Management Accounting Report: Evaluation of TPG Processing System
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This report provides a detailed analysis of management accounting principles and their practical application within TPG Processing, a manufacturing company. It begins with an introduction to management accounting, differentiating it from financial accounting and emphasizing its role in internal decision-making. The report then explores the functions of management accounting, including planning, control, cost accounting, and decision-making. It delves into various management accounting systems such as cost accounting, inventory management, job costing, and price optimization, illustrating their use within TPG Processing. Furthermore, the report examines different types of management accounting reports, including budget reports, accounts receivable aging reports, and performance reports. It critically evaluates how management accounting is integrated within the organization and highlights the benefits of these systems, such as improved cost control and better decision-making. The report also covers cost analysis techniques and the advantages and disadvantages of budgetary control planning tools. It explores how management accounting can be used to address financial problems and lead an organization toward sustainable success. The report concludes by summarizing the key findings and emphasizing the importance of management accounting in modern business operations.
MANAGEMENT
ACCOUNTING
ACCOUNTING
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Table of Contents
PART A...........................................................................................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1 Management Accounting Explanation..............................................................................1
Roles Functions of Management accounting.........................................................................2
Management Accounting System...........................................................................................2
P2 Types Of Reports..............................................................................................................4
D1 Critical evaluation of how management accounting is integrated within the organization5
M1 Benefits of the system and their application....................................................................5
CONCLUSION................................................................................................................................6
PART B............................................................................................................................................6
INTRODUCTION...........................................................................................................................6
P3 Calculate cost using appropriate techniques of cost analysis............................................7
P4 Advantage and disadvantage of different types of planning tools of budgetary control.13
M3 Use of different planning tools and their application.....................................................17
P5 Organisation could use management accounting to respond to financial problem.........17
M4 Financial problems, management accounting can lead organisation to sustainable success
..............................................................................................................................................21
D3 Planning tools effectively respond to solving financial problems to lead organisation to
sustainable success...............................................................................................................21
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22
PART A...........................................................................................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1 Management Accounting Explanation..............................................................................1
Roles Functions of Management accounting.........................................................................2
Management Accounting System...........................................................................................2
P2 Types Of Reports..............................................................................................................4
D1 Critical evaluation of how management accounting is integrated within the organization5
M1 Benefits of the system and their application....................................................................5
CONCLUSION................................................................................................................................6
PART B............................................................................................................................................6
INTRODUCTION...........................................................................................................................6
P3 Calculate cost using appropriate techniques of cost analysis............................................7
P4 Advantage and disadvantage of different types of planning tools of budgetary control.13
M3 Use of different planning tools and their application.....................................................17
P5 Organisation could use management accounting to respond to financial problem.........17
M4 Financial problems, management accounting can lead organisation to sustainable success
..............................................................................................................................................21
D3 Planning tools effectively respond to solving financial problems to lead organisation to
sustainable success...............................................................................................................21
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22
PART A
INTRODUCTION
Management accounting is the process of preparing management reports and accounts
that provide authentic and relatable information on time (Saleem Salem Alzoubi, 2016). These
information presented in financial and statical way in front of managers which is helping to make
day to day and short term decisions. It is different from financial accounting because in
management accounting reports and accounts are presented in front of managers on weekly and
monthly basis while in financial accounting reports are presented to investors, creditors, clients
and managers to annually basis. To understand the concept of the report selected company TPG
Processing which is related to manufacturing sector. In the report consist of explanation of
management accounting and their role. Apart from report define elements of different types of
management accounting system and different methods of management accounting reporting.
Further, evaluation the benefits of system and integrated with organisational process.
MAIN BODY
P1 Management Accounting Explanation
As per the IMA (Institute of management accountants): The management accounting may
be defined as a kind of process which is related with the decision making, planning and
performance management system in the aspect of the financial reporting. The aim of doing so, is
to control the assist management in the formulation and implementation of the strategies.
(Cleary, 2015).
From the definition it has been understand that management accounting is continuous
process which can help to manage performance of company in effective manner.
As per the the Chartered Institute of Management Accountants (CIMA): The
management accounting can be defined as the process that involves measurement, accumulation,
preparation and communicating the information and data which is being used by the managers to
make suitable decisions (Suprianto and et.al, 2017).
As per the above definition it has been understand that in management accounting
information include different types information which can help to assess of performance.
1
INTRODUCTION
Management accounting is the process of preparing management reports and accounts
that provide authentic and relatable information on time (Saleem Salem Alzoubi, 2016). These
information presented in financial and statical way in front of managers which is helping to make
day to day and short term decisions. It is different from financial accounting because in
management accounting reports and accounts are presented in front of managers on weekly and
monthly basis while in financial accounting reports are presented to investors, creditors, clients
and managers to annually basis. To understand the concept of the report selected company TPG
Processing which is related to manufacturing sector. In the report consist of explanation of
management accounting and their role. Apart from report define elements of different types of
management accounting system and different methods of management accounting reporting.
Further, evaluation the benefits of system and integrated with organisational process.
MAIN BODY
P1 Management Accounting Explanation
As per the IMA (Institute of management accountants): The management accounting may
be defined as a kind of process which is related with the decision making, planning and
performance management system in the aspect of the financial reporting. The aim of doing so, is
to control the assist management in the formulation and implementation of the strategies.
(Cleary, 2015).
From the definition it has been understand that management accounting is continuous
process which can help to manage performance of company in effective manner.
As per the the Chartered Institute of Management Accountants (CIMA): The
management accounting can be defined as the process that involves measurement, accumulation,
preparation and communicating the information and data which is being used by the managers to
make suitable decisions (Suprianto and et.al, 2017).
As per the above definition it has been understand that in management accounting
information include different types information which can help to assess of performance.
1
Roles Functions of Management accounting
Planning – It is important function of management accounting which can help to provide
all required information and authentic data. For example – The management Accountant of TPG
has been planning about manufacturing which can help to manager regarding to short term
decision (Golyagina and Valuckas, 2016).
Control – In the management sense, it has been described as the process which is part of
management process. It is helping to managers to ensure about that resources to acquired and
used in effective manner as well as obtain goals of an organisation. For example – For
manufacturing process use by this function by TPG processing to control activities to manage
business in effective manner (Arnaboldi, Busco and Cuganesan, 2017) .
Cost accounting – The function of cost accounting to manage information of
management accounting regarding to cost of production by assessing the input costs of each step
of production. For example – TPG company can predict cost of different products which is
manufacturing in company (Florio and Leoni, 2017).
Decision Making – The main role and function of management accounting to provide all
necessary information to top management. It can help to take day to day and short term decision
in effective manner. For example – for investment purpose management of TPG analysis of all
financial information (Solovida and Latan, 2017).
Financial Management – The management accountant can arrange all data and
information which is related to financial condition. The management use financial information to
take decision without any difficulty. For example – The accountant of TPG prepare report in
statistical way and present in front of to management.
Auditing – Management accounting play role to analysis books of company and rectify in
appropriate manner. For example – On monthly basis TPG can appoint internal auditor to cross
verify their books (Bernon, Cullen and Gorst, 2016) .
Management Accounting System
Cost Accounting System – It is a accounting system that can that determine that a
company is doing and helps manager make decisions based on the costs of doing business. Cost
accounting system mainly used by manufactures to record production activities after applying
perceptual inventory system. The particular system coordinate with other department because
they are providing all appropriate information to evaluate cost. On the basis of these information
2
Planning – It is important function of management accounting which can help to provide
all required information and authentic data. For example – The management Accountant of TPG
has been planning about manufacturing which can help to manager regarding to short term
decision (Golyagina and Valuckas, 2016).
