Management Accounting Systems & Techniques

Unit 5 Management Accounting
Systems & Techniques

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
SCENARIO 1.............................................................................................................................3
Management accounting system and its essential requirements............................................3
Different methods of MA reporting.......................................................................................5
Benefits and the limitation of different planning tools for budgetary control.......................7
SCENARIO 2.............................................................................................................................9
Application of different types of management accounting techniques..................................9
Comparing ways companies are adapting management accounting systems for responding
to financial problems............................................................................................................12
CONCLUSION........................................................................................................................14
REFERENCES.........................................................................................................................15
APPENDIX..............................................................................................................................16

INTRODUCTION
Management accounting (MA) refers to the accounting system which assists the
business entity in gathering important business-related information which is being utilized by
the internal management team and is different from the financial accounting. The major
reason behind using MA is to undertake managerial decisions pertaining to cost and other
operational activities. In this report, Capital Joinery Ltd is taken as an organization, which is
into broad range of joiners, windows and the mad to measure doors and so forth. This report
states about the different types of MA systems along with its benefits and application. Along
with this, it throws light on the various types of MA reporting with the techniques which is
being utilized by the business entities. It covers the pros and cons of the planning tools for
building up the budgetary control and along with carrying out a comparative analysis of eth
MA systems being used by the two large organizations.
SCENARIO 1
Management accounting system and its essential requirements
As per the IMA, London, management accounting refers to application of the
professional skills and knowledge in the preparing of the crucial reports which result into
providing support to the management in regard to the formulation of the policies and the
other strategic plans and implementing control.
There are various types of management accounting systems which can be used by the
business organization for meeting with its operational requirements. A detailed analysis of
the various MA system is stated below.
Cost accounting system
This MA system is being utilized by the entities in order to determine or estimating
the cost of the its products. This system is also used for the purpose of valuation of inventory,
exercising cost control and in carrying out the profit analysis. It mainly designed for keeping
track of the flow of the stocks from the different stages of the production. For instance, if the
material A transferred from one process to another (Hasyim and Jabid, 2019). It will be
updated automatically in the system. This approach is mainly used by the manufacturing
organization in order to determine how much inventory is put under the different stages. The
essential requirement of this system, is in regard to recording the cost of every transaction
that takes place which assist in establishing the control as well.
Benefits:
 This system assists in identifying the activities which are profitable in nature.

 The information gathered through it provides support to organization n undertaking
decision making.
 This can be used in calculating the profit/loss pertaining to the product on a periodic
basis.
 It can be utilized in establishing cost control in regard to inputs and supplies.
Application
The cost accounting system is used by the manufacturing concerns for appropriately
recording the cost in association with the production of the good.
Inventory management system
This system is mainly implemented for effectively measuring and monitoring the
inventory of the goods in whichever form they are like work in progress, just raw material or
the processed finished product. For the large organizations having complex supply chain, this
system is very much useful (May, Atkinson and Ferrer, 2017). This is very crucial for all
businesses which assist in systematically managing the inventory related problems. This
system is essential in determining the proper time for the placing a new order and the size of
it along with the cost associated with holding it.
Benefits:
 This MA system is effective in overcoming the situation of under or over stock of
goods.
 It provides assistance in identifying the right time to place order.
 It can be further utilized for forecasting eth future requirement and trends.
Application
It can be used by Capital Joinery Ltd for the purpose of managing its stocks of
materials and the business supplies.
Job costing
This type of system is being used when the products are created as per the
specification provide by the client. This system actually incorporates the cost which will be
incurred for completing the given job (Alami and ElMaraghy, 2020). This helps the entity in
putting price of the good which is reasonable in terms of profit. It takes into consideration all
types of cost whether direct or indirect cost. This approach is essential for the firms which are
producing multiple products which are different from one another.
Benefits:
 Through this system, cost is being analyzed from different side which results into
increasing the operational efficiency of the firm.