Management Accounting: Systems, Techniques, and Planning Tools

This document provides an overview of management accounting, including its definition, essential requirements, and different methods used for reporting. It also discusses the benefits and application of management accounting systems within an organizational context. Additionally, it explores the advantages and disadvantages of various planning tools used in budgetary control and how organizations adapt management accounting systems to address financial problems. The document is relevant for students studying management accounting or related courses.

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1...............................................................................................................................................1
Explain what is meant by ‘Management Accounting’ and give the essential requirements of
different types of management accounting systems. ..................................................................1
Explain different methods used for management accounting reporting......................................2
Benefits of management accounting systems and their application within an organizational
context..........................................................................................................................................3
Task 2...............................................................................................................................................4
Apply a range of Management Accounting Techniques..............................................................4
Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents......................................................................................................4
Task 3...............................................................................................................................................4
Explain the advantages and disadvantages of different types of planning tools used in
Budgetary Control. ......................................................................................................................4
Analyse the use of different planning tools and their application for preparing and forecasting
budgets.........................................................................................................................................6
Task 4 ..............................................................................................................................................6
Compare how organisations are adapting management accounting systems to respond to
financial problems........................................................................................................................6
Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success............................................................................................8
CONCLUSION................................................................................................................................9
REFERENCE.................................................................................................................................10

INTRODUCTION
Management accounting is defining as financial information that states the financial
position of a company and helps to manage and organise all activities. This is related to
accounting that involves measuring, processing and communicating the financial activities that
can help to increase the business performance and profitability. In business environment it is
important to have good knowledge about accounting and management that can help to make the
right business decision. The management of organisation uses accounting and prepare the
financial statement that used to know the how much profit is earning organisation and how it can
be solve problems. This report is based on Volpi Ltd that is manufacturing sector operating
business by using management accounting and preparing the reports on time. This report covers
discussion about system of management accounting, its benefots, reports that uses to manage
income and expenses, planning tools which are uses to control budgets and financial problems
which can be solved by using a optimum accounting system.
Task 1
Explain what is meant by ‘Management Accounting’ and give the essential requirements of
different types of management accounting systems.
In an environment of business, accounting is the practical term which is uses by
organisation for knowing the income and expenses that are related to a business and helps to
make profits. The companies who are running business and managing the activities is liable to
use the accounting principle and standards which can be uses to make the right business decision
and improve profitability. In other words, management accounting is the practice of accounts and
financial data that are being used to operate and control the organisational functions that provides
high profitability. Volpi Ltd is managing its business activities and functions in a organised form
with the help of system in relation to management accounting that are as explained:
Inventory management system – The meaning of inventory is stock that are available in
organisation and helps customers to place order and fill their needs. A system which is used to
order, organise, and store the organisation's inventory is considered as inventory management
system. Volpi Ltd is uses this system to manage the order and control over excessive inventory.
This is the easiest way of managing inventory of organisation and increase the business
performance. This is essential required to manage the inventory in chosen organisation and place
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the order accordingly that can help to provide the products and services to customer at the time
of checking availability.
Cost accounting system – The cost accounting system is uses by companies to
estimating cost of their products and services which have produced. Whenever, products are
manufactured by organisation then next phase is to identify the cost which have incurred in
producing so further decision can be taken accordingly. Volpi Ltd is using cost accounting
system for getting the accurate cost of their manufactured products which is critical for making
profitable operation. This is important to use for companies as it helps to engaged in production
of products and knowing how much cost or expenses have incurred in activities.
Job order costing system - This system is related to assigning and accumulating the
cost of organisation as per individual unit of output. Such system mainly used when various
products are produced are sufficiently different from each other and each has significant cost.
Volpi Ltd is using job order costing system for defining and accumulating the manufacturing
cost of particular unit and help to manage the productivity. This is uses by chosen organisation as
designing and producing custom made machines, meeting with customer's needs and increasing
the outcome. The essential requirement of job costing system is to collect the cost of products
and maintain the productivity.
Explain different methods used for management accounting reporting
Management accounting reports are the document of business organisation that provides
details of their activities and action in relation to a business. For organisation it is important to
prepare management accounting reports that can be used by internal and external shareholders
which encourages them to invest money or not. As investors or shareholders are the partner of
business who analysis the financial information by seeking the reports and make a judgement. In
context to Volpi Ltd different types of management accounting reports are prepared that are as
explained:
Inventory management report: To effectively grow the business, important part is
manage the inventory stock that can help to understand the business health. Inventory
management report is important for organisation that mainly uses to record the inventory and
eliminate the wastages. In regard of Volpi Ltd, management prepare inventory report that uses to
manage and organise the stock of organisation and increase the productivity. The management of
chosen company collect information and prepare up to date, accurate and relevant inventory
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management report that helps to fill the gaps of inefficiencies, identifying weakness and increase
the profitability.
