Management Accounting and Budgetary Control in Alpha Ltd

MANAGEMENT
ACCOUNTING

INTRODUCTION
Management accounting is referred as presentment of in-depth information related with
accounts so that management of a company can formulate advantageous policies (Anessi-Pessina
and et. al., 2016). In order to work on this project, selected organisation is Alpha Ltd. This
company operates at medium level and achieve turn over of £500,000 on annual basis. This
company offers local prepared pizza to their customers and employees around 50 employees.
This assignment report will discuss about the concept of management accounting and use of
management systems and reporting in business context. Other than this, cost analysis techniques
are discussed to formulate financial statements. Benefits and drawbacks associated with usage of
planning tools in budget control are carried out along with need of MA systems in resolving
financial conflicts in an organisation. At last, comparison in two manufacturing companies will
be discussed to show how they use accounting systems to resolve their financial issues.
TASK 1
P1
Management accounting is utilised to define accounting methods, techniques and systems
so that a business firm can maximise their profit margins and minimise their expenses. Role of
management accounting to include those financial information which helps in taking right
business decision so that all the expected activities can be performed under limited capital. There
exist some benefits of management accounting to Alpha Ltd which are listed below:
 Planning: It helps an organisational management to plan and prepare right business
policies related to inflow and outflow of capital, production, selling etc. These planning
helps in proper utilisation of capital so that maximised profits can be achieved (Carlon
and et. al., 2015).
 Controlling: Management accounting helps an organisation in comparing their
efficiency with standard performance. By this, productivity and performance of Alpha
Ltd can be controlled in a proper manner.
 Decision making: By using management accounting techniques, in-depth view of
finance and accounts is achieved. This assists the manager of company to take right
decision related with finance so that desired outcomes can be achieved (Coad, Jack and
Kholeif, 2015).
1

There exist different kind of management accounting systems which allows a company to
perform time consuming work within limited time. Information about these systems in context
with Alpha Ltd is stated below:
Cost accounting system: It is defined as a product costing system that helps in
estimating profitable operations and outcomes of an organisation in detailed manner. This
framework allows a company to acknowledge the estimated costs of their offerings so that
activities like inventory valuation, profitability analysis, cost control etc. can be carried out
efficiently. This system will allow Alpha Ltd to estimate the closing value of finished good,
work in progress and inventory material so that accurate financial statement can be prepared
(Collis and Hussey, 2017).
Inventory management system: This is referred as aggregation of technology,
procedures and process so that maintenance of inventory and stocked product can be carried out
effectively. In order to implement inventory management system effectively, manager in Alpha
Ltd is need to focus on their storage and warehouses to identify the actual number of inventory.
FIFO and LIFO are the two methods which is used by management to identify the actual cost of
their inventory. In LIFO, last purchased inventory is used first and in case of FIFO, materials
which are buy earlier are given priority while manufacturing.
Price optimisation system: It is stated as a procedure to find a pricing sweet spot or the
best price at which customers are willing to purchase the product of company in maximised
quantity. In both B2B and B2C settings, Alpha Ltd downs and up their supply chain to achieve
maximised sales. This system will help the company if their products is charged high,
appropriate or low. By this, needed modifications in pricing policy of a company can be carried
out properly.
P2
Various kind of management accounting report which can be used by the management of
Alpha Ltd is discussed below:
 Job cost report: It is refereed as a general report which helps an organisation in tracking
the on going cost of an business activity or operation. There exist some job costing
reports which additions the total costs when a job is fulfilled so that future operations will
not be impacted in negative manner. In case of Alpha Ltd, job costing can benefits the
2