Management Accounting Systems and Their Business Applications Report

This report provides a comprehensive overview of management accounting systems and their practical applications within a business context. It begins by defining management accounting and its crucial role in financial transactions, emphasizing its importance in recording and analyzing financial data to achieve long-term goals. The report then explores various types of management accounting systems, including cost accounting, inventory management, and price optimization systems, detailing their essential uses. Different accounting reporting systems, such as performance reports, account receivable aging reports, and variance analysis reports, are also examined. The report further delves into the benefits of using management accounting systems and critically evaluates reporting systems, different costing methods, and planning tools. It also includes an analysis of financial problems and a comparison of companies based on their financial issues, offering insights into evaluating current financial challenges. The report concludes by summarizing the key findings and emphasizing the significance of management accounting in business operations.

Management Accounting
systems and its Applications

Table of Contents
INTRODUCTION...........................................................................................................................3
SECTION 1......................................................................................................................................3
P1:Various types of management accounting systems and its essential use .........................3
P2: Different accounting reporting system ...........................................................................4
M1: Benefits of using management accounting system ........................................................6
D1: Critical evaluation of reporting system ..........................................................................6
P3: Different costing method use for evaluating net profitability of the company................6
M2: Evaluation of accounting techniques............................................................................10
D2: Critical evaluation of profit and loss statements...........................................................10
SECTION 2....................................................................................................................................10
P4: Advantages and disadvantage of using planning tools..................................................10
M3: Evaluation of planning tools.........................................................................................12
D3: Critical analysis of financial problems..........................................................................12
P5 Comparing the companies on their financial issues........................................................12
M4: Analysis on evaluation of current financial issues........................................................13
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is utmost important process a company use to carried out every
possible financial transactions those are done in everyday business operations. This is done in
order to record systematic posting of entries into different books of accounts. The primary aims
and objectives of managers is to ensure that every transactions should be put into their respective
statements in appropriate manner. The motive behind doing so is to attain their long term goals
within set time period (Burritt and et. al., 2011).
The information for the purpose of identifying impacts over the company can be followed
by using various accounting systems and their detail explanations would be summarise into
specific reports. This report consists of various aspects in accordance with Nero Ltd. With the
use of costing methods proper understanding of net profitability can examine. Use of planning
tools in budgetary control process are mention under this report. Some specific tools and
techniques those are helpful in resolving financial issues are discuss under this project.
SECTION 1
P1:Various types of management accounting systems and its essential use
In every business organisation there are crucial decision which is needed to be taken by
the managers in order to draw positive outcome during the time. For this purpose, managers
would required to have proper information that will be helpful in order to generate timely results.
In accordance to this, management accounting systems will assists by the department to identify,
summarise, analyse and record data as per their time of occurrence. Every resources would be
available to allocate various aspects of departments as per their demand and needs. This will
access them to accomplish their aims and work in full efficiency and their productivity would
also be enhanced accordingly (Management Accounting, 2017). Every systems is individually
essential for the betterment of an organisation growth and sustainability. This would aid in
making future expansion and investments in some other portfolios to generate maximum
revenues. Planning there resources in best and suitable manner can be helpful to maximise their
goodwill as well as their market share at the same time (Chen and et. al., 2011). There are
various accounting systems those are useful in this process. These are mentioned underneath:
Cost accounting system: For every manufacturing company cost is vital aspects which
will increase their production capacity. Without having sufficient techniques cost cannot be
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manage by the department. This would be directly or indirectly related with the production
process. Some costs are incurred over expenses like material, labour and other overhead. For this
plan, it will be vital fore the managers to make sure about total costs and expenses they are going
to be invested over the manufacturing of one units. The primary motive using this systems is to
control excess costs which is charged over production. The entire system will be divided
according to there requirement.
