Analyzing Management Accounting Systems at Airdri Limited: A Report

This report provides a comprehensive analysis of management accounting practices, focusing on Airdri Limited, a manufacturer of hand dryers. It explores various management accounting systems such as inventory management, job costing, price optimization, and cost accounting. The report details different methods used for management accounting reporting, including accounting receivable aging reports, performance reports, and cost marginal accounting reports. Furthermore, it examines different planning tools like budgets, budgetary control, scenario tools, forecasting tools, and contingency tools, discussing their advantages and disadvantages. The report also compares how organizations, specifically Airdri Limited, adapt management accounting to address financial problems, such as overspending and poor money management, concluding with insights into the application and effectiveness of these strategies.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Different types of management accounting system..........................................................1
P2 Different methods used for management accounting reporting........................................2
TASK 3............................................................................................................................................3
P4 Different types of planning tools and their advantages and disadvantages.......................3
TASK 4............................................................................................................................................5
P5 Compare how organisations are adapting management accounting.................................5
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Management accounting is the process of preparing management accounts and reports
which is related to financial and statistical information (Zoni, Dossi and Morelli, 2012). It is
prepared by the accountant of the company and provide all information regarding to business
activities. These accounts and reports presented to top management on particular time to provide
help in decision making process. To understand the concept of selected company Airdri limited,
who is manufacturer hand dryer and they are recognised for low energy consumption and
longevity. This report consist of different types of management accounting system and reports
which is used by company. Apart from analysis the use of planning tools which is used in
management accounting and company has adapted management accounting system in order to
solve financial problem.
TASK 1
P1 Different types of management accounting system
Management accounting : It is the presentation of accounting information which is
develop strategies and business policies to be selected by the management and conduct daily
routine activities. As Airdi limited can use different types of management accounting system
which determines that company is performing as per the requirement or not. There are different
types of it which are as mention below:
Inventory management system: An inventory management system tracks the goods
through entire supply chain. Airdri limited can use this system so that it can make proper records
of the inventories. LIFO, FIFO & AVCO are the systems which are useful to manage the stock.
As FIFO describes the first in first out which means those stock which are received first when
have to be sold first. Whereas LIFO describes that last in first out which means those inventories
which are received last they have to be sold first. AVCO is average cost method in which
material has used on average basis for the manufacturing process. As management of Airdri
limited apply these methods as per the requirement. So this system is useful for the organisation
in order to manage the stock (McLaney and Atrill, 2014).
Job costing system: Under this system organisation record the jobs which are performed
by them as per the specification of consumers. Airdri limited use this to evaluate the cost that is
involved in service delivering process of organisation. For the company it is very beneficial in
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order to identify cost of each job that is performed by the corporation within stipulated time
period.
Price optimisation system: This system is used to consider the reactions of consumers
which are associated with the different prices set by the management. As the manager of Airdri
limited apply this method to set appropriate prices of its products. As a result, maximum number
of consumers will attract towards the company. So this system is beneficial for the firm in order
to set suitable prices for its products.
Cost accounting system: As company use this system to identify cost that is involved in
its operating activities which is helpful to analyse total expenditures that arises which delivering
the services. Airdri limited can apply this to keep track record of cost that is faced by
organisation in order to deliver the products. For the corporation it is require to anticipate the
profitability by analysing unrequested costs. It is important for an organisation to minimize the
cost in order to maxima the profits (Bromiley and et.al, 2015).
P2 Different methods used for management accounting reporting
Management accounting reporting: To keep the detailed information of business of
organisation it is used. It is important for the organisation to make accounting reports so that it
can get all information which can be useful in order to take effective decisions which support the
growth of business. As there are distinct divisions in Airdri limited and all of them prepare their
own report so that corporation can know the performance of each department. On the basis of
these reports management can formulate different plans & strategies which is beneficial for the
success of business. Airdri limited can prepare various reports which are as mention below:
Accounting receivable agin report: This report has been used by Airdri limited so that
it can know the inflow and outflow of cash within the company. These reports have been made
when organisation is depend on credit transaction. This report has consisted of memos and
invoices. With the help of this data and information, it can be analysed that which consumers
does not make payment. In organisation use software which provides the relevant information
and produce data. The company record the details that how many consumers have bought the
goods on cash basis or credit basis and all details are recorded with name, number, address and
terms of payment.