Control – In the management sense, it has been described as the process which is part of
management process. It is helping to managers to ensure about that resources to acquired and
used in effective manner as well as obtain goals of an organisation. For example – For
manufacturing process use by this function by TPG processing to control activities to manage
business in effective manner (Arnaboldi, Busco and Cuganesan, 2017) .
Cost accounting – The function of cost accounting to manage information of
management accounting regarding to cost of production by assessing the input costs of each step
of production. For example – TPG company can predict cost of different products which is
manufacturing in company (Florio and Leoni, 2017).
Decision Making – The main role and function of management accounting to provide all
necessary information to top management. It can help to take day to day and short term decision
in effective manner. For example – for investment purpose management of TPG analysis of all
financial information (Solovida and Latan, 2017).
Financial Management – The management accountant can arrange all data and
information which is related to financial condition. The management use financial information to
take decision without any difficulty. For example – The accountant of TPG prepare report in
statistical way and present in front of to management.
Auditing – Management accounting play role to analysis books of company and rectify in
appropriate manner. For example – On monthly basis TPG can appoint internal auditor to cross
verify their books (Bernon, Cullen and Gorst, 2016) .
Management Accounting System
Cost Accounting System – It is a accounting system that can that determine that a
company is doing and helps manager make decisions based on the costs of doing business. Cost
accounting system mainly used by manufactures to record production activities after applying
perceptual inventory system. The particular system coordinate with other department because
they are providing all appropriate information to evaluate cost. On the basis of these information
2
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set cost of different products and maintain purchase system and storage system. Through the
system recognise management problems and try to sort out it. For example – TPG Processing
follow the system to know flexibility and simplicity in products as well as cooperation with
several departments to gather all appropriate information.
Inventory Management System – It is considering as type of management accounting
system to manage inventory at each level of manufacturing process. There are supervising of
management of stock and non capitalized asset of business. It is depending on the company that
which method apply by company to manage their inventories, thee methods are LIFO (Last in
first out) , FIFO (First in first out) and AVOC. The TPG processing has been applied FIFO
method to manufacture products in order to use in sufficient manner. There are focusing on every
aspects like production to retail, warehousing to shipping and movements of the stock. For
example TPG company apply first in first out inventory system in order to manage stocks in
storage. The requirement of this system treat inventory as money, aware for regular stock to
understand how much inventory utilise for production process.
Job Costing System – In this system tracking record of manufacturing process while
prepare report of job costing. With the help of this system monitor of each activity and included
direct material, direct labour and overhead. In TPG has been applied particular system to identify
problem regarding to manufacturing process. They can take all detailed information to manage
all thing and produce products to know management things. For example – Through this report
TPG can determine cost of different aspects (Agrawal, 2018) . The requirement of this system
that It is categorised into different cost like direct material, direct labour and overhead expenses.
There are fixed cost and variable cost are identified and use to calculate of cost.
Price Optimisation System – The system has been used to control price of different
products and develop a effective structure which can set prices of their products. With the help of
this system analysis of market trends and know perception of people regarding to their products.
The manufacturing company TPG has been produced different types of products ans there is
need to set prices of their products. So company set price structure and analysis demand of their
product after that decide price of various products. For example – TPG has been produce
different types of products and for this need to set price structure so this system has been applied.
3
system recognise management problems and try to sort out it. For example – TPG Processing
follow the system to know flexibility and simplicity in products as well as cooperation with
several departments to gather all appropriate information.
Inventory Management System – It is considering as type of management accounting
system to manage inventory at each level of manufacturing process. There are supervising of
management of stock and non capitalized asset of business. It is depending on the company that
which method apply by company to manage their inventories, thee methods are LIFO (Last in
first out) , FIFO (First in first out) and AVOC. The TPG processing has been applied FIFO
method to manufacture products in order to use in sufficient manner. There are focusing on every
aspects like production to retail, warehousing to shipping and movements of the stock. For
example TPG company apply first in first out inventory system in order to manage stocks in
storage. The requirement of this system treat inventory as money, aware for regular stock to
understand how much inventory utilise for production process.
Job Costing System – In this system tracking record of manufacturing process while
prepare report of job costing. With the help of this system monitor of each activity and included
direct material, direct labour and overhead. In TPG has been applied particular system to identify
problem regarding to manufacturing process. They can take all detailed information to manage
all thing and produce products to know management things. For example – Through this report
TPG can determine cost of different aspects (Agrawal, 2018) . The requirement of this system
that It is categorised into different cost like direct material, direct labour and overhead expenses.
There are fixed cost and variable cost are identified and use to calculate of cost.
Price Optimisation System – The system has been used to control price of different
products and develop a effective structure which can set prices of their products. With the help of
this system analysis of market trends and know perception of people regarding to their products.
The manufacturing company TPG has been produced different types of products ans there is
need to set prices of their products. So company set price structure and analysis demand of their
product after that decide price of various products. For example – TPG has been produce
different types of products and for this need to set price structure so this system has been applied.
3
P2 Types Of Reports
Budget Reports – Budget managerial accounting reports plays significant role to
measure performance of the company. It is prepare by every organisation such as small
business, department wise and large organization. It is prepared by TPG processing to
predict their future income and expenses and analysis business activities of each
departments. TPG can try to achieve their goals and objectives. It can help to manager to
guide regarding to prepare plans and manage incomes and expenses to achieve goals and
objectives.
Account Receivable Agin Report – It is a critical report which can use to manage cash
flow in order to extend credit of customers for their business. There are most of the report
keep separate column for invoice and its presented as 30 days, 60 days and 90 days. With
the help of particular report identify problems regarding to collection process. In the
context to TPG processing identify those people who can not pay on time so for collect
payment on time prepare effective strategy (Commerford and et.al, 2016).
Cost Material Accounting Report – With the help of particular report compute the cost
of articles which is manufacturing. There are including raw material, labour and
overhead. These amounts has been categorised in produced products to realise cost of
various items versus their selling prices. In order to TPG identify cost of their material
after that analyse of market trends to its products and services.
Performance Report – The particular report has been developed to get review regarding
to individual employee and organizational performance in reference to specific
accounting period. These types of report mainly develop by large organization because
there is need to know about their employees skills. To evaluate the performance of
employees applied various indicator in order to provide rewards to their employees.
Job costing Report - In this report present expenses for specific project which has been
finance by companies. With the help of this report predict about revenues then match
with actual revenues after then analysis to know differences. The job costing report can
help to recognise higher earning process and focus on additional efforts rather than
wasting time and money. The particular report used by TPG to know correct areas an
track to progress of report.
4
Budget Reports – Budget managerial accounting reports plays significant role to
measure performance of the company. It is prepare by every organisation such as small
business, department wise and large organization. It is prepared by TPG processing to
predict their future income and expenses and analysis business activities of each
departments. TPG can try to achieve their goals and objectives. It can help to manager to
guide regarding to prepare plans and manage incomes and expenses to achieve goals and
objectives.
Account Receivable Agin Report – It is a critical report which can use to manage cash
flow in order to extend credit of customers for their business. There are most of the report
keep separate column for invoice and its presented as 30 days, 60 days and 90 days. With
the help of particular report identify problems regarding to collection process. In the
context to TPG processing identify those people who can not pay on time so for collect
payment on time prepare effective strategy (Commerford and et.al, 2016).
Cost Material Accounting Report – With the help of particular report compute the cost
of articles which is manufacturing. There are including raw material, labour and
overhead. These amounts has been categorised in produced products to realise cost of
various items versus their selling prices. In order to TPG identify cost of their material
after that analyse of market trends to its products and services.
