Management Accounting System and Techniques

Unit 5 Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1 Management accounting system and their essential requirement.....................................1
P2 Type of management accounting reports and its importance to management..................4
M1 Various type of system and their benefits .......................................................................5
TASK 2............................................................................................................................................6
P3 Cost analysis techniques to prepare income statement to calculate cost...........................6
M2 Range of management accounting techniques...............................................................11
P4 Advantage and disadvantage of various types of planning tool......................................11
M3 Evaluation of planning tool for preparing budgets........................................................12
P5 Adaption of management according to respond financial problem................................13
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting known as managerial accounting system that aid organisation to
operate their business operations. Management accounts are of different types which is essential
for managers to undertake as to formulate decisions in best effective manner. With the help of
accounting system managers can make internal decision-making process related to financial and
non-financial aspects in best effective manner. Management accounting system benefits
organisation to take advantage of different tools, techniques and methods and conduct operations
of company in best effective manner. As to effectively understand concept and practices of
management accounting Essentra Packaging is used in present report. In this project formative
discussion has been made on management accounting concepts. Further report include
managerial techniques along with disadvantages and advantages of planning tool.
TASK 1
P1 Management accounting system and their essential requirement
Management accounting: It is a systematic process that include different types of
activities such as presentation, analysation and collection of non-monetary and monetary terms.
By undertaking management accounting organisation can effectively able to take numerous
advantages through which their can further able to accomplish their daily basis operations related
to planning, organizing, staffing, decision-making and controlling in best effective manner. Thus,
it is essential for Essentra Packaging to understand importance of management accounting in
order to conduct their daily basis operations. This will significantly aid them to accomplish their
short as well as long term objectives in best effective manner.
Reliability:
It is essential for an organisation to have all the essential and related data as well as
information in reliable manner. This will further aid company to undertake best effective form
decision-making process in order to improve future performance of organisation.
Up to date:
It is the basis responsibility to company managers to make sure that informations that are
covered in accounting statements are accurate and up-to-date. With the help of best effective
form of accounting system organisation can effectively able to maintain financial records as to
operate their business functioning in best effective manner while assuring market stability.
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Different Types of accounting system:
Price optimisation system –
Price optimisation system aid organisation to evaluate price of their related products as
well as services. This will allow Essentra Packaging to review perceptions of customers on
different pricing level. With the help this company can able to gain sustainable advancements in
marketplace with larger competitive edge organisation is required to set price of products and
services in a well structured manner. This will allow company to significantly increase overall
profitability of organisation. In order to accomplish this organisation is required to identify
behaviour of customers related to products and service.
Inventory management system -
Organisation is required to manage their day to day function, for this they are required to
keep constant track of their inventory segment. Inventory management system allow company to
have regular track on their utilization of resources. This will allow them to reduce unnecessary
amount of wastage. Further it has been identified that, it is essential for Essentra Packaging to
undertake different strategies related to inventory management as this will benefit them to
control their excess wastage and expenses. With the help of this company can effectively able to
engage in cost-effective manufacturing process. This will significantly aid company to enhance
their profitability and productivity. Thus, It is essential for Essentra Packaging to implement
inventory management system within their operational system as to gain maximum advantages
while reducing necessary amount of wastage.
 LIFO –
◦ This method indicates that those stock that come at the end will go out first. Thus,
LIFO method is last in first out.
 FIFO –
◦ FIFO method is stock coming first and sale out first. Thus, in FIFO there is the
process of first in first out.
 AVOC –
◦ AVOC method included calculations of cost of inventory on average basis.
Cost accounting system –
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Cost accounting system benefits company with numerous form of benefits for an instance, it will
allow organisation to effectively manage their cost input in each and every activity. With the
help of this they can enhance organisational overall profitability in best effective manner. In
addition with this, organisation can conduct their activities related to understanding, evaluation
and summarising of cost of services and goods in a well define manner. It has been further
identified that cost accounting system benefit Essentra Packaging to operate their business
functions with estimated cost and further increase overall profitability of organisation in best
effective manner.
Job costing system –
Job Costing system allow organisation to evaluate organisation overall expenditure rate
during the process of particular job. This method is mainly suitable in those organisations those
who are engage in providing multiple products and services to customers. As Essentra Packaging
engage in the process of offering different form of manufacturing services to customers. Thus, it
becomes important of company to make effective evaluation of every single individual unit cost.
Essentra Packaging by udertaking job costing system can able to gather required data which is
affiliated with particular assigned job. There are some certain data as well as information which
is being defined below that can be undertaken by company with the help of job costing system:
Direct material –
It is most crucial element in variable cost. This will allow organisation to have
continuous track on this manufacturing segment. This will benefit them to manage their
organisational cost linked with particular job.
Direct labour –
This factor signifies that organisation can have regular track on their specific job. With
the help of this company can effectively able to accomplish their tasks and operations within
specified period of time .
Overhead -
At the last ending phase of every accounting period all sum of every cost to apply
methodology linked with allocation.
Difference Between Management Accounting and Financial Accounting
Management Accounting Financial Accounting
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