Management Accounting Systems and Methods

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Meaning of management accounting with essential need of types of management
accounting systems. ...............................................................................................................1
P2 Various methods utilised in management accounting reporting......................................3
TASK 2............................................................................................................................................5
P3 Figuring costs with the usage of appropriate methods of cost analysis and preparing an
income statement by using marginal and absorption costs....................................................5
TASK3...........................................................................................................................................10
P4 The benefits and disadvantages of various kinds of planning tools in budgetary control. 10
TASK 4..........................................................................................................................................13
P5 Adaption of management accounting systems by different organisations in solving
financial problems................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is the process of using the financial information of the company
to prepare management accounts and reports to make budget related decisions (Ali and Zhang,
2015). It prepares monthly and weekly reports for the management of the businesses. It is one of
the important element useful for running the organisation. It helps in assisting management to
achieve better control and efficient planning in the organization. It is applicable in every kind of
organization like not-for-profit administration, government organisation or sole proprietorship.
Management accounting is considered as a significant decision-making procedure utilised by the
internal management. This report is based on the company Excite Entertainment Ltd.
It is engaged in leisure and entertainment industry in the UK. This study alludes the
meaning of accounting system, explanation of need management accounting system in
enterprises, management accounting report methods. It also describes the usage of techniques of
cost analysis for preparation of income statement, merits and demerits of various types of
planning processes for controlling the budget. In the final part of the report the comparison
between different organisation's way of utilising this accounting system to solve financial
problems is discussed.
TASK 1
P1 Meaning of management accounting with essential need of types of management accounting
systems.
Management accounting- It make the necessary use of the data of the firm and make
valuation of the inflows and outflows (Arnaboldi, Lapsley and Steccolini, 2015). This
information can be used by the management to take important decisions about the product
manufactured, whether to make any changes in it or not. the applied strategies are improving the
sales; the estimated profit is earned or not. Management can conduct the planning for the future
and evaluate the overall performance of the concern. Management accounting helps in
identifying the risks associated in various fields. Hence, through this the company can take better
investment decisions.
Management accounting system- It involves the internal systems which the enterprise
utilises to figure out the processes for the organisational management. There are various types of
accounting system which different organisation uses in its operations. Excite Entertainment Ltd.
1

make use of this system in valuing assets, revenues and expenses. It helps in selecting finite
alternatives for the formulation of better decisions.
Types of Management accounting system:-
Cost accounting system- Manufacturers use this system to keep record of the production
exercise by using a everlasting inventory system. It helps in tracking the flow of stock during the
different stages of manufacturing (Ashraf and Uddin, 2015). This cost accounting system can be
applicable in all types of businesses like manufacturing, trading products and delivering services.
It needs five basic things for valuation. They are input measurement base, an inventory method
of valuation, cost assemblage methodology and recording of inventory cost cycle at particular
period.
Cost accounting system depends on variety of costs which are flowing in and through
with the inventory accounts. It selects any from among the pure historical costing, standard
costing and orderly historical costing. It is not possible for any business to perform without the
usage of cost accounting and it will cause in making of incorrect decision and thereby result in
suffering losses. Its objective is to minimize the business operation cost by controlling and
distinguishing them whenever required. Hence, the profits will be increased. Excite
Entertainment Ltd. exercises cost accounting system in verifying the products manufactured by
it are profitable or it requires some modification. It manages the costs and keeps balance between
the cash inflow and outflow.
Job accounting system- This system assigns the costs to specific job in which the
company is engaged. It is used majorly by the industries like construction where the costs are
allocated according to the various projects held by the business. Job accounting system is the
process of collecting subject matter about the various costs related with a particular production of
commodity and service job (Bedford, 2015). This data may be essential for submitting the
information of cost to the client for the fulfilment of contract where costs can be returned back. It
can be also useful for finding out the quality of enterprise’s estimating system to quote different
prices for earning a reasonable profit. The costs of inventory manufactured can also be
determined by this system. Excite Entertainment Ltd. management team operates this system to
investigate whether production cost surpasses the overheads, the ultimate price of products and
the quantity. The company also use this system in evaluating profits attained on particular
employee jobs.
2