Management Accounting Systems and Reporting for Business Decisions

This report offers a comprehensive analysis of management accounting, focusing on its principles, systems, and practical applications within Dell Inc. The introduction defines management accounting and distinguishes it from financial accounting, highlighting its role in providing financial and non-financial details for internal decision-making. The report then delves into the specifics of management accounting systems, including job costing, inventory management, and price optimization systems. Furthermore, the report examines the use of management accounting reporting, such as budget reports, accounts receivables, job cost reports, and inventory reports, providing insights into how these reports aid in organizational control, planning, and decision-making. The analysis includes the distinct roles of management accounting users like top-level management and policy makers. The report emphasizes how Dell Inc. can leverage management accounting for effective financial and operational management. Overall, the report provides a valuable understanding of how management accounting supports strategic planning and operational efficiency within a business context, using Dell Inc. as a case study.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Management accounting ............................................................................................................3
TASK 2............................................................................................................................................5
Management accounting system and its internal systems ..........................................................5
TASK 3............................................................................................................................................6
Use of management accounting reporting...................................................................................6
TASK 4............................................................................................................................................8
Definition and calculations ........................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
There are a number of accounting approaches in financing that are being applied in their
activities by company organizations. The word Management Accounting (MA) may be explained
as a kind of accounting methodology by providing financial and non - financial details in which
internal reports are generated. This method is commonly used for businesses engaged in
industrial operations. The project report is based on Dell incorporation which operates its
operations in the process of making personal computers. This company is a leading in the aspect
of computer manufacturing and selling. In current time company is facing issue which is that
they are unable to know whether they should personal computers or not. For this purpose,
different types of tasks are covered under project report. The report covers information about
Management accounting systems (MAS), reports as well as some calculations are also carried
out.
TASK 1
Management accounting
Definition of MA:
MA is also known as systematic accounting which can be described as a method of supplying the
managers with financial details which resources while making decisions. MA is utilized
primarily by the organization’s management department, so that is the one aspect that renders it
distinct from financial reporting (Azudin and Mansor, 2018 ). Through this phase, tax
information and documentation including payroll, annual balance sheets are exchanged with the
management team committee by operational budget. This accounting approach is completely
different from financial accounting (FA) due to serval reasons which are mentioned further. It
can be applied in the Dell computer corporation so that they manage their financial and non-
financial information in a systematic manner.
How MA is distinct with FA.
There is numerous variation between both accounting methods because each of them is being
applied in a specific manner in operations of companies. Below difference between both
accounting is mentioned in such manner:
Basis MA FA
Information Under this form of accounting, In FA, only those transactions’

included information about monetary and
non-monetary transactions are
included.
information is contained which is
related to monetary transactions.
Compulsory This accounting is not essential for
companies to implement even they
are listed in any stock exchange.
FA is mandatory for those companies
which are listed in any specific stock
exchange.
Outcome In MA, internal reports are
produced in accordance of need of
business.
Under FA, various types of financial
statements are prepared including
P&L, balance sheet etc.
Auditing It is not essential that internal
reports produced under this
accounting need to be audited.
While in this accounting, it is
necessary to do auditing of prepared
financial statement before presenting
to stakeholders.
Users of MA information:
As per the above discussion, this can be inferred that MA is mainly useful for internal
stakeholders because they utilize key information form it. Below some key users of this
accounting are mentioned in such manner:
 Management department- In a particular company, management department is one of the
key department whose responsibility is to manage all tasks and activities in an effective
manner. In order to do so they need key information which can be derived via internal
reports produced under MA. In the context of Dell company, they use this information for
better decision making.
 Top level management- the management accounting is also used by the top level people
of management for taking the correct and right future decisions for the company (Bedford
and Speklé, 2018). The management accounting contains the financial information about
the company, the top level people review these information and data and then they
evaluates the financial and management soundness of the businesses.
 Policy makers: The people who forms the policies or rules for the organisation also needs
the management accounting information. In this actual information and the statistical data
is been analysed and evaluated by these people so that they can make the objectives and
goals for the company in a appropriate manner.

