Management Accounting: Systems & Financial Adaptation - HNC

This report provides a comprehensive overview of management accounting, focusing on its essential requirements, reporting methods, and application in addressing financial problems. It begins by explaining management accounting and its role in decision-making and planning, highlighting the importance of management style and organizational structure. The report then details various management accounting reporting methods, including cost reports, budget reports, performance reports, and variance analysis. It also explores planning tools for budgetary control, such as budgets and cost-volume-profit analysis, outlining their advantages and disadvantages. Finally, the report compares how organizations adapt their management accounting systems to respond to financial problems, emphasizing the importance of identifying financial issues, financial governance, and managerial accounting skill sets. The report uses Marriot as an example to illustrate these concepts.

Managing Accounting

Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.................................................................................................3
P2 Explain different methods used for management accounting reporting.................................4
LO 2.................................................................................................................................................5
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs............................................................................5
LO 3.................................................................................................................................................5
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control.........................................................................................................................5
LO 4.................................................................................................................................................7
P5 Compare how organizations are adapting management accounting system to respond to
financial problems........................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Managing accounting refers to maintaining the financial information of company from
which by analyzing it company can take or make its future decisions. These managing
accounting includes the invoices, balance sheet, bills, statuary obligations and the like. This
information is used by the internal team of organization to make future plans and objectives
through these accounting reports. The purpose of these managing accounting is to use statistical
data and take a good future decision about the organization future. For reference purpose this
report has taken an example of a company, Marriot. Marriot is a multinational hospitality
company. It was founded by J. Willard Marriot in America (Appelbaum and et. al.,2017). The
company owned and manages a broad range of hotels and related lodging facilities. This
company has the third largest hotel chain in the world. As it is very much famous and has a good
brand name, the services provided by the hotel are of top notch quality and value.
This report discusses the essential requirements of different types of management
accounting system, different methods used for management accounting reporting. Apart from
this the report also includes the calculation of cost using the appropriate techniques of cost
analysis to prepare an income statement using marginal and absorption costs. The report also
includes the advantages and disadvantages of different types of planning tools used for budgetary
control.
LO 1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
Management accounting, which is also called as managerial accounting, refers to a
process of providing the information about finance of the organization so that the company’s
manager can make the required decision. It is only used by the organization, and it’s the only
thing which makes it different from financial accounting. With the right application of
knowledge and skills during the preparation of managing accounting in such a manner that it
helps in making the policies, planning and controlling activities for the company. The paramount
use of management accounting is to make the decisions for the organization (Brewer, Garrison
and Noreen, 2015). There are some tools and techniques which can be used in management
accounting, some of them may include financial accounting, costing, business analysis,
economies and so on. There are several objectives of financial accounting, some of them are as
follows:
 Decision making: With the help of management accounting, the organization can make
the necessary decisions according to the need and trend of business. Through these
managerial accounting, the organization can take fare and better decision for this
operations. Decision taken with rational analysis and with sound mind after analyzing the
whole financial condition can help the company in its growth.

 Planning: Planning is an ongoing process. It takes place at every stage and every
department. Planning helps the organization to plan for their future goals and objectives.
Proper planning helps the organization to get prepared for the resources and the
associated risks that can proved to be a great help for the organization.
The major objective and aim of managerial accounting is to analyses the information about the
financial situation and condition about business which can be used by different department of the
company for various sources (Butler and Ghosh, 2015). Through the help of these information,
the company can make critical decisions related to pricing, strategies, costing, planning and so
on. But there are several requirements which in different types of managerial accounting, and
they are:-
 Management style: The system or approach which is followed by the Marroit Company
does affect the management style. It is very much necessary to follow a certain type of
management style as it help in defining to whom and how the data or information will be
progress to yield a expected results. There are two types of management style, i.e.,
autocratic and democratic style.
In autocratic style, the information extracts from the data is distributed to individuals who has the
power to take decisions, and they generally are top level management people.
Whereas in democratic style, the information which is extracted is distributed among all the
employees and the opinions and ideas are taken from them before coming to any particular
decision.
 Organisational Structure: Organisation structure defines the type of managerial
accounting. If the organization structure is flat, then different managerial accounting will
be applied. But it the organsiational structure is tall, then some different approach will be
used into the structure.
P2 Explain different methods used for management accounting reporting.
Management accounting is a process in which the management reports are been prepared
and these reports provide the acute information of the company’s true and sound conditions or
situation. And through these reports the managers can take the required decisions about the
future objective and goals of business (Crosson and Needles, 2013). Marriot Company has
several methods for management accounting reporting which are explained as follows:
 Cost reports: Cost reports refers to the reports which entail all the associated cost of the
business. Cost reports can be of marketing cost reports, production cost reports, human
resource cost report, raw material or inventory cost report and the so on. These reports
helps the manager in getting the actual expense or cost their department has incurred
during a particular period of time. If the cost incurred is more than of the standard cost

