Management Accounting Application in Wider Business Environment HNC

This report provides a comprehensive overview of management accounting and its application within the broader business environment. It covers various aspects, starting with an information booklet explaining the concept of a management accounting system and report, including different management accounting systems like inventory, cost, job costing, and price optimization. The report then delves into management accounting techniques, highlighting their use in productivity analysis, sales trend prediction, and financial planning. Furthermore, it evaluates different planning tools and their application in budget preparation and forecasting. Finally, the report compares and contrasts two management accounting systems to solve financial problems, providing a holistic understanding of how management accounting contributes to effective business management. Desklib offers a platform to explore similar solved assignments and past papers for students.

Running head: MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING
Name of the University
Name of the student
Author notes

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Table of Contents
Task 1........................................................................................................................................2
Information booklet useful for understanding the concept of management
accounting system and management accounting report..............................................2
Task 2........................................................................................................................................9
Management accounting techniques...............................................................................9
Task 3......................................................................................................................................12
Evaluation of different planning tools and their application in budget preparation
and forecasting..................................................................................................................12
Task 4......................................................................................................................................14
Comparison and use of two management accounting systems to solve financial
problems.............................................................................................................................14
References.............................................................................................................................17
Appendix..................................................................................................................................19

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Task 1
Information booklet useful for understanding the concept of management
accounting system and management accounting report
The quantitative and qualitative information that is required for evaluating the
operational and financial performance is gathered from the managerial accounting
techniques. The managerial accounting is a sub division of the accounting system
which is used to make plans and strategy to control the usage of funds by the
managers. It supports in the decision making process by the application of budgeting
and after that it is used to control the budget by making comparison the budgeted
figures with the actual figures, and from the result of the difference between the
actual and the budgeted figures it can be possible to calculate the variances of the
budgeted and the decisions can be taken based on the outcome of such variances.
The managerial accounting techniques as a resource management tool give
emphasis on the estimation of the future and on the other hand as a technique for
controlling the resources it concentrates on the present situations.
Assisting the management to make improvements continuously
The management accounting helps the management to continuously monitor
the results of the budgets and that can help in continuous improvement of the
effectiveness of processes and systems and expand the superiority of the goods and
facilities provided by them. The improvement is to be made on continuous basis to
eliminate the adverse effect of abnormal waste of materials, time and efforts of the
labours, and increase the productivity (Otley 2016).
The management accounting is related with the methods of measurement,
identification, explanation, and communication of the financial data to the
management. The various management accounting system which is utilised by the
organizations are:
Inventory management system

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This management accounting system is utilised by the company to manage
and control the goods that are kept in inventory of the organization. This system is
required at various locations of an organization to maintain a planned course of
actions and maintaining the inventory (Cooper Ezzamel and Qu 2017).
Cost accounting system
The cost accounting system is utilised by the manufacturers to write down
production activities by utilizing the system of perpetual inventory. The cost
accounting system is formed for manufacturers in order to monitor the continuous
flow of the stock used in the different process of manufacture.
inventory
management
product
management
purchase
module
customer
master
inand
outwards
in and
outwards
challan
management
inventory
status report

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Job costing system
The job costing process is formed to assign the cost that the organization has
to incur for a particular job which is related with the process of production. The job
costing system is mainly used in the industries like construction where costs are
allocated to various projects of the company (Amara and Benelifa 2017).
cost accounting
system
input
measurement
basis
inventory
valuation method
cost
accumulation
method
cost flow
assumption
recording interval
capbility

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Price optimization system
The method is used to detect the products, the price of which can be
increased even though the customer is not willing to pay. This method of
management accounting system helps to frame a strategy that will help the business
to sell the products quickly at a price which will fetch higher profit margin to the
organization.
In small organization it is very essential to make optimum utilization of funds
and for that reason it is essential to prepare a budget from which it will ne possible to
measure the inflow and out flow of cash easily. Managerial accounting reports can
assist the management by providing the necessary information that is required to
bring control in the costs, giving financial motivation to the efficient employees,
eliminating the products that are not useful and making investments in these types of
products which will provide higher return to the organization. Based on the nature of
the business and the sensitivity of time of the financial information that the
management or owner may require, that means that in what interval they want such
reports, monthly, quarterly weekly or on daily basis (Ax and Greve 2017).
job
costs
labour
materials
subcontracts
equipment
rental
other direct
costs