Inventory management system: This is a discipline activity which is primarily
associated with a particular shape and storing of goods into there warehouses. As there inventory
are kept at various locations within a facility to supply it from one destination to another. This
can help the managers to record every possible entry according to their data of occurrence. It is
one of the techniques of supervision of non-capitalised stock items. This simple means that right
stock should be having at the right quantity.
Price optimisation system: It is known as use of numerical analysis which is done by
the company in order to examine how clients will react over various prices for their products. It
is used to identify that Nero Ltd will be best able to meet it objectives like as increasing
operational gains. This focus on the facts that price and demand are associated to each other as
the price will be charged at a very high level this would not be able to increase sales because of
reduction on total demand. Although, it is the most appropriate prices which is set in order to
receive maximum profit during the time (Goyal, 2014).
Job costing system: Under this process, this will involve in different jobs that will be
needed to be perform during the production of products. At that time, those costs will be incurred
so that they require proper check system in order to examine exact cost for an individual activity
job costs. Apart from this costs that will be related to a group of job would be analyse according
to their time duration. This essential to evaluate total time and cost use by the company to
produce each product.
P2: Different accounting reporting system
A report is a detailed information about companies performance during an accounting
year. It is vital for every organisation whether small or large to make timely report so that proper
identification of their current position can easily be analysed. As it has been seen that report are
primary base of every decision making which is done by various shareholders and investors. The
sources of report preparation can be taken from different statements such as profit and loss,
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balance sheet and cash flows statements. The motive behind doing this is to analyse whether
company is capable enough to deal with their long and short-term liabilities. Before making any
crucial decision investors use to make evaluation of key aspects on the basis of the report
presented by the accounts departments (Soin and Collier, 2013).
If any thing requires to be corrected then they would asked at the same time to make
certain modification before releasing it into the market. In this data would be preserve and can be
utilised for the future planning. The report cannot be made without having proper consultation
from some other department. There perception is more essential so that chances of biases would
not be present. There are various reporting systems that would guide and record crucial data
according to their entry date and time. This would provide clear image and facts about current
position of the company. Some of them are discuss underneath:
Performance report: It is known as one of the crucial report for Nero Ltd by which
actual performance can be determine more easily. They are done regularly with the help of local
government that will be financed by public finance. They need to show that funds was spend in
more efficient and useful manner in their respective segments. These kind of reports are crucial
to analyse past performance with the present one. It is an essential activity in accounting
management. It consists of collecting and disseminating production detail and utilisation of
resources and some other vital information related with the performance of an organisation.
Account receivable aging report: It is known as one of the crucial report by the help of
which company can determine to list of unpaid customers invoices and inactive credits note as
per the date ranges. It is said to be primary techniques which is used by Nero Ltd to gather total
invoices those are overdue for payment. It is used as a standard to estimate the financial position
of Nero's customers (Vakalfotis, Ballantine and Wall, 2013).
Variance analyse report: Under this process, all those are direct expenses or cost those
are incurred directly to the production of products. There will be same similar amount of
variances that are associated with the manufacturing. All those deviations those are determine
during the time are recorded into this reports so that shortcoming can easily be analyse. It can be
examine by taking values of actual and standard costs of material and labour.
Job cost report: Under this report, every possible related to an individual job or group of
activity are carried out during the time. This will be useful for the management in order to make
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vital decision by which uncertainty and unnecessary costs can be avoided. This would leads to
increase profitability of Nero Ltd in order to earn additional benefits in future time.
Inventory control report: This reports are more vital for the managers in order to
manage and control going of stocks from he businesses. It is more crucial for the managers to
determine whether company's is having sufficient amount stock for the year. Three are various
techniques which are helpful in this process such as Inventory turnover ratio, EOQ and ABC
costing. For this, it will be ensure that quantity of material shall be used in best and effective
manner in order to incur maximum gain for the company (Ward, 2012).
M1: Benefits of using management accounting system
There are various essential aspects those are making company more profitable. This can
be done by using effective accounting systems in order to record every financial transactions.
