UNIT 5 - Management Accounting System Assignment

UNIT 5: MANAGEMENT ACCOUNTING
STUDENT ID CCL-019-023

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1.Management accounting systems and its various types:...................................................1
P2.Methods used for management accounting reporting:......................................................4
M1.Benefits of management accounting system: ..................................................................5
D1.Integration of Management accounting system with accounting reports:........................5
TASK 2............................................................................................................................................6
M2.Different techniques of management accounting system:...............................................9
TASK 3..........................................................................................................................................10
P4.Different types of planning tools for budgetary control:.................................................10
TASK 4..........................................................................................................................................12
P5.Adapting management accounting systems to respond to financial problems:..............12
M3.Use of different planning tools:.....................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is a process of application of professional knowledge and skill
in the preparation of accounting information to assist the managerial personnel in planning,
implementation, control and monitor the operations of an undertakings. In this, Management
accountants use various information relating to cost of a particular product and provides
assistance to reduce the cost. To understanding the management accounting, a company named
Thirdway Group Plc is chosen, which is engaged in furniture, architecture work and other
company is given in this report named as Nero Ltd. This report is divided into four task, the
first task talks about the management accounting system, its various types and methods used for
management accounting reporting. Second task explains the different cost techniques for
analysis of cost and for preparation of income statements using marginal and absorption costing.
Third task provides the details about various planning tools used for budgetary control and their
advantages and disadvantages whereas forth task describes the ways for adopting management
accounting systems to respond the financial problems.
TASK 1
P1.Management accounting systems and its various types:
Management accounting is the process to prepare different types reports regarding to
internal activities then present in front of top management. In present time every organisation
want to maintain and control their internal system in effective manner so they can apply
management accounting system.
Management accounting system is the collection of activities relating to the monetary
aspects of an company which are necessary for recording of these transactions for future
perspective. It gives a systematic view of transactions and helps in smooth functioning of the
business operations. By the help of this, a summarised financial statements is prepared at year
end which includes balance sheet, profit and loss account, cash flow statements and so on. The
Thirdway Group Plc uses the various types of management accounting systems which are as
follows:
 Inventory management system: This system is very important in any organisation
because it tracks record of all the inventory chain in an organisation. It covers everything
from production to retail, warehousing to shipping and all movements of stocks since the

stage it purchased (Bennett and James, 2017). In an inventory management system,
various sub system exist which is essential part of this system such as warehousing
inventory management, retail inventory management etc. For this, various valuation
method are used like FIFO, LIFO and weighted average method for valuation of
inventories.
 Cost accounting system: It is also called product costing system and costing system also.
This system is a framework used by Thirdway Group Plc to estimate the cost of their
products and services for calculating the actual profits of the company. It is essential to
have this system in an organisation because by the help of this it can value its raw
materials, work in progress and finished goods and as a result, may easily find out that
which product is profitable and which one is not. Cost accounting system has mainly two
types, which are job order costing and process costing.
 Price optimisation system: This system is very useful in an organisation because it is
helpful in determining a preferred set of prices so that an organisation like Thirdway
Group Plc can increase its profitability for the interest of its stakeholders. It is
mathematical function that helps the organisation to determine in what way customer
react in different pricing situations for its products and services (Burritt and Tingey-
Holyoak, 2012).
 Job costing: In job costing system, cost is determined for a particular job or assignment
which is given to perform to a particular person. This helps the Thirdway Group in
establishing the workers performance relating to particular job and cost incurred related
to same job.
Distinction between management and financial accounting:
There are number of differences between financial accounting and management
accounting, some of these are as follows:
 Aggregation: Financial accounting is helpful in reporting the entire business activities
relating to finance which focuses only on the monetary items but management
accounting also focuses on the non monetary items and it provides more detailed report
related to product line, geographical region and so on.
 Efficiency: Financial accounting focuses more on achieving efficiency in profitability of
business whereas other is more engaged in proving efficiency in employees working.