Performance reports: With the help of performance report company can analyse the
performance of their business and if it up to the mark than strategies and plans are made for the
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further expansion. Apart from this, company can evaluate the defects which hamper the
performance of business. It is important for Airdri limited to analyse the performance of different
business projects and on the basis of it organisation can take decisions for the improvement so
that business will grow and earn maximum profits which helps the corporation to achieve its
goals and objectives (Walker, Fleischman and Johnson, 2012).
Cost marginal accounting report: It is required for the organisation to minimise the
cost so that profit margin will increase. Cost represent expenses which incur in the business of
firm. It compares with revenue generated from incurring it. Cost marginal accounting report has
consisted of information related to the price & amounts on which company sold it products. As
profits are analysed on the basis of it and it involves direct cost, inventory cost, overhead cost,
labour cost etc. As Airdri limited calculate profits which generated & the cost involved while
manufacturing the vehicles. With the help of it Airdri limited can know the performance of
manufacturing procedure & how corporation can minimise the cost in order to get more profits.
TASK 3
P4 Different types of planning tools and their advantages and disadvantages
Budget – It is a financial plan which is prepared by accountant of the company in order to
predict income and expenses for attain goals and objectives of the company. The particular plan
present to management team to provide help short term and long term decision making process.
Budgetary Control – It is the process of preparing of budgets and set performance of the
company on the basis of budget plan. After all implementation there are comparing performance
of the company with budgeted amount to control business activities. It is essential tool which can
help to control cost and increase profit.
Scenario Tool
It is a planning tool which can be used by different types organization in order to
evolutional of strategies, plans, tactics and policies. The particular tool defines about the
uncertainties which will come any time and affect to company performance. The company has
been using this planning tool to get budgets in a challenging situation by using spreadsheet in
order to prepare different plans and budgets for the company (Thomas, 2016). Scenario tool
helps company to consider range of future scenarios which can be faced by company so that
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company can be prepared for everything. Budgets can be prepared on the basis of assumption
which can get through this planning tool. Advantages – On the basis of this tool get all appropriate information and finding which
can help to know future assumption. It can help to understand present for imaging to
better tomorrow (Yazdifar and et.al., 2012). it is good help to Airdri limited deal
regarding to potential uncertainties after the awareness of weak signals and get better to
prepare to conduct all new situations to maintain business as growing and alive.
 Disadvantages – Many times this tool can not provide all appropriate information
because few thing in practical way in right but after implementation it can not easy to
understand. If any competitor come in market and provide products in low price it means
all calculation and strategy get fail and there is need to prepare another strategy after the
changes of market.
Forecasting Tool
The forecasting tool can provide guidance regarding to future uncertainties and attempts
different issues. The particular tool predict future on the basis of past and present activities after
that provide all estimated result in front of top management. This tool mainly depended on
assumption base and estimate by experiences, knowledge and judgement of people. They can
forecast amount regarding to future growth perspectives. In the context of Airdri limited can
forecast all income and expenses in the reference of Airdryer manufacturing. According to that
prepare effective strategies and prepare for future uncertainties. Advantages – With the help of this planning tool company can estimate upcoming
income and expenses which can help to store raw material in present time due to increase
rate of inventories. It can help to generate more income due to received appropriate
financial information. The selected company this planning tool help to develop effective
budget in effective way and estimate accurate data (Takeda and Boyns, 2014).
 Disadvantages – This financial tool cannot provide accurate information because any
time external activities change and market diversify. So these activities can harm
business in effective manner and show wrong information. The Airdi limited has not
created effective business policies regarding to these issues and bear many problems.
Contingency Tool
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This planning tool designs for an organization to get success in the context of future
events and situations. This tool will work in effective way because they already give chance to
prepare alternative plan. When plan A will not work in proper way that time use Plan B to get
success in the specific event. In the context of the selected company it is essential for reduce
unexpected losses but after some times the company has not arrange all accounting books which
is cause of bear much more financial losses (McLean, McGovern, T. and Davie, 2015). Advantages – The particular tool provide help in quick decision making process and
deduct all appropriate risks and losses related to particular situation or event. Sometimes
it can provide alternative plan which is helping to survive with other problems. The
contingency planning can help to produce effective budget in the context of the company.
 Disadvantages - The disadvantages of the particular planning tool that it was based on
the reactive assumption not also on proactive assumption. In Airdri limited, accountant
can monitor all business activities but cannot reduce uncertainties easily which cannot
analysis by this and did not analysis actual budget.