Performance Report – The particular report has been developed to get review regarding
to individual employee and organizational performance in reference to specific
accounting period. These types of report mainly develop by large organization because
there is need to know about their employees skills. To evaluate the performance of
employees applied various indicator in order to provide rewards to their employees.
Job costing Report - In this report present expenses for specific project which has been
finance by companies. With the help of this report predict about revenues then match
with actual revenues after then analysis to know differences. The job costing report can
help to recognise higher earning process and focus on additional efforts rather than
wasting time and money. The particular report used by TPG to know correct areas an
track to progress of report.
4
Project Report – In the report defined all appropriate information regarding to project
which can handle by company. In the report record all detailed information regarding to
project. It will help to understand requirement and according to that prepare strategies.
Competitors Analysis Report – In competitive market need to analysis their competitors
so there is need to prepare report regarding to their strategies. When company want to get
competitive advantage that time track all information to their rivals and record in report.
It can help to prepare strategy in effective manner (van Helden, 2016).
Inventory & manufacturing Management report – In the report mentioned
information regarding to direct material, direct labour and variable overhead. These are
used in manufacturing to product as well as provide information of inventories. The
report defined that in the stage of manufacturing process how much material has been
used for product. In TPG track all record and provide to management to evaluate actual
cost and budgeted cost.
D1 Critical evaluation of how management accounting is integrated within the organization
Management accounting important part of every organisation and it can adopted by TPG
to manage business operations in effective manner. Management accounting systems and reports
are play significant role in organisational process due to smoothly running business activities.
These are related to various departments and show business activities to manage all result to
control process system. These reports present all required information which is related to internal
system of TPG and system manage issues which is origin in business during to manufacturing
process (Yang and Liu, 2017) .
M1 Benefits of the system and their application
The management accounting system has been applied by different organization in
appropriate manner and it can provide befits to TPG processing these are -
Cost Accounting System – The particular system has been applied by TPG processing in
order to know effectiveness of processes then use for appropriate modification. In the company
of TPG use cost accounting system to set and deduct the prices. The system can help to gather all
required information of different system and set purchase system, order system.
Inventory Management System – Through the system track all records of invention at
the time of manufacturing process. The company TPG processing apply particular system
5
which can handle by company. In the report record all detailed information regarding to
project. It will help to understand requirement and according to that prepare strategies.
Competitors Analysis Report – In competitive market need to analysis their competitors
so there is need to prepare report regarding to their strategies. When company want to get
competitive advantage that time track all information to their rivals and record in report.
It can help to prepare strategy in effective manner (van Helden, 2016).
Inventory & manufacturing Management report – In the report mentioned
information regarding to direct material, direct labour and variable overhead. These are
used in manufacturing to product as well as provide information of inventories. The
report defined that in the stage of manufacturing process how much material has been
used for product. In TPG track all record and provide to management to evaluate actual
cost and budgeted cost.
D1 Critical evaluation of how management accounting is integrated within the organization
Management accounting important part of every organisation and it can adopted by TPG
to manage business operations in effective manner. Management accounting systems and reports
are play significant role in organisational process due to smoothly running business activities.
These are related to various departments and show business activities to manage all result to
control process system. These reports present all required information which is related to internal
system of TPG and system manage issues which is origin in business during to manufacturing
process (Yang and Liu, 2017) .
M1 Benefits of the system and their application
The management accounting system has been applied by different organization in
appropriate manner and it can provide befits to TPG processing these are -
Cost Accounting System – The particular system has been applied by TPG processing in
order to know effectiveness of processes then use for appropriate modification. In the company
of TPG use cost accounting system to set and deduct the prices. The system can help to gather all
required information of different system and set purchase system, order system.
Inventory Management System – Through the system track all records of invention at
the time of manufacturing process. The company TPG processing apply particular system
5
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because in manufacturing process need to different types material at different stage. So for this
need to evaluate detailed information regarding to inventory.
Job Costing System – It is beneficial for company to predict cost of various types
products which is manufactured by company. TPG Processing has been adopted job costing
system to know about processing system and cost of assorted products. After then evaluate the
quality of products (Qian, Hörisch and Schaltegger, 2018) .
Price Optimisation System – The particular system can help to set price structure of their
products which is manufactured by company. TPG manufacturing several types products and
price of these products set on the basis of market analysis and help to generate much more profit.
CONCLUSION
Management accounting is important part of any organisation which can mange all
aspects in effective manner. Through management accounting prepare reports and books to
present financial information of company in front of top management and it can help to take
decision regarding to business. Management accounting consist of different types of system
which can maintain business activities and identify all appropriate information. The reports has
been provide all sufficient information then it will compare with actual information to know
actually differences.
PART B
INTRODUCTION
Management Accounting is the presentation of accounting information in order to
formulate the policies to followed by the management and assist its day to day activities. It will
provide help to management to conduct functions such as planning, organising, staffing,
directing and controlling (Dauth, Pronobis and Schmid, 2017). Through management accounting
analysis of internal business activities then presented information in front of top management
which can help in decision making process. To understand the concept of the report selected
company TPG Processing which is related to manufacturing sector. In the report consist of
different types of planning tools of budgetary control and its advantage and disadvantage. In
addition recognise financial problem through comparison with other company then sort out with
management accounting system and approach.
6
need to evaluate detailed information regarding to inventory.
Job Costing System – It is beneficial for company to predict cost of various types
products which is manufactured by company. TPG Processing has been adopted job costing
system to know about processing system and cost of assorted products. After then evaluate the
quality of products (Qian, Hörisch and Schaltegger, 2018) .
Price Optimisation System – The particular system can help to set price structure of their
products which is manufactured by company. TPG manufacturing several types products and
price of these products set on the basis of market analysis and help to generate much more profit.
CONCLUSION
Management accounting is important part of any organisation which can mange all
aspects in effective manner. Through management accounting prepare reports and books to
present financial information of company in front of top management and it can help to take
decision regarding to business. Management accounting consist of different types of system
which can maintain business activities and identify all appropriate information. The reports has
been provide all sufficient information then it will compare with actual information to know
actually differences.
PART B
INTRODUCTION
Management Accounting is the presentation of accounting information in order to
formulate the policies to followed by the management and assist its day to day activities. It will
provide help to management to conduct functions such as planning, organising, staffing,
directing and controlling (Dauth, Pronobis and Schmid, 2017). Through management accounting
analysis of internal business activities then presented information in front of top management
which can help in decision making process. To understand the concept of the report selected
company TPG Processing which is related to manufacturing sector. In the report consist of
different types of planning tools of budgetary control and its advantage and disadvantage. In
addition recognise financial problem through comparison with other company then sort out with
management accounting system and approach.