Cost accounting report: This report is related to process of recording, reporting and
analysing the cost of company where products are manufactured. This is important for
organisation to make a better financial decision, developing budgets accurately and increase the
efficiencies that can help to operate and manage the business. Volpi Ltd is preparing cost
accounting report for analysing and identifying the cost of products and services that can help to
maintain the high net profit margins.
Performance report: A business mainly depends on its performance that is ongoing
process which can help to operate the business and increase the profitability. This involves
measuring, reporting and managing the progress which can help to operate the business and
complete the task effectively. Volpi Ltd is a manufacturing organisation that prepares
performance report by analysing performance and making the good business decisions.
Benefits of management accounting systems and their application within an organizational
context
Systems Uses and benefits
Inventory management system This system is uses to record and monitor the inventory level
in organisation. Volpi Ltd is getting benefits of such system
as it manage, record and control the inventory which helps
to maintain the performance.
Cost accounting system The system is uses to know the cost of product and services
which are produced by organisation. Volpi Ltd using this for
disclosing profitable and non profitable activities, guiding
for future production and controlling over material and
supplies.
Job costing system This system is uses to aggregate and allocate the cost of each
activities separately and manage the business performance.
Volpi Ltd is using job order costing system to accumulate
the cost of per unit that can help to control over expenses
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and increase the business performance.
Task 2
Apply a range of Management Accounting Techniques.
Marginal costing: This can be defined as principle in which variable cost are charged to
cost units and fixed cost are written off that can help to increase the organisational profitability.
Absorption costing: This is the method of accounting cost which states the full cost of
manufacturing and provide a service. In other words, it is managerial accounting method which
uses to capture all cost in relation to production and helps to state the profitability.
Accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents
Management accounting technique are important for organisation which are uses by
management in order to analyse the profitability and productivity of business. The aim
organisation is to use a effective technique and method to analyse business profitability by
managing all activities and cost of products. This also involves expenses which incurred in
organisation and manage them properly.
Task 3
Explain the advantages and disadvantages of different types of planning tools used in Budgetary
Control.
The instruments and techniques uses by organisation for identifying and running the
business accurately is known as planning tools. This can help to operate and manage the
activities that are related to a business and increase the performance. This is important for
organisation to focus on organisational performance and bring the uses of planning tools that can
help to control over budget and increase the profitability. The Volpi Ltd is focusing on different
planning tools that are as explained:
Operating budget: An operating budget consist all revenues and expenses which
incurred in organisation over a period and helps to manage the day by day activities. This budget
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stars with revenues that are generated by management and state the type of each expense. By
using this budget an organisation can maintain the good performance and activities of their
business as it consider all income and expenses. Volpi Ltd is using operating budget to know the
sales and expenses which arises while running the business. This can help to know how much
profits are earning by company and how it controls that helps to increase the performance.
Advantages Disadvantages
 This can help to make long term
planning by predicting cost and
expenses.
 This provide accurate and relevant
information to Volpi Ltd which
increases business performance and
profitability.
 Time is highly required in preparing the
operating budget.
 The allocation of expenses can be
difficult and rigid in chosen
organisation.
Master budget: The master budget is defined as addition of all lower budgets which are
produced by organisation's different functional areas. This can help to determine the company's
health and productivity which supports to increase the industry profitability. The management of
Volpi Ltd uses master budget by considering comprehensive overview of organisation's finances.
This budget also involves HR, Marketing, Finance and other department which are operating and
organising by management.
Advantages Disadvantages
 The master budget in Volpi Ltd reveals
how much the company is earning
and spending as a whole.
 This can help to identify which
department is spending excessively and
managing the expenses.
 This is whole budget that can be
difficult to read for users.
 This does not defined the expenses of
specific department and activities.
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Cash budget: This budget mainly related to cash inflow and out flow that is the main
work of organisation. The success of business mainly depends on cash inflow that means how
much is company getting and how much it is expending on necessary activities or infrastructure.
By using this organisation estimates whether a company has sufficient amount or cash to
maintaining operations. Volpi Ltd is preparing the cash budget by considering all inflow and
outflow which can help to operate a business and increase the organisational profitability.