then necessary steps would be taken but if it is under control of lower than the set budget
then there is nothing to worry about.
 Budget: Budget report is a report which the organization prepares for very department. It
is the budget of financial and materials budget which can be used by the departments.
Departments have to try their best to perform all the task between the given budget. A
proper planning is done about the activities which will going to perform into the
department along with the associated cost and then the budget is prepared accordingly.
Budget also lays a framework of activities which helps the organization in organizing the
resources and finance accordingly.
Performance report: The performance report refers to the report in which the performance of
employees is stated. In this report every employee performance is been noted down according to
the department they belong. Through the report Marriot can analyze which employee has given a
significant performance and which employee performance was not up to the mark so that
required training program can be organized for them (Ibarrondo-Dávila, López-Alonso and
Rubio-Gámez, 2015). Performance report is also related to the performance of department has
given in a particular time period. From that report the performance of whole the department is
evaluated and then see that which department has failed into achieving the goal and objective.
Then after analyzing necessary measures are been taken towards the department which has
performed below the expected results.
 Variance analysis: Variance analysis refers to determining the difference between
standard budget and the actual cost incurred. The standard budget is the cost which has
been set before the starting of an activity and actual cost refers to the actual expense
which has incur during the activity. If the actual cost is more than the standard cost then
the company, Marriot, has to undertake some necessary measures and control methods to
bridge the gap between standard and actual cost. But if the difference is nominal or low
then it will be okay if not to take any necessary steps.
LO 2
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs.

LO 3
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control.
There are several types of planning tools for budgetary control and they are as follows:
Budgets: Budgets are the detailed statements which provides all the information and cost which
a department needs during a particular time being. Budgets are set after the competition of
planning process. It is futuristic because here the budgets get set by keeping in view the plans
which the department or organization has set as a future goal. It control the budgets of
manufacturing unit, production unit, marketing unit, sales unit and the so forth and then it
communicate the budgets into respective departments (Jones and et. al.,2012). With the help of
that department proceed their work accordingly. Budget is viewed as a target for managers which
they have to complete or achieve. Budget has its own advantages and disadvantages and these
are as follows:
Advantages:
 It helps in coordinating the activities of the entire department with the organizational
comprehensive goal.
 It helps in translating the plans into actions by allotting the resources and required funds.
 It improves the communication activities among the employees.
Disadvantages:
 Budgets create problem when it becomes very strict to apply and follow.

 It can cause unfairness as a department allotted with more budget and another with less
budget.
 A strict and rigid budget curbs the innovation and creativity of employees.
Cost volume profit analysis: The cost volume profit analysis refers to analyze the effect of sales
volume and the price of product at operating activity of business. It includes how the operating
profit is affected by any change in fixed costs, variable cost, selling price per unit and sales mix
of one or two products. It also has its own advantages and disadvantages which are as follows:
Advantages:
 It is very much easy to calculate, a set of standard formulas need to get apply to get the
analysis result.
 The breakeven point help the organization in planning about the future prices and costs.
 It helps the organization in setting up the price for product or commodity.
Disadvantages
 It does not provide the accurate information when two or more product prices get
involved.
 It assumes that the sales remains constant but the demand for the product keeps on
changing.
 It only gives the results or undertakes a specific period of time, after that the result would
be unreliable.
LO 4
P5 Compare how organizations are adapting management accounting system to respond to
financial problems.
Many corporations or company get confuse into what type of structure or policies they
should adopt in their organization system. The procedure should be suited with the
environmental requirement and changes. The management accounting system keeps on changing
with the time and need of organization (Jiambalvo, 2019). The organization, Marriot, can use the
following management accounting system to respond to financial problem:
Identifying financial issues: Using various tools such as budgetary targets, key performance
indicators have to get address without any sort of delay. The managers should first identify the
area where he is facing the financial issue or problem because only after proper identification of
area the required measures can be taken through establishing various controlling measures and
techniques.
Financial governance: The financial system which is opt by the Marriot should be and
understand the actual financial governance which is taking place. The financial governance