Every income and extra costs will be analyse by the help of using appropriate systems so the
performance can easily be enhanced. It will helps in reducing expenditure of the company those
are incur at the time of production. Improve cash flow and make business decision in the favour
of developing better understanding of accounting tools.
D1: Critical evaluation of reporting system
In order to generate better outcomes for the company it is crucial to analyse reporting
systems in more appropriate manner. In company's like Nero Ltd to analyse employees and other
departments to perform there roles and responsibilities in more efficient manner. The use of
accounting reports can guide managers to take useful information about upcoming investment
planning. The profitability position and sustainability can easily be determine by the company on
the basis of these reports. The would assists in important decision-making about expansion of
their business as well as maximum goodwill at the same time.
P3: Different costing method use for evaluating net profitability of the company
Costs are known as future estimation of amounts those are going to be incur by the
company for the purpose of producing products. This costs would increase the productivity of an
organisation. Managers all have to determine these costs for the purpose of making decision in
order to manager and control their extra costs. If these are not controlled in right time then it
would create a huge burden on clients and could not be able to buy the products. This will have
adverse impacts on the productivity as well as reputation of Nero Ltd. To deal with such kind of
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costs issues, managers need to identify all those areas which taking maximum costs. A well
organise measures would be taken into consideration to reduce extra burden over the company.
The best suitable methods under this situations can be use by company are mentioned
underneath.
Absorption costing: This is related with those costs which is incurred over entire
production process whether they are related either with variable or fixed. Because all cost are
taken into consideration so that this would known as full costing method. The total amount
which is associated with the selling and administration will be taken into account afterwards
instead of units. There is been always seems to have differences in actual and budgeted amount
so variances would be identified (Otley and Emmanuel, 2013).
Marginal costing: This costing methods is related with those costs which is incur by the
company over the production of an additional units. It does not consider fixed costs only variable
costs are used. These are happens to be the costs which alter in direct ratio and varies with the
change in units. The main computation which is to made in order to determine net profitability of
the company. This would be related with total variable costs which is incurred in order to
eliminate total amount of sales made during the time. Under this, there is no allocation of fixed
cost because of which there is certain variations would be seen over the net profits.
Absorption costing Marginal costing
In this methods, both variable and fixed costs
are taken into considerations.
Only variable costs are taken into accounts
during the production process.
Because of fixed costs there would be seen a
change in net profits.
The profitability can be measure by using
profit volume ratios analysis.
It is not considered more effective method of
taking vital decisions.
Most of managers would use this costing
techniques to take crucial decision-making.
Marginal costing for Quarter 1:
Quarter 1
Particulars
Amount
(in ￡)
Sales 66000
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Less: Cost of sales
Opening inventory 0
production cost (78000*0.65) 50700
Less: Closing stock (12000*0.65) 7800
42900 42900
Contribution 23100
Less:
Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 1900
Marginal costing for Quarter 2:
Quarter- 2
Particulars
Amount
(in ￡)
Sales 74000
Less: Cost of sales
Opening inventory
(12000*0.65) 7800
production cost (66000*0.65) 42900
Less: Closing stock (4000*0.65) 2600
48100
Contribution 25900
Less:
Fixed overhead 16000
Fixed & selling expenses 5200
21200
Net profit 4700
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Working note Q1 Q2
Variable costing profit 1900 4700
Opening inventory 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100
Opening inventory 0 10200
Closing stock 10200 3400
Absorption costing for
Quarter 1:
Particulars
Amount (in
￡)
Sales 66000
Less: Cost of sales
production cost (78000*0.65) 50700 0
Semi-variable (78000*0.20) 15600
Total Variable cost 66300
Less: Closing stock 10200
56100
Gross profit 9900
Less: -400
9500
Selling and distribution as
fixed 5200
Net Profit 4300
Absorption costing for
Quarter 2:
Particulars
Sales 74000
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Less: Cost of sales
Opening stock 10200
COGS (66000*0.20) 13200
production cost (66000*0.65) 42900
Total Variable cost 66300
Less: Closing stock 3400
62900
Gross profit 11100
Less: selling expenses -2800
8300
Fixed expenses 5200
Net profit 3100
Working note
Fixed costs 16000
Budgeted cost of production
80000
per units
Budgeted fixed cost 0.2
Variable cost per units 0.65
M2: Evaluation of accounting techniques
It has been been determine that effective strategies can only techniques which can help
the company to create benefits to the company. Nero Ltd can enhance their profitability by using
effective tools and techniques. It is more gainful for future forecasting in order to increase their
productivity. Conservatism techniques is more reliable for the protection of resources while
materiality techniques is been helpful in utilisation of labour in smooth running of their
operations.