TASK 4
P5 Compare how organisations are adapting management accounting
Financial problem: This problem has been arisen when business of an organisation
does not performing well and it suffering from the losses than the situation of financial problem
has arises. It can hamper the performance of organisation and will affect the profits of firm. As a
result, corporation does not achieve the goals and objectives which are set by the management.
As Airdri limited can face different financial problems which arises in the organisation. There
are various financial problems which are faced by the organisation such as:
Spending more money than earnings: As the company cannot anticipate the activities
and situations which can appear in the future and create the financial problems for the
organisation. If Airdri limited spend more money without analysing the factors which can affect
the performance of company and its operations. As a result, organisation will face the financial
problems in its business.
Lack of money management: For an organisation it is important to manage the funds
which support the growth of company. Money is most important factor and without it business of
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company does not grow. If management of Airdri limited does not make effective strategy than it
will face the financial problems.
In order to resolve above financial issues, company can use various techniques mentioned
below:
Financial Governance: As per the concept of the financial governance has emphasised
to follow the rules and regulations which are associated with it. It provides help Airdri limited to
manage & control the financial information as well as data. With the help of this concept money
management problems can be resolved in the organisation. All transactions will be recorded as
per the need which provide help the minimise the risk.
Management accounting approaches – These approaches part of management accounting
techniques which can help to sort out all financial problems in effective manners. There are
defined different financial tool which can help to identify financial issues in order to solve in
effective manner -
KPI – The key performance indicator can apply by the company to measure problems
regarding to financial and non financial performance. These indicators can help to achieve
organisational objectives and track different factors in the regarding of growth. In the Airdri
limited compare their result with budgeted result to sort out financial problems.
Benchmarking – The particular financial tool used by company in order to compare their
business activities and performance with other companies in order to improve performance of the
company. With the help of this tool analysis different types of issues and provide detailed
information regarding to company (Bromiley and et.al, 2015).
Comparison of selected company with other company
Airdri limited Sunshine motors
Problem – There are identify problem of lack
of money management due to cannot manage
all finical accounts in proper manner.
Problem – The company has been faced
problem of that people can have various
thoughts so according to that apply theories
Approach – There are company have applied
key performance indicator to measure all
financial and non financial problems.
Approach – To solve these types of problem
company has been applied benchmarking and
compare performance from other organisation.
The company has been followed cost The company has been followed price
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accounting system for know appropriate result
an maintain all necessary information.
optimization system.
CONCLUSION
As per the above mentionable report it has been concluded that management accounting
important part of any organisation which can set all financial activities in systematic way.
Different types of management accounting system and reports can help to top management in
decision making process. Planning tools of the company help to forecast income and expenses to
reduce uncertainties and prepare effective strategy. After that selecting company can compare
their performance with other company in order to reduce financial problems in impressive
manner.
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REFERENCES
Books and Journals
Zoni, L., Dossi, A. and Morelli, M., 2012. Management accounting system (MAS) change: field
evidence. Asia-Pacific Journal of Accounting & Economics. 19(1). pp.119-138.
McLaney, E. J. and Atrill, P., 2014. Accounting and finance: an introduction. Pearson.
Bromiley, P. and et.al, 2015. Enterprise risk management: Review, critique, and research
directions. Long range planning. 48(4). pp.265-276.
Walker, K. B., Fleischman, G. M. and Johnson, E. N., 2012. Measuring management accounting
service quality. Management Accounting Quarterly. 13(3). p.15.
Thomas, T. F., 2016. Motivating revisions of management accounting systems: An examination
of organizational goals and accounting feedback. Accounting, Organizations and
Society. 53. pp.1-16.
Yazdifar, H. and et.al., 2012. A processual approach towards studying management accounting
change. Journal of Accounting–Business & Management. 19(2). pp.44-58.
Takeda, H. and Boyns, T., 2014. Management, accounting and philosophy: The development of
management accounting at Kyocera, 1959-2013. Accounting, Auditing & Accountability
Journal. 27(2). pp.317-356.
McLean, T., McGovern, T. and Davie, S., 2015. Management accounting, engineering and the
management of company growth: Clarke Chapman, 1864–1914. The British Accounting
Review. 47(2). pp.177-190.
Bromiley, P. and et.al, 2015. Enterprise risk management: Review, critique, and research
directions. Long range planning. 48(4). pp.265-276.
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