TASK 2
Management accounting system and its internal systems
Management accounting consists of company's internal financial information which been
used by the managers so that they can make the good future decisions about the company. These
management accounting information can only be used by the internal team of the company, this
factor makes management accounting system very much different from the financial accounting.
Through the information or statistical data provided to the internal team, they analyse and
evaluate it so that they can make the future decision accordingly. Through these information or
data the organisation can better control there operations, make the appropriate plans and keep the
actions or work at the desired directions. Management accounting system involves many other
systems like:
Job costing systems: In job accounting system the organisation estimates the cost which is
related to a specific work or job. In this the cost get accumulate which can get incurred in the
performance of a particular activity. This would help the organisation in knowing the cost which
this particular activity would going to take. For example, in the case with Dell company, the
organisation can estimate the cost for the activities which they are conducting. The separate cost
can get incurred for production activity (Botes and Sharma, 2017). In that cost the organisation
can evaluate the total cost which the company is incurring in the production activity. If the
company believes that too much cost is getting in their production department or activity, then
they will analyse the department activities and take out the areas where they can reduce the costs.
Inventory management systems: In inventory management system, there is a full record about
inventories about the stocks available with the company. It is the combination of technology in
which the organisation stores and saves the information about the inventories. Such technology is
very much useful for the organisation as it helps it having easy maintenance for the same. In the
company dell, the inventory management system has been used in maintaining the stocks or the
inventory which the company has with itself. These information may include the number for
finished goods, unfinished goods, raw materials which the company has, orders in process in the
like. Through this information the company can make the corrective decisions about the
inventory. This would also enable the company, Dell, in taking the corrective measures and
actions in regard with inventories. Through the adoption of inventory system the company, Dell,
can forecast about their inventory, it will also help in making the better decisions about the

inventories, it will increases the transparency into the operations which would increase the
reliability. Apart from this, the inventory management system also helps the Dell company in
maintaining a good relationship with suppliers, vendors, other partners and so on. Through this
system the organisation can easily have a track upon their inventories, suppliers, deliveries and
the like. The company from this can keep an record about where the product has been delivered
and at what time. This will reduce the chances for dislocating or lost of a product. Inventory
management system would also enable the company in satisfying the needs for the customers in
a more effective manner by providing the products to them at time and having the proper
availability of the same.
Price optimisation system: The price optimisation system is the mathematical program which
analyse the demand of the customers at various prices. It has been said that the demand of the
commodity increases when the price for the same gets decrease, it theory applies to normal
goods. This system enables the organisation in predicting the demand into the targeted market
when the company would be setting a specified price for the product. As in the case with Dell,
the company in predicting the demand for their products they they sells their products at a
specified prices (Järvinen, 2016). This technique is very helpful for the company as it enables the
company in tailoring its price or the cost for the offered product according to the targeted group
or customers. In this system the Dell company makes the correct decisions regrading the prices
for the product which they are offering to their customers.
TASK 3
Use of management accounting reporting
Organisation has various types of accounting reporting and some of them are as follows:
Budget report: The budget report is the report through which the actual performance is
compared with the budget which is set as projections. These budget help in assuring that the
present performance or the actions are going in relation with the projected budget. These budgets
are prepared so that the organisation can make the assumptions about the resources which they
would be needing during the project or financial year. These reports are related with the
financials of the organisation, it can be possible for them that the projected assumptions can get
differ from the actual performance (Lachmann, Trapp and Trapp, 2017). But the company should

try to bring up their operations within that specific budget set. This also enable the organisation
in reviewing the cost. The budget report has these following four things and these are as:
Budget: These refers to the budget in which prepared by the organisation at the starting of the
period. In this the company by taking the past trends and current objectives projects the budget
for this particular period.
Actual: The this actual factor the business puts the actual cost which it has incurred from its
operations.
Over budget: In this over budget column, the difference between the budget and actual budget is
been specified. How much amount the actual budget is greater than the specified budgets.
Percentage of budget: This column will tell about the how much percentage the budgets has
been utilised.
Every department prepare its own budgets according to the activities they are performing. Then
these budgets get presented later to the top level management and then get discussed.
Account receivables: Account receivables refers to the amount of invoices which the
organisation has not received from the customers. These are the amount for which the customers
are yet to pay (Leotta, Rizza and Ruggeri, 2017). The account receivables are shown at the asset
side for the balance sheet. These are taken as an asset as its amount is owned by the company
itself. These come into the category of current assets as they converts in cash within a year and
so. They are the legally forcible claims which the company can take from the customers. The
company's accountant keeps the record for the amount which are related with account
receivables. These receivables also increases the company's liquidity which is very much
beneficial for the company to meet the demand for cash.
Job cost report: The job cost report is the report which is concerning about the cost about which
has incurred in performing a particular job. The organisation has to perform all the activities and
to perform the activities, the organisation incurred the cost for performing it. The job cost report
helps the company in ascertaining the cost which has spend in performing a particular task. In
this report the organisation can watch the status about how much amount has been spent and how
much has been taken as a the budget. Through this the company has ascertain and compare the
cost for performing the activity. If the cost for performing the activity is above the stated budget
than the controlling actions must be taken by the company and bring the cost to a projected
amount.