refers to how an organization should operate its financial matters and issues. By framing the
structure, the organization can follow a proper direction to the path of strong financial reports.
Managerial accounting skill set: The managers of the organization should have the appropriate
skills set and attitude with regard to the management. They should have the ability to manage
their department and the associated factors. These associated factors may include employees
working under a department, their issues and problems, resource allocation, funds receiving and
managing and the so forth (Lohr, 2012). Handling such problems and resources requires a big
deal of managing skills which a manager must inculcate in him. All these resources needs to get
handle with rational mind and sound decisions need to be taken to solve it.
Effective strategies and system: The organization, Marriot, have very effective strategies and
system. As the company has the third world’s largest chains of hotel, then the company has its
success because they have handle their strategies like that. They have opted for strong system, be
it a managerial system, financial system, human resources, inventory and much more. The
system also includes the communication system. A strong communication system where the
employees can communicate to each other irrespective to the position or level they hold into the
workplace has proven to be a great help in the success of organization. Effective and strong
strategies are made after the proper analyses of internal and external factor of environment.
Internal factors may include company’s own system, culture, values, employees and etc which
can be easily controlled by an organization (Maher, Stickney and Weil, 2012). Whereas external
factors are the factors which are independent to any control from organization side, means the
organization cannot have any control on their working. These factors may include political,
economical, social, technological, environmental and legal factors.
CONCLUSION
From the report discuss above, the role of managerial accounting and its benefits have
been discussed. Managerial accounting refers to the managing a report which helps the
organization in making the future decision. There are different types of requirement in
accounting management and some includes, management style, organizational structure and etc.
Also there are different methods for accounting management reporting some may include, cost
analysis, budgetary, variance analysis and so on (Matherly and Burney, 2013). The report also
discuss about the ways to handle financial problems. Some of the ways are good managerial
skills, identification of financial issues, proper financial governance, effective strategies and
system and the so on.

REFERENCES
Books and journals
Appelbaum, D., and et. al.,2017. Impact of business analytics and enterprise systems on
managerial accounting. International Journal of Accounting Information Systems, 25,
pp.29-44.
Brewer, P. C., Garrison, R. H. and Noreen, E. W., 2015.Introduction to managerial accounting.
McGraw-Hill Education.
Butler, S. A. and Ghosh, D., 2015. Individual differences in managerial accounting judgments
and decision making. The British Accounting Review. 47(1). pp.33-45.
Crosson, S. V. and Needles, B. E., 2013. Managerial accounting. Cengage Learning.
Ibarrondo-Dávila, M. P., López-Alonso, M. and Rubio-Gámez, M. C., 2015. Managerial
accounting for safety management. The case of a Spanish construction company. Safety
science.79. pp.116-125.
Jiambalvo, J., 2019. Managerial accounting. John Wiley & Sons.
Jones, T., and et. al.,2012.Strategic managerial accounting: hospitality, tourism & events
applications. Goodfellow Publishers Limited.
Lohr, M., 2012. Specificities of managerial accounting at SMEs: case studies from the German
industrial sector.Journal of Small Business & Entrepreneurship. 25(1). pp.35-55.
Maher, M. W., Stickney, C. P. and Weil, R. L., 2012. Managerial accounting: An introduction to
concepts, methods and uses. Cengage Learning.
Matherly, M. and Burney, L. L., 2013. Active learning activities to revitalize managerial
accounting principles. Issues in Accounting Education. 28(3). pp.653-680.
Warren, C., Reeve, J. M. and Duchac, J., 2013. Financial & managerial accounting. Cengage
Learning.