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System produced quote
Quote recommendation
Optimised quote
Budget reports to monitor the performance of the business
This kind of reports provide assistance to small organizations to monitor the
output of the organization and bring control over the costs incurred for running the
operation of the business. The budget is made to make an estimation of the cost of
production of the coming days on the basis of the trend of the actual expenses made
in the past years. In case the organization in the previous year exceeded the
budgeted figure and fail to bring control over the increasing trend of costs then it may
be required to increase the fund to a more correct level (Nitzl 2016).
The budget reports may be utilised by the entrepreneurs to calculate the
inducements that is to be paid to the efficient employees. The budgeted funds are
given out as bonus to the employees as they have been able to achieve the goal
with an amount which is less than the budgeted amount.
Budget allocation
Client request code
Rule 1
Rule 2
Rule 3

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Receivable aging reports
The aging report is an important tool used by the management to control the
flow of cash in case the organization want to extend the period of credit that is
allowed to the customers. This report helps to categories the customers in
accordance to the period of credit allowed by them. In general, the aging reports
consists of separate columns in the bills, under three categories 30 days late, late for
60 days and the late for 90 days. The ageing report can be used by the managers to
identify the competence of the collection process of the firm.
There are many customers which are not capable to reimburse their balances,
then in that case the organizations may need to bring more control on the credit
policy. On analysing the accounts receivable balances on a periodic basis will help
the management from neglecting any debts that has not been paid by the customers
(Hopper and Bui 2016).
adminstrative costs
directs cost
overhead

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Accounts receivable ageing
current 1 to 30
days
31 to
60days
61 to 90
days
Over
90days
total
200 400 0 0 0 600
0 500 100 0 0 600
0 0 1000 500 250 1750
200 900 1100 500 250 2950
Cost reports
From this report the management will be able to monitor the expenses for a
particular project which is funded by the small organization. These expenses are
matched with the forecasted revenue so that it can be possible to evaluate the profit
earning capacity of the organization. This assists to detect the potential areas from
which it can be possible to earn more revenue so that the organization can
concentrate more in increasing the profit earning sources and not on the areas which
can not fetch higher profits. The cost reports can be utilised for the analysis of the
expenses, simultaneously with the project so that the organization can rectify the
areas of waste before the cost goes out of control (Bromwich and Scapens 2016).
Inventory and manufacturing
In small organizations it is essential to maintain a physical inventory
management system, and that can be done through the managerial accounting
reports so that the manufacturing process can be made more efficient. The inventory
and management reporting system can be useful top record the waste of inventory,
labour cost per hour and overhead costs per hour.
Thus, by integrating the management accounting systems and the
management reporting system the organizations can bring control over the cost and

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can increase the profit margin and bring more efficiency in the production process
(Wen and Mao 2019).
Task 2
Management accounting techniques

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Introduction
Management accounting system is a technique that is adopted by the
organization to bring control over the expenditures and to intensify the efficiency of
the production process. The management accounting system assist the
management to make a budget on the basis of which the future trend of the
company is company is predicted which helps in decision making. The utilization of
the planning tools like fund flow analysis, cash flow analysis, standard costing,
marginal costing and budgetary control are used by the management of the
company to increase the margin profit and to predict the future trend of the financial
performances (Weetman 2019).
Discussion
The major uses of the management accounting are stated below
Productivity
To use of the management accounting system can be analysed by comparing
the productivity before the implementation of any machine or any other equipment
and the productivity after the implementation of the machine. To measure the
effectiveness of the labours and other machinery that are used in the process of
production it is essential to create a comparison between the projected figures and

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the real one. If the actual production is more than the estimated one then it can be
said that the process of production is efficient and that can assist the management to
fulfil the objective of the organization (Dearman Lechner and Shanklin 2018).
Sales trends
The tools for planning of the management accounting also used to predict the
trend of the sales and take necessary actions as per the requirement to implement
any strategy to improve the sales figures as set by the organization. The
management accounting tool is also used to assess that which products are capable
to bring more revenue. The analysis can also help to identify the nature of the
products and also toe assess the present market demand of the products and if the
demand is falling then what necessary changes are to be implemented so that it can
be possible to capture more market and attract more customers. The information that
can be gathered from management accounting will help the organizations to identify
the target market and to set the amount of units that is essential to sale to increase
the margin of profit (Jin 2017).
Financial planning
Management accounting can also used as a financial planning tool as it helps
to deliver data concerning the management of the expenditures, which includes the
process of making plan based on the fund available and how much funds the
organization can raise in the future, the organization can prepare a strategic plan
regarding the time when it may be required to take loan from the market and when to
go for long term investments. Financial planning can help the organization to
manage its working capital requirement and can save from the payment of
unnecessary penalties or late fees (Taylor and Scapens 2016).
Thus management accounting provide the necessary information from which
it can be possible for the management to identify the areas which are providing
revenue and help o improve the financial condition of the company and also
simultaneously help to detect the areas where more improvements will be required
so that the organization can increase its financial strength.