In addition, the report
contains a practical part that shows preparation of income statements through marginal and
absorption technique of the management accounting. At the end of report, the assignment
includes several MA system that can be adopted by the business in order to improve the
efficiency of company in facing several financial problems.
Scenario 1
Explaining meaning of management accounting and essential requirement of different MA
systems in the business
Management Accounting

"Management accounting is a procedure performed by professional managerial
accountant in order to analyse and summarise different financial performance of the company in
order to collect data relating to financial transactions of the company and summarising and
presenting each information in such a way so that it could help the managers in having a overall
review of overall financial performance of the company (Management Accounting – Meaning,
Advantages & Functions. 2017)."
Origin of management accounting
The system of management accounting was developed by various mass merchants when
the amount of business activities handled by them started increasing day by day. They
formulated their own systems for managing their several business activities in order to manage
each business activity in an effective manner.
Management accounting system
Management accounting system is a part of overall management system of a business
organisation that concerns with performing a range of managerial function for the purpose of
reviewing each financial transaction including various monetary and non monitory activities of
the firm. Further, the system also includes a process of developing more effective strategies,
plans and procedures of the firm in order to improve the efficiency of business in performing
financial activities and enhancing financial position of the company as well.
Difference between management accounting and financial accounting
Both management accounting and financial accounting are different from each other.
Some major difference between these two concepts are as under:
Basis Management Accounting Financial Accounting

Definition Management accounting is the
procedure that deals with
gathering, sorting and
processing financial and non-
financial information in order
to set systems, and prepare
reports of the company. These
reports are being used by the
managers in their decision
making process in context to
choosing the best funds
sources and usage for
accomplishment of business
strategy.
Financial accounting is that
procedure which deals with the
recording and summarising all
the transactions in contxt to the
source and use of economics
resources. Financial managers
use general accepted
accounting principles, and
complying well defined rules
and regulations in order to
record all the financial
transactions of the company
Users This system provides
information to internal users of
company (Ortea and Gallardo,
2015).
Financial accounting provides
information to both internal
and external users of the firm.
Audit Reports of management
accounting is not required to
be audited.
These reports are required to
be adopted by company by
external auditing firms
Different types of MA system