6
P3 Calculate cost using appropriate techniques of cost analysis
Marginal costing method (Year 1)
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 37000 70 2590000
Marginal Cost of sales
Opening Stock
Add – Variable production Cost
Direct Material 40100 12 481200
Direct Labour 40100 16 641600
Variable expenses 40100 20 802000
Total Variable Cost A 1924800
Less – Closing stock – end of year 1
B [opening stock units + Units
produced – units sold] 3100 48 148800
Marginal cost of sales (A-B) 1776000
Fixed indirect production cost 64000
Gross profit: (Sales – MCOS –
Fixed production cost ) 750000
Selling and distribution overheads 10000
Admin Overheads 15000 25000
Profit before interest & tax (PBIT) 725000
Interest expenses 1000
Profit before tax [PBIT – Interest] 724000
Tax @ 19% 137560
7
Marginal costing method (Year 1)
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 37000 70 2590000
Marginal Cost of sales
Opening Stock
Add – Variable production Cost
Direct Material 40100 12 481200
Direct Labour 40100 16 641600
Variable expenses 40100 20 802000
Total Variable Cost A 1924800
Less – Closing stock – end of year 1
B [opening stock units + Units
produced – units sold] 3100 48 148800
Marginal cost of sales (A-B) 1776000
Fixed indirect production cost 64000
Gross profit: (Sales – MCOS –
Fixed production cost ) 750000
Selling and distribution overheads 10000
Admin Overheads 15000 25000
Profit before interest & tax (PBIT) 725000
Interest expenses 1000
Profit before tax [PBIT – Interest] 724000
Tax @ 19% 137560
7
Net profit: Profit before tax – tax 586440
Marginal Costing method (Year 2)
Marginal Costing method (Year 3)
8
Marginal Costing method (Year 2)
Marginal Costing method (Year 3)
8
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Absorption Costing method (Year 1)
9
9
Absorption Costing Method (Year 2)
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 41000 70 2870000
Absorption Cost of sales
Opening Stock 3100 48 148800
Add – Absorption production
Cost
Direct Material 48100 12 577200
Direct Labour 48100 16 769600
Variable expenses 48100 20 962000
Fixed indirect production cost 64000
10
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 41000 70 2870000
Absorption Cost of sales
Opening Stock 3100 48 148800
Add – Absorption production
Cost
Direct Material 48100 12 577200
Direct Labour 48100 16 769600
Variable expenses 48100 20 962000
Fixed indirect production cost 64000
10
Total Variable Cost A 2521600
Less – Closing stock – end of
year 1 B [opening stock units +
Units produced – units sold] 10200 48 489600
Absorption cost of sales (A-B) 2032000
Gross profit: (Sales – ACOS) 838000
Selling and distribution
overheads 10500
Admin Overheads 15000
Profit before interest & tax
(PBIT) 812500
Interest expenses 1250
Profit before tax [PBIT –
Interest] 811250
Tax @ 19% 154137.5
Net profit: Profit before tax –
tax 657112.5
Absorption Costing Method (Year 3)
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 61000 70 4270000
Absorption Cost of sales
Opening Stock 10200 48 489600
Add – Absorption production
Cost
11
Less – Closing stock – end of
year 1 B [opening stock units +
Units produced – units sold] 10200 48 489600
Absorption cost of sales (A-B) 2032000
Gross profit: (Sales – ACOS) 838000
Selling and distribution
overheads 10500
Admin Overheads 15000
Profit before interest & tax
(PBIT) 812500
Interest expenses 1250
Profit before tax [PBIT –
Interest] 811250
Tax @ 19% 154137.5
Net profit: Profit before tax –
tax 657112.5
Absorption Costing Method (Year 3)
Item
Number of
units £ P.U. Amount (£) Amount (£)
Sales 61000 70 4270000
Absorption Cost of sales
Opening Stock 10200 48 489600
Add – Absorption production
Cost
11
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Direct Material 51100 12 613200
Direct Labour 51100 16 817600
Variable expenses 51100 20 1022000
Fixed indirect production cost 64000
Total Variable Cost A 3006400
Less – Closing stock – end of
year 1 B [opening stock units +
Units produced – units sold] 300 48 14400
Absorption cost of sales (A-B) 2992000
Gross profit: (Sales – ACOS) 1278000
Selling and distribution
overheads 10500
Admin Overheads 15000
Profit before interest & tax
(PBIT) 1252500
Interest expenses 1250
Profit before tax [PBIT –
Interest] 1251250
Tax @ 19% 237737.5
Net profit: Profit before tax –
tax 1013512.5
Difference between the marginal and absorption costing:
Basis Marginal costing Absorption costing
Meaning An effective decision making tool
which is made for ascertaining total
cost which is meant for production
Apportionment of the total cost to a
cost centre in order to determine the
total cost of the production is known
12
Direct Labour 51100 16 817600
Variable expenses 51100 20 1022000
Fixed indirect production cost 64000
Total Variable Cost A 3006400
Less – Closing stock – end of
year 1 B [opening stock units +
Units produced – units sold] 300 48 14400
Absorption cost of sales (A-B) 2992000
Gross profit: (Sales – ACOS) 1278000
Selling and distribution
overheads 10500
Admin Overheads 15000
Profit before interest & tax
(PBIT) 1252500
Interest expenses 1250
Profit before tax [PBIT –
Interest] 1251250
Tax @ 19% 237737.5
Net profit: Profit before tax –
tax 1013512.5
Difference between the marginal and absorption costing:
Basis Marginal costing Absorption costing
Meaning An effective decision making tool
which is made for ascertaining total
cost which is meant for production
Apportionment of the total cost to a
cost centre in order to determine the
total cost of the production is known
12
process of a business firm. In this,
current status of the cost is used to be
taken care.
as absorption costing.
Cost
recognition
A variable cost is considered as a
product cost, while the fixed cost is
majorly considered as period costs.
In this type of cost, both fixed and
variable cost is considered as product
cost. In this, cost is considered as
nominal to ascertain products quality
for longer time period.
Cost per unit Variances in the opening and closing
stock does not influences cost per units
of the output.
Variances in the opening as well as
closing stock affects the cost per units.
Cost data Presented to the outlines the total
contribution of each products.
Presents into the conventional manner.
Use of the marginal costing: Marginal costing is the method of costing and decision
making which is used for internal reporting in which only marginal cost are being charged to the
cost units and also fixed costs are also treated as lump-sum. Marginal cost is used in business to
estimates total cost the business on each units produced and also incur on its. Influences here will
be given to ascertaining using techniques such as sum of the variables and each add on in cosy
will be subtracted by this.
The major reason for differences in profit/loss is increasing flux in cost components as
well as increases in expenses onto prominent basis.
Role of financial reporting is to communicate financial position of the business on larger
basis. Using the financial reporting, information on expenses as well as cost of the firm is used to
be taken care. This would assists in managing profitability of a businesses at the proactive basis.
As, helps in setting standard to communicates expenses or profits on larger basis. Hence, role of
financial reporting is centred to the purposes of accomplishing correct figures of the business
performances.
13
current status of the cost is used to be
taken care.
as absorption costing.
Cost
recognition
A variable cost is considered as a
product cost, while the fixed cost is
majorly considered as period costs.
In this type of cost, both fixed and
variable cost is considered as product
cost. In this, cost is considered as
nominal to ascertain products quality
for longer time period.
Cost per unit Variances in the opening and closing
stock does not influences cost per units
of the output.
Variances in the opening as well as
closing stock affects the cost per units.
Cost data Presented to the outlines the total
contribution of each products.
Presents into the conventional manner.
Use of the marginal costing: Marginal costing is the method of costing and decision
making which is used for internal reporting in which only marginal cost are being charged to the
cost units and also fixed costs are also treated as lump-sum. Marginal cost is used in business to
estimates total cost the business on each units produced and also incur on its. Influences here will
be given to ascertaining using techniques such as sum of the variables and each add on in cosy
will be subtracted by this.
The major reason for differences in profit/loss is increasing flux in cost components as
well as increases in expenses onto prominent basis.
Role of financial reporting is to communicate financial position of the business on larger
basis. Using the financial reporting, information on expenses as well as cost of the firm is used to
be taken care. This would assists in managing profitability of a businesses at the proactive basis.
As, helps in setting standard to communicates expenses or profits on larger basis. Hence, role of
financial reporting is centred to the purposes of accomplishing correct figures of the business
performances.
13
P4 Advantage and disadvantage of different types of planning tools of budgetary control
Budget – The budget is defined as a precise statement, representing a financial estimate
of income and expenditure of the government for specific period of time. It can help to know
financial result and financial position of the company in future. The purpose of preparing
budgets to planning and measure of performance where include spending for fixed assets, rolling
out new products, provide training to employees, setting up bonus and controlling business
activities (Definition of Budget. 2019).