Inventory report: In this report the organisation prepares the report about the inventory which
they have with them. The report tell the department about the current status with regard to
inventory. So that they can take the decisions making accordingly. As in the case with Dell
company the organisation through the inventory report would get to know about the transaction
which has been done yet by the company, the amount of inventory which has been stored into the
warehouse, the goods or products that are in work in progress category and so on (Malina, 2017).
From this the company can analyse the area or activity which is over loading and which has
shortages.
The company uses all these budgets into their structures or processes. Dell performs the
inventory budget to analyse the activities related to inventories, the job cost report in which the
dell company analyse the cost incurred by performing a particular job so and take the corrective
measures when the company thinks that the cost expenditure is greater than the projected amount
(Mokhtar and et. al., 2016). Dell company also maintains the account receivables in which they
sells the products to the customers in the view to receive the amount in the future.
TASK 4
Definition and calculations
Direct materials: Direct materials are the materials which are brought by the company to
make or complete their finished product. The Materials which have been brought by the
company does not used into the production process, rather it directly gets attached to the main
project to finish the actual product. All these are the tangible products which the company
brought up from the other company or party and then they attached or use it in making the
finished product. Dell company purchases the RAM and software from intell and microsoft, here
the company has buy the raw materials i.e. RAM and software to make a finished product which
is laptop (Nørreklit, 2017). The company goes for direct materials because they lack in
producing all these products or materials by themselves. Though purchasing the product or raw
material from other party adds up to the cost for company but a single company cannot produces
all the things or materials by itself.
Direct labour: It refers to the cost which is associated with the wages or salaries of the
labour that works for production department. The cost for the labour is directly added to the total

cost. If the work performed by an employee is nit related to the production activity then it would
be considered under the indirect cost head. Some companies calculate the cost through:
Hourly basis : In which the total hour a worker as work gets taken account and then cost is
calculated.
Days basis : In this the organisation calculates the cost for labour on the bases of days he has
worked (Nuhu, Baird and Appuhamilage, 2017).
Unit produced: In this the company calculates the cost for labour according to the unit he has
produced.
The company dell follows the day basis in which the organisation gives the wages or the
salaries to their employees on the basis of days they have worked.
Direct overhead: These are the cost which gets incurred during the process of
production such as electricity, space for carrying out the production activity, water, and the like.
All such costs do get adds up in the calculation of total costs. These cost are very much stable
and constant as they does not get change with any change into the volume of production
outcomes.
Fixed overhead: Fixed overheads are the costs which are stable and constant to the
company (Otley, 2016). There cost are very much stable irrespective to the level for production.
Some of these costs are rent, depreciation caused to the fixed assets, salaries to the production
managers, supervisors, amount specified as insurances, taxes and so on. These are the cost which
are fixed for the company. Dell company have to pay for these cost irrespective to the volume of
their production.
Product cost: The cost which get into the production of the product is known as Product
cost. The product costs include the cost for materials, labour costs, costs for factory overhead and
so on. The actual selling price of a product can only get ascertain after adding up all the cost
associated in producing one unit of product. After adding up all the costs, the actual selling price
of a product is ascertain. The after sales services which the company provides to the customers
also get included into the product cost. The product cost gets included into the financial
statements under the head of manufacturing overheads.
Period cost: They are the cost which are indirect in nature as they are not related to the
production activity (Qian, Hörisch and Schaltegger, 2018). They are shown in the income

statements of the company for that particular accounting period. Some of the examples may
include marketing expenses, selling expenses and etc.
Marginal costing: It refers to an extra cost incurred into the production of one more unit
of product (Quattrone, 2016).
Total cost of marginal:
Particulars Amount
Direct material 200000
Direct labor 150000
Variable overhead 60000
Marginal cost of production 410000
Per unit cost 410
Absorption costing: In this type of costing, the value for the inventory is taken at the
market or current value which it has into the market rather than according to its cost for
production.
Particulars Amount
Direct material 200000
Direct labor 150000
Variable overhead 60000
Fixed overhead 60000
Absorption cost of production 470000
Per unit cost 470
Income statement under absorption costing
Sales 960000
Less: cost of goods sold
(1000*470) 70000
Gross profit 890000
Less: Expenses
Selling 30000
Administration 40000
Distribution 25000
Net profit 795000

Income statement under marginal costing
Sales 960000
Less: Cost of goods sold
(1000*410) 410000
Contribution 550000
Less: Expenses
Selling 30000
Administration 40000
Distribution 25000
Net profit 455000
CONCLUSION
From the report presented above, the management accounting system and its import5nace
has been mentioned. The management accounting information are the information or data which
are only used by the internal sources or employees of the organisation, through these information
the organisation sets the future goals and takes the corrective decisions. The MAS are of various
types i.e. budgets, inventory management system, job costing, price optimisation system and so
on. The report also includes the explanation of some terms like direct costing, direct overhead,
marginal cost, absorption costing and so on. At last the calculation about the company's financial
soundness has been performed.

REFERENCES
Books and Journals
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accounting and control research. Journal of Management Accounting Research. 30(2).
pp.23-58.
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Pacific Accounting Review.
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Accounting, Auditing & Accountability Journal.
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accounting research—A longitudinal perspective over four decades. Management
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Management Accounting Research. 31. pp.118-122.
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