UNIT 5 Management Accounting | Assignment

UNIT 5 Management
Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management Accounting and types of management accounting systems that could be used
by Nisa....................................................................................................................................1
P 2. Different methods used by Nisa for management accounting reporting.........................3
TASK 2............................................................................................................................................5
P3. Production of income statements showing absorption costing and marginal costing
techniques...............................................................................................................................5
TASK 3............................................................................................................................................7
P4. Advantages and disadvantages of different types of planning tools................................7
TASK 4..........................................................................................................................................10
P5. Adapting management accounting systems to respond to financial problems...............10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The performance of a business is reflected through accounting. There are two branches of
accountancy, fiscal and management. Financial division deals with fiscal data and transactions.
Management Accounting (MA) have wider scope, as it considers both monetary and
administrative information of business and aids the governance in significant decision making. In
presented report a detailed analysis is done of management accounting systems, its relevance and
applications in the organisation and it is carried out on the basis of Nisa is a leading retail chain
in economy of UK. With these various reporting methods which can be used in enterprise is
presented, income statements are prepared on marginal and absorption accounting technique.
Different planning tools considerable in governance of firm, their advantages and disadvantages
are reported as well.
TASK 1
P1. Management Accounting and types of management accounting systems that could be used by
Nisa
Management Accounting:
Management Accounting is also known as cost accounting or managerial accounting, it is
the process of analysing operations and business costs to prepare internal financial reports to aid
manager's decision making process in achieving business goals. This enables managers to look at
the events that happen in and around a business while considering the needs of the business.
Main aim of cost accounting is to translate estimates and data into knowledge that will ultimately
be used to guide decision making (Mårtensson and et.al., 2016). Outcome of the same are shown
in form of periodic reports. These reports are usually confidential and are for internal use only. In
management accounting, it is required to utilize qualified information and skills for preparing
accounting statements.
The main difference between financial and management accounting is that, FA provides
information which is required by stakeholders in order to assist decision and MA put emphasis
on providing data and information for aiding managers in decision making process.
Functions of management accounting system:
 Analysis and interpretation of data: For effective planning and decision making data is
analysed in meaningful manner.
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 Facilitates control: It helps in translating given objectives into strategies and plans for
its effective achievement of goals.
 Provides data: Management accounting provides relevant data for past progress and for
making future forecast. Means of communication: Forwarding plans upward, downwards and outwards through
organization.
Difference between management and financial accounting:
Basis Financial accounting Management accounting
Data evaluation period After a definite time period. On daily basis.
Aim Information is supplied in the
form of P&L account, income
statements etc. for
stakeholders (Otley, 2016).
It is designed to provide
accounting information for
internal use of management
Precision Higher Lower
Legal compulsion It is compulsory for every
business.
No compulsion for every
business to install this system.
Types of management accounting systems that could be applied in Nisa:
Management Accounting System is a framework in which various objectives, functions
are incorporated and are evaluated crucially for decision making. These are also termed as
standardised system which aims at analysing, identifying and communication information.
 Cost accounting system: This type of system is defined as cost ascertainment, which
is directly related to a specific product or activity. Cost are allocated in this either
through activity based or traditional form of system. This could be defined as the
identification of all expenses and allocating it to relevant product or activity. In case
of activity based cost system, expenses related to specific operations are allocated to
it directly (Cost accounting, 2018). Expenses which are related to overall operations
of organization are allocated on the basis of proportionate to all departments or
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