Budgetary Control – It states that how well a manager can arrange budgets to monitor
and control costs and operations in particular accounting period. Budgetary control consider as
process for manager who can estimated amounts in budget then compare actual budget with
estimate amount to measure performance.
Preparing of Budget – Budget is systematic process where take past and present data as
a base. To prepare a budget TPG processing system takes steps such as – In the first step analysis
of all department of an organisation then review the issues that can hinder performance and
impact growth. Budgets are prepared on monthly and annually basis where determined each type
cost like fixed and variable costs. In next step identified to total income and expenses for specific
period of time then recorder amount compare with budgeted amount. In order to make
trustworthy future budgets analysis are made to fix the issues and drawbacks (Mizikovsky and
et.al, 2016).
Fixed Budget
The particular budget remain fixed it can not change their financial plan during to
specific accounting period. In reference to TPG processing applied the budget to experience of
substantial variation from their expected activity level.
Advantage
A fixed budget allows to measure performance of company in reference to short and long
term period of time. With the help of fixed budget TPG processing can control their cost.
Disadvantage
The disadvantage of this budget that lack of flexibility so when generate any situation
that time can not change amount of expenditure and income.
Lack of expertise who can predict cost accurate so no need to change in future.
14
Budget – The budget is defined as a precise statement, representing a financial estimate
of income and expenditure of the government for specific period of time. It can help to know
financial result and financial position of the company in future. The purpose of preparing
budgets to planning and measure of performance where include spending for fixed assets, rolling
out new products, provide training to employees, setting up bonus and controlling business
activities (Definition of Budget. 2019).
Budgetary Control – It states that how well a manager can arrange budgets to monitor
and control costs and operations in particular accounting period. Budgetary control consider as
process for manager who can estimated amounts in budget then compare actual budget with
estimate amount to measure performance.
Preparing of Budget – Budget is systematic process where take past and present data as
a base. To prepare a budget TPG processing system takes steps such as – In the first step analysis
of all department of an organisation then review the issues that can hinder performance and
impact growth. Budgets are prepared on monthly and annually basis where determined each type
cost like fixed and variable costs. In next step identified to total income and expenses for specific
period of time then recorder amount compare with budgeted amount. In order to make
trustworthy future budgets analysis are made to fix the issues and drawbacks (Mizikovsky and
et.al, 2016).
Fixed Budget
The particular budget remain fixed it can not change their financial plan during to
specific accounting period. In reference to TPG processing applied the budget to experience of
substantial variation from their expected activity level.
Advantage
A fixed budget allows to measure performance of company in reference to short and long
term period of time. With the help of fixed budget TPG processing can control their cost.
Disadvantage
The disadvantage of this budget that lack of flexibility so when generate any situation
that time can not change amount of expenditure and income.
Lack of expertise who can predict cost accurate so no need to change in future.
14
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Flexible budget
The particular budget are helpful in modifying the actual budgets of company due to
some emergency or uncertainty that unable to work according to old budget. In TPG processing
system this budget applied to record new expenditure that can be generated by any future
situation and help to identify ways of increase revenues.
Advantage
It is prepared with latest trends of market so it will help to manager to control business
activities in effective manner (Elmassri, Harris and Carter, 2016). With the help of this budget TPG processing make possible adjustments and as per the
changing situation in revenues and expenditure will be recorded.
Disadvantage
To prepare this type budget need to trained labour and complex in nature.
There is required to much more time, extra efforts so as a result create lacks of discipline.
Zero Based budget
The particular budget recognise as management planning tool which can use to prepare
new budget where take zero as base. In TPG processing this budget is helpful to predict the
entire cost that will use in valuable goods that is incurred depending upon the actual expenses in
fact of old data.
Advantage
As zero base it is analysing each department from starting so it will provide efficiency
and accuracy in result. ZBB can create better communication and coordination in between different departments
and help in decision making process.
Disadvantage
The major disadvantage of this budget that to prepare of this need to skilled and
experience people (Coyne, Coyne and Walker, 2016) .
To prepare of the budget need to analysis from starting which takes much more timing.
Behaviour Implication of budgets
Budget is consider as controlling tool where show implication of different behaviour
issues which is related to manager. If a manager dysfunction so budgetary slack. Different
behavioural issues pretend as more apparent due compare performance actual with standard.
15
The particular budget are helpful in modifying the actual budgets of company due to
some emergency or uncertainty that unable to work according to old budget. In TPG processing
system this budget applied to record new expenditure that can be generated by any future
situation and help to identify ways of increase revenues.
Advantage
It is prepared with latest trends of market so it will help to manager to control business
activities in effective manner (Elmassri, Harris and Carter, 2016). With the help of this budget TPG processing make possible adjustments and as per the
changing situation in revenues and expenditure will be recorded.
Disadvantage
To prepare this type budget need to trained labour and complex in nature.
There is required to much more time, extra efforts so as a result create lacks of discipline.
Zero Based budget
The particular budget recognise as management planning tool which can use to prepare
new budget where take zero as base. In TPG processing this budget is helpful to predict the
entire cost that will use in valuable goods that is incurred depending upon the actual expenses in
fact of old data.
Advantage
As zero base it is analysing each department from starting so it will provide efficiency
and accuracy in result. ZBB can create better communication and coordination in between different departments
and help in decision making process.
Disadvantage
The major disadvantage of this budget that to prepare of this need to skilled and
experience people (Coyne, Coyne and Walker, 2016) .
To prepare of the budget need to analysis from starting which takes much more timing.
Behaviour Implication of budgets
Budget is consider as controlling tool where show implication of different behaviour
issues which is related to manager. If a manager dysfunction so budgetary slack. Different
behavioural issues pretend as more apparent due compare performance actual with standard.
15
There are consider different behaviour such as Dysfunctional, Participating, Budgetary slack and
top management support. These are affect to budget making process.
Pricing
The pricing strategies of any company depend on the market activities such as market
activities favour of the company so they can set high prices other wise set low. It can base on the
competitors because if they set high price to compete them set high price otherwise not.
Competitors Determine their prices- A business can set effective pricing strategy which
can help to gain profitability and sold more units in overall market share. Price is one of thing
that a consumer identify about a product then decide factors to make pricing strategies. To
determine prices apply skimming pricing strategies which can help to know other competitors
price.
Supply and demand Consideration- In the market demand high of the product of TPG
processing that time supply their product on time so management accounting maintain relation
between both factors. When demand is low so supply will be low so in supply and demand have
positive relation. Through management accounting arrange relation and different between
demand and supply.
Common Costing System
Actual costing is system of common costing where record amount on the basis of
products which include actual material, actual labour and overhead. In Normal costing method
use to know derivation of cost use in appropriate manner. The elements used for the normal
costing such as actual cost of labour and standard. In standard costing system use as planning
tool which can help to planning budgets, managing and controlling costs as well as analysis of
cost management performance. In reference to TPG processing can apply standard costing
system to prepare budget in effective manner and control cost to generate more profit (Cools,
Stouthuysen and Van den Abbeele, 2017) .
Cost system of any company different from other companies because they apply different
system to prepare structure and control cost in effective manner. There are considering cost
activity such as
Job costing Batch Costing Process Costing Contract costing
job costing system
help to know
Batch costing is kind
of order costing and
Process costing term
related to cost
It is tracking cost
which is connected to
16
top management support. These are affect to budget making process.
Pricing
The pricing strategies of any company depend on the market activities such as market
activities favour of the company so they can set high prices other wise set low. It can base on the
competitors because if they set high price to compete them set high price otherwise not.
