Unit 5: Management Accounting

Unit 5
Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and its system............................................................................3
P2 Management Accounting Reporting:................................................................................4
M1 Benefits of Management Accounting Systems:...............................................................5
D1 Integration of management accounting system and management accounting reporting in
organizational processes:........................................................................................................6
TASK 2............................................................................................................................................6
P3 Calculation of cost using management accounting techniques:........................................6
D2 Interpretation of the data:.................................................................................................9
TASK 3............................................................................................................................................9
P4 Different types of planning tools used for budgetary control:..........................................9
M3 Use of planning tools and their application in forecasting budgets:..............................13
TASK 4..........................................................................................................................................13
P5 Management accounting techniques used to identify financial problems:.....................13
M4 Analysis of how management accounting can lead an organisation to sustainable success:
..............................................................................................................................................15
D3 Planning tools respond appropriately to solving financial problems to lead organisations to
sustainable success:..............................................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
In today's economically changing world, the organizations have financial management
system that only provides the information and assistance of external organizational factors hence
the entrepreneurs are feeling the need of a system that can avail the information and manage the
internal activities and factors of an organization. For this purpose, the method which is evolved
is known as management or managerial accounting. Management accounting process was
followed at the beginning of 19th century and it differs from financial accounting in so many
aspects such as users of information and statements, format, legal aspects and others.
For the optimistic knowledge of management accounting process and its utilization, a
trainee management accountant of KEF LTD., which is the medium sized enterprise in the
manufacture sector. The company is preparing a report which explains the management
accounting, its systems, reporting process and various financial problems and their solutions with
the help of management accounting techniques. The report also includes some costing data and
information which help the management to better understanding of these managerial accounting
techniques.
TASK 1
P1 Management accounting and its system.
Management Accounting: The term management accounting can be defined as a
complete cycle that includes the process of collecting, recording, classifying, summarising,
preparing, presenting, reporting and controlling the financial and non-financial data in such a
manner so that it can help the management of the organization in order to measure the efficiency
and performance of the personnel as well as the operations and activities, planning the strategies
for achieving the objectives and making effective decisions to increase the profitability of the
company (Cuzzocrea and et.al, 2018).
Management Accounting System:
The management of KEF LTD follows various managerial accounting systems so that it
can impressively manage an effective business strategy. Some of them are elaborated below: Price Optimisation System: Price optimisation system is a mathematical analysis
technique that provides the information and material data about how the demand of a
product or service vary by the variation in price. It also analyse the behaviour and
reaction of the customers toward different price set for the same products in different

situations (Eckardt, Selen and Wynder, 2015). It records and classifies the information
and then apply it on cost of production of inventory to help the administration in opting
out the best price that improves the profit and customer satisfaction as well. For
collecting the information and observing costumer behaviour on different pricing, various
channels are used by KEF LTD. The company proposed different sets of prices to its all
age brackets' consumers and decide optimistic price according to them.
 Inventory Management System: Inventory management system is a framework that
includes the structure and process of maintaining and supervising the inventory of the
organization. Inventory is an essential asset for the company and it is necessary to
maintain record of it (Fullerton, Kennedy and Widener, 2014). It is crucial for an
establishment to manage and keep a proper record of the inventory whether it is raw
material, work in progress, finished stock in warehouse and showrooms, goods sent on
consignment or goods dispatched for delivery to vendors or customers. For tracking its
inventory, KEF LTD uses software which helps the company to solve the queries of the
customers on time and also guides to maintain the quality of the juice products.
P2 Management Accounting Reporting:
Management Accounting Reports: These reports are basically the result statements
which contain the variances between estimations, forecasts and actual outcomes related to
different activities and operations and are prepared and presented by management accountants to
help the management in controlling and planning appropriate guidelines and strategies for
betterment of the employees as well as the procedures. Performance Report: Performance report can be defined as a report card which is
provided to any person, activity or process so that the effectiveness of their efforts and
efficiency of performance can be measured in order to achieve their objectives. An
establishment uses this kind of reports to analyse the potential of its employees, strategies
and management as well (Giannarakis, Konteos and Sariannidis, 2014). This report
reveals the variance between the efforts done by the employees and efforts they supposed
to do. The receiver of this report is liable to perform the remedial activities to improve
the performance if required. KEF LTD. management prepares performance reports for
employees and activities so that they may be rewarded, trained or change accordingly.