Principles and Practice of Management Accounting

Unit 5- Principles and Practice of
Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
P1 Management accounting and different types of management accounting systems................3
P2 Different methods applied for management accounting reporting.........................................5
P3 Calculation of costs.................................................................................................................7
P4 Advantages and disadvantages of several kinds of planning tools used for budgetary
control..........................................................................................................................................9
P5 How organizations are adapting managerial accounting systems to responding to financial
problems.....................................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is a process of evaluating a business operations and costs to
prepare financial records, accounts and report. This process will help the business managers in
their decision-making process for achieving the company's goals and objectives. Management
accounting will assist the organization by providing timely and accurate information and data of
the statistical and financial. It assists the management team in the short term and long term
decision. Alpha ltd company is a medium-sized manufacturing company. It specialises in the
production of local made pizzas. It is a medium size company because it has approximate 50
employees. And has turnover of 5, 00, 000 (Medium size company, 2019). The Alpha Ltd.
Company has fifty members of staff. The company has turnover of UK dollar 5, 00, 000 per
annum. The Alpha Ltd company started their business in 2001 as a small pizza company. Now,
the company has become a fast grown company and planning to develop its franchising business.
This report will include the explanation of management accounting and different types of
management accounting system and its role in the business operations. This report will also
highlight various methods of management accounting reporting and several advantages and
disadvantages of the many types of planning tools used fort budgetary control. This report will
also state that role of management accounting in solving the issues of financial problems.
MAIN BODY
P1 Management accounting and different types of management accounting systems
Management accounting plays an important role in any organisation. In the today's
business environment, effective management accounting is very crucial because it helps the
company in their wealth creation and profit maximization. In the Alpha Ltd company , the
management accounting assist in managing financial activities and budgetary issues.
Management accounting includes cost accounting and managerial accounting. Management
accounting is the best procedure to analysing the organization's operations and costs.
Management accounting plays a integral role in the preparation of internal financial account,
records and report that can assist the business manager in their decision making for the business
success. In other words, we can say that management accounting is a process to determine the
data of financial and costing and transform this data into effective information for the officers
and management in the Alpha LTD company (Raj, Walters and Rashid., 2017). Management
accountants also knowns as managerial accountants. Management accountants collects the

financial data and information from around a business and translate them into effective
knowledge and used in the decision-making. Management accounting also a procedure of
recording and analysing the businesses activities for the internal use of organization to enhance
the productivity and efficiency. Management accounting is known as a accounting process that
involve the combination of non financial and financial statements with the purpose of offering
great decision making opportunities for the Alpha Ltd company. Financial manager of the
company use the accounting information for gaining the effective control on decisions. It plays a
major role in management planning, management system of performance, integrated financial
reporting and decision making (Bismark Kusi Appiah, Majumder and Monaheng., 2020).
Management accounting providing a detailed outline regarding the product lines, customer bases
and profit percentages. Alpha Ltd company uses advanced management accounting in their
organisation for improving purposes of decision making. It offers a whole pictures of customer
bases, profit figures and products and services. It also assists in addressing and reporting the
accurate results of company's business. It generate a clear situation of company's business and
helps in finding solutions of various problems or causes. Management accounting manage
various activities in the company by using budgetary control, cost volume profit, cash budget,
absorption costing and marginal costing.
There are different types of management accounting systems that requires in any business
Types of management accounting systems includes cost accounting system, inventory
accounting system, job costing system and price optimization.
Cost accounting system
Cost accounting system will use by the Alpha LTD company to evaluate its product costs
for profitability analysis, cost control and inventory valuation (Morden., 2017). This system can
by applied by the company in two ways either by the traditional costing system or activity based
costing system. It is a effective management tool and also involved marginal costing, absorption
costing, budgetary costing, activity based costing, uniform costing, operation costing, inventory
control and standard costing. With the application of cost accounting system, Alpha Ltd
company will enable in analysing, allocating, recording, categorizing and summarizing all the
actions of business activities and controlling the whole operational and managerial costs.
Absorption costing system recognize the actual costs of product according to their production.
This considers fixed costs and also variable costs of product. In the Marginal costing, cost of the