Competitors Determine their prices- A business can set effective pricing strategy which
can help to gain profitability and sold more units in overall market share. Price is one of thing
that a consumer identify about a product then decide factors to make pricing strategies. To
determine prices apply skimming pricing strategies which can help to know other competitors
price.
Supply and demand Consideration- In the market demand high of the product of TPG
processing that time supply their product on time so management accounting maintain relation
between both factors. When demand is low so supply will be low so in supply and demand have
positive relation. Through management accounting arrange relation and different between
demand and supply.
Common Costing System
Actual costing is system of common costing where record amount on the basis of
products which include actual material, actual labour and overhead. In Normal costing method
use to know derivation of cost use in appropriate manner. The elements used for the normal
costing such as actual cost of labour and standard. In standard costing system use as planning
tool which can help to planning budgets, managing and controlling costs as well as analysis of
cost management performance. In reference to TPG processing can apply standard costing
system to prepare budget in effective manner and control cost to generate more profit (Cools,
Stouthuysen and Van den Abbeele, 2017) .
Cost system of any company different from other companies because they apply different
system to prepare structure and control cost in effective manner. There are considering cost
activity such as
Job costing Batch Costing Process Costing Contract costing
job costing system
help to know
Batch costing is kind
of order costing and
Process costing term
related to cost
It is tracking cost
which is connected to
16
manufacturing cost in
systematic manner like
direct material, direct
labour and overhead to
forecast real value.
similar to job costing
where each units
recognised as their
batch.
accounting where
defined on method of
costing. It is used to
assign manufactured
cost.
particular contact of a
customer.
Strategic Planning
It is prepared to analysing of internal and external environment then develop strategic
planning regarding to financial position of TPG processing (Brewer, Garrison and Noreen,
2015). There are applying PEST analysis to know external environment regarding to company -
Political – There are considering of government tax policies, new rules and regulation
which is created by UK government regarding to manufacturing industry.
Economical – In this section includes interest rates which is back bone and holds country
together. In the manufacturing industry it depends on the profit from its international
branches.
Social – To connect society need to communicate and know population growth and
conduct wireless society.
Technological – In this section consist of new technology and innovation which is
related to production.
For internal analysis of TPG processing conduct SWOT analysis -
Strength – The strength of TPG processing that it is stable and demand for manufacturing
trends. In present time it is highly effectively and capability to maximise the productivity
as well as profitability.
Weakness – It built non essential goods so it will show high competition in market and
little room growth of TPG processing.
Opportunities - Get opportunity in global market and capability to become a stable
business designation.
Threat – In present time largest manufacturing industry low wage high productivity
nation (Sledgianowski, Gomaa and Tan, 2017) .
17
systematic manner like
direct material, direct
labour and overhead to
forecast real value.
similar to job costing
where each units
recognised as their
batch.
accounting where
defined on method of
costing. It is used to
assign manufactured
cost.
particular contact of a
customer.
Strategic Planning
It is prepared to analysing of internal and external environment then develop strategic
planning regarding to financial position of TPG processing (Brewer, Garrison and Noreen,
2015). There are applying PEST analysis to know external environment regarding to company -
Political – There are considering of government tax policies, new rules and regulation
which is created by UK government regarding to manufacturing industry.
Economical – In this section includes interest rates which is back bone and holds country
together. In the manufacturing industry it depends on the profit from its international
branches.
Social – To connect society need to communicate and know population growth and
conduct wireless society.
Technological – In this section consist of new technology and innovation which is
related to production.
For internal analysis of TPG processing conduct SWOT analysis -
Strength – The strength of TPG processing that it is stable and demand for manufacturing
trends. In present time it is highly effectively and capability to maximise the productivity
as well as profitability.
Weakness – It built non essential goods so it will show high competition in market and
little room growth of TPG processing.
Opportunities - Get opportunity in global market and capability to become a stable
business designation.
Threat – In present time largest manufacturing industry low wage high productivity
nation (Sledgianowski, Gomaa and Tan, 2017) .
17
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M3 Use of different planning tools and their application
To manage budgetary control there is require to apply different types of planning tools
which can help to manage business activities. Flexible budget can use to apply in future situation
that time modify actual budget and recognise actual income and expenditure of company. Fixed
budget can use to know actual long time period objectives. Zero based budgeting can help to
strength and weakness of an organisation and reduce to weakness to make effective.
P5 Organisation could use management accounting to respond to financial problem
In present time ever company face various types of financial problems which can affect
to bushiness operations and functions. These issues are based on the different situation and TPG
processing can not able to handle so as a result come out their limitations like they are not to
generate enough funds, increase production and satisfy to employees. There are mentioned some
financial problem which can face by TPG progressing -
Special order – Many times customer demands for extra units so as a result it will affect
to overall profitability and it will increase day by day. In case, if management take special order
and take decision to produce goods in particular period of time so it will affect to employees.
They are not happy with management decision and it will reduce to customer base as well as
provide advantage to competitors.
Lack of money management – The particular financial problem can influence to business
activities in effective manner. If company can not manage their money so funds will be
decreased and for management need to skilled person in proper manner. There is more than
spending on several activity of promotion which is not able to increase sales so there is required
to skilled and experience person who can manage things in effective manner.
In order to analysis of various financial problem in TPG Processing so there are applying
management accounting system as well as tool to supply the best results. Basic accounting tool
can support to business and provide solution of related financial problem ((Cattarino and et.al.,
2016) .
KPI – Key performance indicator can use analysis financial performance in financial and
non financial way. It can observe overall performance of company and take valuable decision to
increase profitability. Thus, performance indicator can identify problem regarding to particular
project that related to whole expenses and total return from investment. In reference to TPG
18
To manage budgetary control there is require to apply different types of planning tools
which can help to manage business activities. Flexible budget can use to apply in future situation
that time modify actual budget and recognise actual income and expenditure of company. Fixed
budget can use to know actual long time period objectives. Zero based budgeting can help to
strength and weakness of an organisation and reduce to weakness to make effective.
P5 Organisation could use management accounting to respond to financial problem
In present time ever company face various types of financial problems which can affect
to bushiness operations and functions. These issues are based on the different situation and TPG
processing can not able to handle so as a result come out their limitations like they are not to
generate enough funds, increase production and satisfy to employees. There are mentioned some
financial problem which can face by TPG progressing -
Special order – Many times customer demands for extra units so as a result it will affect
to overall profitability and it will increase day by day. In case, if management take special order
and take decision to produce goods in particular period of time so it will affect to employees.
They are not happy with management decision and it will reduce to customer base as well as
provide advantage to competitors.
Lack of money management – The particular financial problem can influence to business
activities in effective manner. If company can not manage their money so funds will be
decreased and for management need to skilled person in proper manner. There is more than
spending on several activity of promotion which is not able to increase sales so there is required
to skilled and experience person who can manage things in effective manner.
In order to analysis of various financial problem in TPG Processing so there are applying
management accounting system as well as tool to supply the best results. Basic accounting tool
can support to business and provide solution of related financial problem ((Cattarino and et.al.,
2016) .
KPI – Key performance indicator can use analysis financial performance in financial and
non financial way. It can observe overall performance of company and take valuable decision to
increase profitability. Thus, performance indicator can identify problem regarding to particular
project that related to whole expenses and total return from investment. In reference to TPG
18
processing, there are applying KPI to know about financial problem which is related to lack of
money management.
Benchmarking – It is management tool which is used to measure performance of
company to identify financial problem (Ji, 2017). Benchmarking can support to fix standards and
help to measure performance of the company regarding to their competition. The management
tool can use in TPG processing to sort out the issues of special order because to maintain
business there is required to business operation. It is helpful to get possible result in future.
