BTEC Level 5 Management Accounting: Systems and Reporting Techniques

This report provides a comprehensive overview of management accounting, focusing on its systems and reporting methods within the context of Modern Ltd. It defines management accounting and details the essential requirements of various management accounting systems, such as cost accounting, inventory management, and price optimization. The report also explains distinct types of methods used in management accounting reporting, including standard costing, variance analysis, overhead allocation, target costing, throughput accounting, activity-based costing, and time-driven ABC. Each method is explained in detail with respect to its application in Modern Ltd, highlighting its role in improving decision-making, cost control, and overall efficiency. Desklib offers students access to similar solved assignments and past papers.

Management Accounting

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Explaining what is management accounting and essential requirements of some
management accounting systems.................................................................................................1
P2. Explanation of distinct types of methods that are used by managers in management
accounting reporting....................................................................................................................2
REFERENCES................................................................................................................................5

INTRODUCTION
Management accounting is considered as a great way to prepare administration reports
addition to records which provides precise, measurable data and opportune budgetary to directors
of company. It presents various charts, statistics, etc at regular intervals through which key
decisions for betterment of entity are taken and strategies for avoiding future losses are
implemented. With this, accountants focus to provide better customer services and controlling
product prices through employing devices of cost controlling. For present management
accounting project, chosen organisation is Modern Ltd that is specialised in manufacturing and
selling two commodities that are Product X along with Product Y.
The report demonstrates essential understanding related to management accounting systems.
It further applies range of techniques of management accounting and explains use of certain
number of planning tools in business. At last, it comprises comparison between entities about use
of management accounting so to respond effectively for financial problems.
TASK 1
P1. Explaining what is management accounting and essential requirements of some management
accounting systems
Definition of management accounting
As per Christ and Burritt (2018), management accounting is defined as a modern concept
that is widely used in business concerns as a technique of accounting. It is presenting accounting
information effectively for helping decision makers for framing policies and daily operations of
company. In Modern Ltd, management accounting guides in making optimum use of techniques
in recognising, measuring, analysing, devising and interpreting information for planning,
evaluation along with controlling resources.
Management accounting system
There are multiple mechanisms which provides critical information for operational
decision making of business. All these mechanisms are defined as management accounting
system. In relevance to Modern Ltd, management accounting systems aids in costing together
with managing manufacturing and selling processes. Key systems and their essential
requirements in Modern Ltd are below:
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Cost accounting system: With this mechanisms, organisational managers estimate
product costs so to analyse profits, control costs along with perform valuation of inventory. In
Modern Ltd, cost accounting system determines real costs that are related with manufacturing
commodities and providing services through focusing on all expenses involved in processes.
Essential requirements that state use of the system in the venture is that it ensures effective
accounting for overheads, materials, etc and guide to ascertain costs of offerings.
Inventory management system: Through the system, it becomes possible to track goods
available with company throughout supply chain. In Modern Ltd, adoption of inventory
management system governs the ways in which stock of products are managed for business. Its
essential requirement is that it optimise entire mapping of complete journey of commodity,
spanning from order delivery to target customer.
Price optimisation system: It is a mathematical program which calculates the way in
which demand varies at variant levels of price. In association to Modern Ltd, application of price
optimisation system is done to tailor product pricing for segments of customer with the help of
simulating aspects related to respondence of target audience for changes in prices with scenarios
of driven data. Essential requirement in Modern Ltd of the system is to select preferred
optimisation technique, monitoring outcomes along with upgrading data inputs for improving
pricing accuracy.
Functions related to management accounting
Major function related to management accounting in an organisation is to provide
assistance to managers about performing effectively (Rikhardsson and Yigitbasioglu, 2018). In
Modern Ltd, functions on which management accounting works are to provide information,
assist in planning, act as communication medium, facilitate control and coordinating entire
practices of the venture.
P2. Explanation of distinct types of methods that are used by managers in management
accounting reporting
Definition of management accounting reporting
In all business, there are some reports that aims to inform about ongoing tasks of business
to managers which are termed as management accounting reports. Within an organisation, for
example, Modern Ltd, management accounting reporting are continuously devised as per
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requirements in an accounting period. Methods that are adopted by management accountant of
Modern Ltd in management accounting reporting are as explained in clear manner:
Standard costing: A method that compare normal costs as well as revenues with real
outcomes for the purpose of arriving at variance and informing decision makers for deviations so
that corrective measures are taken for improvement is said to standard costing. In context to
Modern Ltd, use of standard costing provide formal basis to managers to assess performance
together with efficiency.
Variance analysis: A quantitative method of reporting about difference among planned
and that of actual behaviour is defined as variance analysis. In Modern Ltd, use of variance
analysis is for maintaining a control on operations of entity and mitigating potential risks.
Overhead allocation: It refers to apportionment of all indirect costs that are involved in
manufacturing or producing goods. In various companies, allocation of amount of overhead is
substantially more than direct costs related to gods. In Modern Ltd, using the method that is
overhead allocation, it becomes easy for management accountants to cut costs and improvise
product efficiency.
Target costing: It refers to a method which determines life cycle costs associated with a
commodity that must be sufficient for developing particular functionality along with quality
through ensuring attainment of desired profits (Ainsworth and Deines, 2019). In Modern Ltd,
objective of using the method by managers is to assure profitable targets, reducing costs,
improving sales prospects and serving as ley guide in manufacturing process of Product X and
Product Y.
Throughput accounting: It is an approach which help administration with support data
to improve profitability of entity. By using this method, management accountant of Modern Ltd
generates best incremental profits for short term through looking towards bottlenecks along with
eliminating all.
Activity based costing: A management accounting reporting method that assigns
overhead together with indirect costs to all commodities and services. In Modern Ltd, use of
activity-based costing enable to make improvisation in products and analysing customer
profitability promptly.
Time driven ABC: A method that help in reporting of costs continuously which results
in revealing costs involved in activities of entity and time that is spent on them. In Modern Ltd,
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Time Driven ABC provides information related to cost behaviours, traces practices for object of
cost and foster better decision making.
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REFERENCES
Books and Journals:
Ainsworth, P. and Deines, D., 2019. Introduction to accounting: An integrated approach. John
Wiley & Sons.
Christ, K. L. and Burritt, R. L., 2018. The role for transdisciplinarity in water accounting by
business: reflections and opportunities. Australasian Journal of Environmental
Management. 25(3). pp.302-320.
Rikhardsson, P. and Yigitbasioglu, O., 2018. Business intelligence & analytics in management
accounting research: Status and future focus. International Journal of Accounting
Information Systems. 29. pp.37-58.
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