Management Accounting System and Techniques

Management
Accounting System and
Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P1: Explain management accounting and give the essential requirements of different types of
management accounting systems................................................................................................4
P2: Explain different methods used for management accounting reporting...............................5
TASK 2............................................................................................................................................6
P3: Calculate cost using appropriate techniques of cost analysis to prepare an Income
Statement using Marginal and Absorption Costs........................................................................6
TASK 3..........................................................................................................................................12
P4: Explain the advantages and disadvantages of different types of planning tools used for
budgetary control......................................................................................................................12
TASK 4..........................................................................................................................................14
P5: Compare how organisations are adapting management accounting systems to respond to
financial problems.....................................................................................................................14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18

INTRODUCTION
Management accounting is a branch of accounting, that provides financial information to
the organisation so that they can make managerial decision. Management accounting is a
procedure of identifying, analysing, interpretation and communicating the information that leads
in achieving organisational goals (Campos and et. al, 2019). It uses all the functions of
management including planning, organising, staffing, direction and control. This accounting
provides information which is useful for the organisation. The objective of management
accounting is to use statistical data and take an accurate decision. Generally, it is used for
internal purpose and it is not regulated by any law.
Management Accounting helps the organisation to take important decisions related to the
functionality and management. This may include decisions like price determination, number of
units to be sold in order to earn profit or how much of a bonus can the company afford to give its
employees. This facilitates the business to run smoothly with extensive opportunities of growth
and expansion.
Management accounting is a combination of Management and Accounting, management
is an art of getting things done through people by motivating and influencing them in the right
direction on the other hand accounting is a process of identifying, recording, analysing and
presenting data in an effective way (Wen, 2020). Management accounting is accounting of such
data which can make people do the required task and take important planning decisions.
Connect Catering Services is a SME and a family owned business located at Oxfordshire.
The enterprise provides catering services. Connect Catering feels that the implementation of the
management accounting systems along with financial accounting systems would enable them to
strengthen its decision making which will help the enterprise to survive in the long run and in
this competitive market. In this report various management accounting system which are
essential while making organisational decisions. Various techniques of cost determination are
used and explained.

TASK 1
P1: Explain management accounting and give the essential requirements of different types
of management accounting systems.
Here management accounting system will be used to analyse the situation of Connect
Catering Services. Management accounting will enable Connect Catering Services to get
organisational reports and these reports will help it to make necessary changes and take required
decisions in the organisation itself and the management.
Management Accounting will provide the organisation with information about
manufacturing of services which will further help in preparing budgets which will aid in
improvement of management (VYSOCHAN and HYK, 2020).
Commonly used Management Accounting Systems are:
 Cost Accounting System: It is one of the important system of management
accounting system. This system consists of various accounting techniques by
which the business can find cost of certain tasks and projects, with this they can
compare their profits with their costs and take necessary decisions and plan
accordingly. In context to Connect Caters Services, the company uses Cost
Accounting System with which they are able to manage all their relevant cost like
that of raw material, processes and of distribution of products.
 Inventory Management System: This system has techniques that help the
management to maintain the level of stock. This system involves the process of
stocking and restocking the organisation's inventory so as to increase overall
sales as stock will be available when needed (Guo, 2019). Connect Caters
Services uses this system with its various techniques to manage inventory.
Techniques may include LIFO, FIFO, JIT and ABC analysis.
 Job Costing System: Job costing system is a type of management accounting
system which is generally used by manufacturers (of goods and services both)
because accountant can easily estimate the cost of performing a every job. This
system will help the accountant in assessment of costs of every department
separately (de Lautour, 2019). The organisation assesses the cost required for
every job and running business activities. This information is of crucial use for
the managers to formulate trading strategies.