Financial Governance – The particular management tool can use to sort out financial
problem in effective manner. There are financial governance described as the best management
tool because it provides best solution regarding to any financial problem which can faced by
company. It will help to maintain performance of company and collect useful information to
control and arrange financial resources and workforce. In reference to TPG processing can solve
the problem of lack of money management through record each transaction and control to misuse
of money. It can reduce to mismanagement of money and increase profitability of an enterprises.
To manufacturer special orders to recruit skilled workforce in order to manage orders and
provide delivery on time.
Financial governance can use to monitor strategy of an organisation because it provides
feedback regarding to different strategy. When in company recognise any financial problem that
time it will guide how to use these strategy in effective manner (Parker and Fleischman, 2017) .
Comparison between Marks & Spencer and Tesco plc
Marks & Spencer Tesco Plc
The company merchandise into cloths, food
products. It can face problem of pricing which
is related to financial problem. It is finding that
consumer can not happy with pricing policies
of company.
In the company recognised many financial
problem like special order and lack of money
management. It is creating when company did
not focus on money management. They do not
record record every transactions in the
accounting books.
In reference to satisfy to customer there is
required to sort out of particular financial
problem in effective manner. So there are
To manage these financial problem there is
need to apply management accounting system
like inventory management system to fulfil the
19
money management.
Benchmarking – It is management tool which is used to measure performance of
company to identify financial problem (Ji, 2017). Benchmarking can support to fix standards and
help to measure performance of the company regarding to their competition. The management
tool can use in TPG processing to sort out the issues of special order because to maintain
business there is required to business operation. It is helpful to get possible result in future.
Financial Governance – The particular management tool can use to sort out financial
problem in effective manner. There are financial governance described as the best management
tool because it provides best solution regarding to any financial problem which can faced by
company. It will help to maintain performance of company and collect useful information to
control and arrange financial resources and workforce. In reference to TPG processing can solve
the problem of lack of money management through record each transaction and control to misuse
of money. It can reduce to mismanagement of money and increase profitability of an enterprises.
To manufacturer special orders to recruit skilled workforce in order to manage orders and
provide delivery on time.
Financial governance can use to monitor strategy of an organisation because it provides
feedback regarding to different strategy. When in company recognise any financial problem that
time it will guide how to use these strategy in effective manner (Parker and Fleischman, 2017) .
Comparison between Marks & Spencer and Tesco plc
Marks & Spencer Tesco Plc
The company merchandise into cloths, food
products. It can face problem of pricing which
is related to financial problem. It is finding that
consumer can not happy with pricing policies
of company.
In the company recognised many financial
problem like special order and lack of money
management. It is creating when company did
not focus on money management. They do not
record record every transactions in the
accounting books.
In reference to satisfy to customer there is
required to sort out of particular financial
problem in effective manner. So there are
To manage these financial problem there is
need to apply management accounting system
like inventory management system to fulfil the
19
applied price optimization system which can
help to prepare pricing strategies.
demand of clients.
Management Accounting Skill sets
Characteristics of effective management accountant
A management accountant can effective manage all business operations and record daily
transaction to analysis performance of company. An accountant need to broad variety of skills
and characteristics in order to get success. It is part of soft skills and tackle situation of
companies. So there are defined different characteristics of management accountant -
Good oral and written communication skills – A accountant gave to skill of good
listening and communication with clients. The can provide all accounting books in
effective manner in front to top management (Cooper, 2017).
Accuracy and an eye for detail – When record transaction in book that time mention all
reason and date of spending money so it will help to remember transaction.
Excellent analytical and numerical abilities – They have abilities to understand complex
transaction easily and compute transaction easily.
Ability to work as a team - Accountant can work as team because a single person can not
collect all appropriate information regarding to their business so need to communicate
with all departments.
Skills be used to prevent and deal with problems
These skills can use to prevent and tackle to problems in various situation because
management accountant can work for the company as important employee. The skills use to
record data in effective manner and apply on the problems because they can find out solution
regarding their problems. Lack of money management can solve through excellent analytical and
numerical activities where identify every transaction and on time record in accounting books.
With the help of these skills company gain more profitability and productivity (Sohn, 2016) .
Effective Strategies and system
Strategies Procurement of fund – When company procure their fund that time need to show all
reports regarding to funds and on right time because it can use to financial position. There
20
help to prepare pricing strategies.
demand of clients.
Management Accounting Skill sets
Characteristics of effective management accountant
A management accountant can effective manage all business operations and record daily
transaction to analysis performance of company. An accountant need to broad variety of skills
and characteristics in order to get success. It is part of soft skills and tackle situation of
companies. So there are defined different characteristics of management accountant -
Good oral and written communication skills – A accountant gave to skill of good
listening and communication with clients. The can provide all accounting books in
effective manner in front to top management (Cooper, 2017).
Accuracy and an eye for detail – When record transaction in book that time mention all
reason and date of spending money so it will help to remember transaction.
Excellent analytical and numerical abilities – They have abilities to understand complex
transaction easily and compute transaction easily.
Ability to work as a team - Accountant can work as team because a single person can not
collect all appropriate information regarding to their business so need to communicate
with all departments.
Skills be used to prevent and deal with problems
These skills can use to prevent and tackle to problems in various situation because
management accountant can work for the company as important employee. The skills use to
record data in effective manner and apply on the problems because they can find out solution
regarding their problems. Lack of money management can solve through excellent analytical and
numerical activities where identify every transaction and on time record in accounting books.
With the help of these skills company gain more profitability and productivity (Sohn, 2016) .
Effective Strategies and system
Strategies Procurement of fund – When company procure their fund that time need to show all
reports regarding to funds and on right time because it can use to financial position. There
20
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is need to disclose amount of funds because on the basis of financial problem decide that
how much amount can use in different departments.
Competitive advantage – To gain competitive advantage need to prepare effective
strategies and it will prepare on time to time and present in front of to management. If
they find any problem so it will correct on time then implement in business to gain
competitive advantage.
System – To establish good financial positions of company their are applied different system
which can disclose all financial position regarding to business - Cost accounting System – The cost accounting system can use to know cost of different
products which is manufacturing by company. These system will described on reports on
time and full disclose in front of management .
Inventory management system – To manage inventory there is required to apply
inventory method to arrange in effective manner like LIFO, FIFO And average stock
method. Through these methods provide accurate information of inventory and full
disclose to know utilisation of resource at each level of manufacturing.
M4 Financial problems, management accounting can lead organisation to sustainable success
In every organisation find out different financial problem which can become reason to
reduce profitability. Through management accounting tool these financial problem identify and
sort out with the help of management accounting system. As a result company get success in
market and tackle their financial problem in effective manner. To lack of money management
and special order can be sort out through inventory management system. So management
accounting play important role to manage financial problems and get success.
D3 Planning tools effectively respond to solving financial problems to lead organisation to
sustainable success
The planning tools can help an organisation to get sustainable success because these tool
can analysed the performance of company. after analysis get of strength and weakness and find
out different financial problems. These problem identify through planning tool and sort out
through management accounting system (Morden, 2016) .
21
how much amount can use in different departments.
Competitive advantage – To gain competitive advantage need to prepare effective
strategies and it will prepare on time to time and present in front of to management. If
they find any problem so it will correct on time then implement in business to gain
competitive advantage.
System – To establish good financial positions of company their are applied different system
which can disclose all financial position regarding to business - Cost accounting System – The cost accounting system can use to know cost of different
products which is manufacturing by company. These system will described on reports on
time and full disclose in front of management .