D2: Critical evaluation of profit and loss statements
From the above computation of income statements by using various costing methods, it
has been seen that in the first quarter of sales with marginal costing they are getting profit of
negative 16100 . Whereas by using absorption costing in first quarter they are incurring profit of
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- 15700. The difference of 400 is arise because of treatment of fixed costs. In the second quarter,
results are more different. They are getting profit of -3700 for marginal cost while -9500 from
using absorption costing.
SECTION 2
P4: Advantages and disadvantage of using planning tools
In every business organisation, it is vital for managers to make use of planning tools so
that better results can be generated during the period of time. It will be required to analyse every
aspects in best effective manner so that future aims and objectives can be examine positively. For
this purpose the most important part which company need to considered is the budget (Lukka
and Vinnari, 2014).
A budget is an estimation of future costs and expenditure those are going to be incurred
during and accounting period of time. It would identify cost and expenses those are investing in
manufacturing of products and services. This happens to be design a comprehensive framework
of operations that are utilise at the time of making particular planning for an operations. Mainly,
it is prepared for maximum of more than one year as it can be determine as positive outcomes
this is done in favour of the company. This would be related with that part of business
organisation which is divided into various sections. Generally, it deliver innovative ideas to the
managers in order to manage their resources without paying any excess costs. In organisation,
planning is known as perfect techniques which is associated with analyse aims for upcoming
future aims and objectives. There are various tools those are helpful in control budgets of an
organisation. Some of them are mention underneath:
Forecasting tools: It is related with future estimation of company's growth and
profitability. This tools would assists them to gain maximum competitive advantages. This will
help the company to identify company's to move in right direction according to their set mission
and vision (Bodie, 2013).
Advantages:
It is more essential for the company in order to identify its pre-determine aims. This
would help them to attain their target in the allotted time period.
Disadvantage:
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By the help of this, managers would face difficulties to estimate future expenses those are
been incur by company during the time.
Scenario tools: In this planning tools, managers can uses it as to analyse best alternative
which will be helpful in order to deal in critical situations. It would assists planning, managing
their functions and operational aspects of Nero Ltd.
Advantages:
With the use of this, company can get proper idea regarding selection of right methods
those are useful in a specific situations.
Disadvantage:
It is not so accurate and reliable for the decision-making of a company. It is more time
consuming planning tools (Arroyo, 2012).
Contingencies tools: It is known as one the primary planning tools which is made for the
development of a firm to react in an effective manner at some specific situations. Implementation
of this tools is includes forming evaluation to use advance HR management facts and financial
resources.
Advantages:
It will help to cut down additional costs those are costing to be impact the profitability of
an organisation. It would safe firms from going into losses.
Disadvantage:
In few situations, it is more difficult in some times because it will be complex in nature
(DRURY, 2013).
M3: Evaluation of planning tools
In respect to increasing efficiency of an organisation, it is crucial for the managers to
make use of resources in an effective manner. Nero Ltd make use of these tools to make
evaluation of total costs and expenses those are incurred during the production time. This would
help in future sales prediction and profitability of the company. Generally, forecasting and
contingencies tools are more effective for the betterment of an organisations. These tools are
helpful in generating affordable profit and growth for the company by utilising resources of the
company in more efficient manner.
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