Analyse the use of different planning tools and their application for preparing and forecasting
budgets.
Advantages Disadvantages
 This can help to defined the cash and
money related activities in chosen
organisation and operated in well
manner.
 This make more resourceful to
company by controlling spending
better.
 To carry and keeping cash in
organisation create a danger of theft.
 This may limits the spending power of
organisation in case if not managed
properly.
Analyse the use of different planning tools and their application for preparing and forecasting
budgets
Budgets are the estimation of income and expenses that arises while running a business.
This is important for organisation to focus on each function and activities of organisation then
prepare different types of budgets which provide a right overview of business transaction and
also helps to control over excessive spendings. In context to Volpi Ltd, management are using
cash budget, operating budget, and master budget by analysing their needs and forecasting which
can help to manage the good performance of business and increase the organisational
profitability.
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Task 4
Compare how organisations are adapting management accounting systems to respond to
financial problems.
Financial problems are considered as money related problems which are facing by
organisation in order to operate a business and increase the organisational performance. The aim
business and management is to find out the problem which are occurring and creating mistake in
perform the actions. Volpi Ltd is manufacturing company that producing different types of
products and services by managing their task. Now management has focused that their
profitability is reducing as compare to other organisation and past years due finance problems.
Types of financial problem are as defined:
Late payment by customers: The business is managing and operating by a person who
have knowledge and good relation with customers that supports to run their activities. During
activities, there are many customers who buys products and services in high quantity and bulk on
credit or promised to pay after some time. This type of activity can be created financial problem
as shortage of finance which has created the problem in running a business. Volpi Ltd facing
financial problem as it has many creditors who buys products on credit and does not make
payment on time.
Expenses are more than income: Happening of expenses in organisation is natural as it
can help to make better business and increase the performance by generating high income. If
organisation is spending higher money than generating income then it become a problem for
entire business and affected the operation. This problem can face by Volpi Ltd because it spends
money on infrastructure, design and etc. that are not valuable.
Tools
KPI: This is a tool which is uses by organisation to identify the performance of their
business and employees. This refer as key performance indicator that uses by management of
Volpi Ltd to analyse the financial and non financial performance in organisation that give results
to bring improvements accordingly.
Benchmarking: This is another tool which is being used to by organisation in order to
identifying and quantifying the performance between two companies. This can help to compare
the performance of organisation as make plans accordingly which can help to bring the
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improvements. Volpi Ltd is using benchmarking tool in comparing their performance with other
company and formulate the plan that can help to operate the business.
Financial governance : This refers as the way which involves regulations to collect,
manage, monitor, and control the financial information that can help to operate the business and
solve the problem-solving. This mainly uses by companies to solve the financial problems by
identifying risk factor and monitoring on expenses. Therefore, Volpi Ltd is using this to solve the
financial governance.
Comparison between Waitrose and Cadbury
Basis Waitrose Cadbury
Financial problem This is larger size organisation
which is facing the problem of
late payment by customers as it
does not receive payment on time
which has created the problem
and affected the business.
The financial problem is facing
by company is expenses are
more than income that reduces
the sales and profitability.
Identification of
problem
This problem is identified by
Benchmarking tool which can
help to compare with other
organisation that how they are
managing their creditors and how
they receive payment that
supports to receive the payment
on time.
This problem is identified by
KPI tool which can help know
what are financial activities and
what are not so expenses can be
control according to them which
can help to reduce the problem.
Uses of system For solving problem Inventory
management system is uses to
solve problem which can help to
track the inventory, maintain
customer's order and increase the
sales by managing stock in chosen
organisation.
For solving problem cost
accounting system should be
used that helps to identify cost
and control over expenses so
that business can be operated
effectively.
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Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success.
Management accounting system are very useful for organisation as it uses to solve the
financial problem and responds properly towards organisation sustainable success. The
management of Volpi Ltd identified that late payment by customer is main problem which are
facing in running business. So management has decided to use financial governance that
formulate credit policy strictly and supports to receive payment on time. Moreover, by using
inventory and cost accounting system it can manage inventory and cost of organisation that helps
to increase profitability.
CONCLUSION
From the above report it can be concluded that accounting is related to a business that
should be focus by management in order to increase the performance and profitability.
Management accounting systems are uses to analyse the business situation and increase the
performance. Reports are prepared by knowing the actual position that support to organise
further activities. Planning tools are uses to control the budget and finance related problem
solves by using the systems accurately.
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