Inventory management system – To manage inventory there is required to apply
inventory method to arrange in effective manner like LIFO, FIFO And average stock
method. Through these methods provide accurate information of inventory and full
disclose to know utilisation of resource at each level of manufacturing.
M4 Financial problems, management accounting can lead organisation to sustainable success
In every organisation find out different financial problem which can become reason to
reduce profitability. Through management accounting tool these financial problem identify and
sort out with the help of management accounting system. As a result company get success in
market and tackle their financial problem in effective manner. To lack of money management
and special order can be sort out through inventory management system. So management
accounting play important role to manage financial problems and get success.
D3 Planning tools effectively respond to solving financial problems to lead organisation to
sustainable success
The planning tools can help an organisation to get sustainable success because these tool
can analysed the performance of company. after analysis get of strength and weakness and find
out different financial problems. These problem identify through planning tool and sort out
through management accounting system (Morden, 2016) .
21
CONCLUSION
As per the mention report it has been concluded that management accounting can play
significant role to support an organisation in systematic analysing, interpretation and decision
making process at managerial level. Different types of planning tool can use to control budget of
and analysed in good manner. Measure of different financial issues of company then identify of
these problems can apply management accounting tool and also system. These system can
respond to sort of financial problem and get sustainable success. It will deciding to get over these
problems to arrange whole growth and sustainability in future frame.
22
As per the mention report it has been concluded that management accounting can play
significant role to support an organisation in systematic analysing, interpretation and decision
making process at managerial level. Different types of planning tool can use to control budget of
and analysed in good manner. Measure of different financial issues of company then identify of
these problems can apply management accounting tool and also system. These system can
respond to sort of financial problem and get sustainable success. It will deciding to get over these
problems to arrange whole growth and sustainability in future frame.
22
REFERENCES
Books and Journals
Agrawal, R. K., 2018. Principle of Management Accounting. Educreation Publishing.
Arnaboldi, M., Busco, C. and Cuganesan, S., 2017. Accounting, accountability, social media and
big data: revolution or hype?. Accounting, Auditing & Accountability Journal. 30(4).
pp.762-776.
Bernon, M., Cullen, J. and Gorst, J., 2016. Online retail returns management: Integration within
an omni-channel distribution context. International Journal of Physical Distribution &
Logistics Management. 46(6/7). pp.584-605.
Cattarino, L. and et.al., 2016. Accounting for continuous species' responses to management
effort enhances cost-effectiveness of conservation decisions. Biological conservation.
197. pp.116-123.
Commerford, B. P. and et.al, 2016. Real earnings management: A threat to auditor
comfort?. Auditing: A Journal of Practice & Theory. 35(4). pp.39-56.
Cools, M., Stouthuysen, K. and Van den Abbeele, A., 2017. Management control for stimulating
different types of creativity: The role of budgets. Journal of Management Accounting
Research. 29(3). pp.1-21.
Coyne, J. G., Coyne, E. M. and Walker, K. B., 2016. A model to update accounting curricula for
emerging technologies. Journal of Emerging Technologies in Accounting. 13(1).
pp.161-169.
Dauth, T., Pronobis, P. and Schmid, S., 2017. Exploring the link between internationalization of
top management and accounting quality: The CFO’s international experience
matters. International business review. 26(1),. pp.71-88.
Elmassri, M. M., Harris, E. P. and Carter, D. B., 2016. Accounting for strategic investment
decision-making under extreme uncertainty. The British Accounting Review. 48(2).
pp.151-168.
Florio, C. and Leoni, G., 2017. Enterprise risk management and firm performance: The Italian
case. The British Accounting Review. 49(1). pp.56-74.
Golyagina, A. and Valuckas, D., 2016. Representation of knowledge on some management
accounting techniques in textbooks. Accounting Education. 25(5). pp.479-501.
Mizikovsky, I.E. and et.al, 2016. Basic accounting and planning aspects of the calculation of
intra-factory turnover of returnable waste. Journal of Economic & Management
Perspectives. 10(4). pp.340-345.
Qian, W., Hörisch, J. and Schaltegger, S., 2018. Environmental management accounting and its
effects on carbon management and disclosure quality. Journal of cleaner production.
174. pp.1608-1619.
Saleem Salem Alzoubi, E., 2016. Ownership structure and earnings management: evidence from
Jordan. International Journal of Accounting & Information Management. 24(2). pp.135-
161.
Sledgianowski, D., Gomaa, M. and Tan, C., 2017. Toward integration of Big Data, technology
and information systems competencies into the accounting curriculum. Journal of
Accounting Education. 38. pp.81-93.
Solovida, G. T. and Latan, H., 2017. Linking environmental strategy to environmental
performance: Mediation role of environmental management accounting. Sustainability
Accounting, Management and Policy Journal. 8(5). pp.595-619.
23
Books and Journals
Agrawal, R. K., 2018. Principle of Management Accounting. Educreation Publishing.
Arnaboldi, M., Busco, C. and Cuganesan, S., 2017. Accounting, accountability, social media and
big data: revolution or hype?. Accounting, Auditing & Accountability Journal. 30(4).
pp.762-776.
Bernon, M., Cullen, J. and Gorst, J., 2016. Online retail returns management: Integration within
an omni-channel distribution context. International Journal of Physical Distribution &
Logistics Management. 46(6/7). pp.584-605.
Cattarino, L. and et.al., 2016. Accounting for continuous species' responses to management
effort enhances cost-effectiveness of conservation decisions. Biological conservation.
197. pp.116-123.
Commerford, B. P. and et.al, 2016. Real earnings management: A threat to auditor
comfort?. Auditing: A Journal of Practice & Theory. 35(4). pp.39-56.
Cools, M., Stouthuysen, K. and Van den Abbeele, A., 2017. Management control for stimulating
different types of creativity: The role of budgets. Journal of Management Accounting
Research. 29(3). pp.1-21.
Coyne, J. G., Coyne, E. M. and Walker, K. B., 2016. A model to update accounting curricula for
emerging technologies. Journal of Emerging Technologies in Accounting. 13(1).
pp.161-169.
Dauth, T., Pronobis, P. and Schmid, S., 2017. Exploring the link between internationalization of
top management and accounting quality: The CFO’s international experience
matters. International business review. 26(1),. pp.71-88.
Elmassri, M. M., Harris, E. P. and Carter, D. B., 2016. Accounting for strategic investment
decision-making under extreme uncertainty. The British Accounting Review. 48(2).
pp.151-168.
Florio, C. and Leoni, G., 2017. Enterprise risk management and firm performance: The Italian
case. The British Accounting Review. 49(1). pp.56-74.
Golyagina, A. and Valuckas, D., 2016. Representation of knowledge on some management
accounting techniques in textbooks. Accounting Education. 25(5). pp.479-501.
Mizikovsky, I.E. and et.al, 2016. Basic accounting and planning aspects of the calculation of
intra-factory turnover of returnable waste. Journal of Economic & Management
Perspectives. 10(4). pp.340-345.
Qian, W., Hörisch, J. and Schaltegger, S., 2018. Environmental management accounting and its
effects on carbon management and disclosure quality. Journal of cleaner production.
174. pp.1608-1619.
Saleem Salem Alzoubi, E., 2016. Ownership structure and earnings management: evidence from
Jordan. International Journal of Accounting & Information Management. 24(2). pp.135-
161.
Sledgianowski, D., Gomaa, M. and Tan, C., 2017. Toward integration of Big Data, technology
and information systems competencies into the accounting curriculum. Journal of
Accounting Education. 38. pp.81-93.
Solovida, G. T. and Latan, H., 2017. Linking environmental strategy to environmental
performance: Mediation role of environmental management accounting. Sustainability
Accounting, Management and Policy Journal. 8(5). pp.595-619.
23
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