Management Accounting: Principles, Tools, Techniques & AIRDIR Case

This report provides a comprehensive overview of management accounting, including its principles, role, and integration within an organization. It discusses the distinction between management and financial accounting, highlighting key elements such as aggregation, efficiency, and reporting focus. The report examines various management accounting systems like inventory management, cost accounting, and price optimization, illustrating their importance in tracking goods, estimating costs, and setting prices. It also delves into specific techniques like job costing and reporting methods such as budget reports, performance reports, and accounts receivable reports. The report further compares and contrasts planning tools, evaluates their effectiveness with examples, and analyzes case studies to demonstrate how management accounting addresses and prevents financial problems. Ultimately, it offers conclusions and recommendations for achieving sustainable business success, using the AIRDIR case as a central reference.

MANAGMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
TASK 1............................................................................................................................................3
1. An explanation of the principles of management accounting............................................3
2. The role of management accounting and management accounting systems......................5
3. The use of techniques and methods used in management accounting by presenting
calculations for an income statement using marginal and absorption costings to show how
these financial reporting and statements support business growth and success.....................8
4. Evaluation of how management accounting is integrated within the organisation. ........13
5. The benefits of the function to the organisation...............................................................13
6. Conclusions that critically reflect the application of management accounting................14
PART 2..........................................................................................................................................14
1. Compare and contrast three planning tools used in management accounting, indicating how
effective you judge each to be and why. Your judgements should be supported by examples to
demonstrate advantages and disadvantages..........................................................................14
2. Using specific case studies as examples, compare ways in which management accounting is
applied, the effectiveness of management accounting in dealing with financial problems and
preventing financial problems in organisations....................................................................16
3. Provide conclusions and recommendations to the organisation on which methods to apply
in order to achieve sustainable business success, based on your findings and evidence
provided................................................................................................................................17
CONCLUSION..............................................................................................................................17
REFERENCES .............................................................................................................................18

INTRODUCTION
Management accounting is the process which makes chain of activities that helps in
making analysis over the cost in relation over particular business is provide. Also in this
operations related to build financial report, records and different accounts for taking relevant
decisions over goals and objectives that has been set by an organization. This is an important
perspective which makes sense developed about financial and cost data making translation
within the meaning of information and data within an organization. It is an important aspect that
is used in order to make development of accounts possible within an organization. Also the
accounting data of an organization makes various perspective to be achieved which is based
upon making budgetary plans that helps in creating financial stability created in an organization.
The report is related upon AIRDIR that has been founded in 1974 and has been dealing within
significant drying industry by finding gaps. Further, the report is based upon management of
accounting with all kinds of necessary requirement for managing accounting system. Also the
methods for management accounting within an organization has been developed with marginal
absorption cost. Further, the file has been discussing about advantages and disadvantages
regarding planning tools and adoption of accounting system to resolved finnacial problems has
been discussed.
PART 1
TASK 1
1. An explanation of the principles of management accounting.
Management accounting is that part of accounts within which an application in relation
over knowledge, tools and techniques through the concept has been formed leading upon
developing accuracy within accounting information this helps students in developing knowledge,
tool with techniques through concept that helps in making accounting information to be formed.
Through such information an organization is able to make plans with various policies making
organizations operations to be performed with better efficiency. Through the process
presentation of accounting and data is based upon economic conditions which is helpful in
making better effectiveness with strategies formed making data in relation upon economics that
has been helping in evaluating performance with management for building strategies by
comparing over things which helps in making budget and forecasting to be created.

Distinction between management and financial accounting:
There are difference in management and financial accounting that are as follows:
Aggregation:
Financial accounting makes depiction done over entire results in relation to business
which makes marginal accounting with reports achieved in detail manner which makes
influences created upon profit, product line and geographical region of its consumers.
Efficiency:
Financial accounting has been helping in terms of profitability which makes business
developed upon managerial accounts in relation to factors causing problem making ways of
resolving issues in positive way.
Reporting focus:
Financial reporting has been creating lot of financial statements which has made
distribution done both internally and externally within an organization. Also the management
accounting concerned with operational reports that makes distribution done within an
organization. After making the observation done with differences in relation over terms that is
useful for an organization in order to gain important insights with results out of it.
Price optimisation system
 This system help AIRDIR to determine the customers perception on different price of its
product.
 It also help the company to determine the best price of their products and services so that
they can maximise their profitability level.
Cost accounting system
 This system helps them to ascertain the best cost of their products with great profitability.
 It helps AIRDIR to measure the efficiency of their procedures in compare to their cost.
Inventory management system
 The system has created benefits within an organization as it helps to maintain accuracy
within its inventory system.
 Through managing inventory in more effective way an organization is able to minimise
cost by increasing sales leading profit uplifted.

2. The role of management accounting and management accounting systems.
Role of management accounting systems:
Inventory management system:
Inventory management system has been helping in tracking goods which is based upon
whole supply chain in relations to goods and services which is related over consumer base. The
management system is related over production in relation to retail warehouse and shopping that
involves movement of goods or stock between them. Inventory management system has been
proven to be helpful in tracking supply regarding products and services from which path of
goods has been passed through. This makes potential developed over transferring management
that has helped in making management done over multiple sites simultaneously to coordinate
each and every activity in proper way of motivating products that helps in placing important part
within the organization by helping in making organization deal with various aspects in
effectiveness. This system of management basically helps in making production capacity
developed for an organization.
Cost accounting system:
Cost accounting system is based upon making product costing system to be developed
with framework that has been used within various firms or organizations making estimation done
about cost of product and services to making analysis done over profitability through valuation
of inventory by controlling cost done in proper manner. In relation over AIRDRI there are
various kinds of cost accounting system which is used for coordinating each and every activity
making estimation with accurate cost in relation to product and services developed within critical
task for an organization. This makes estimation done over the closing values of materials,
finished products and work in progress with positivity.
Price optimisation system:
Price optimisation is an accounting tool that has been proved to be helpful in pricing
fields over evaluation regarding various applications which enables set prices. This makes
calculation some manner with varieties of demand as price changes making combination data
and information over the cost and inventory levels to make recommendation over prices which
enhances pricing. In relation over AIRDRI has helping in making price optimization of system
organization that able to make best process as per demand and supply of goods with services in
best manner.

Job costing:
Job costing incudes various aspects like cost materials, labour and overhead cost that in
involved within specific job. It is considered to be one of the most effective technique which
helps in making traces of cost in relation to an individual which is done through analysing
various factors in more effective manner. Also it deals over enabling accumulation over various
kind of cost related data over small unit which is based upon material, labour and overhead. In
context of AIRDRI they are required to use job costing in order to evaluate various kinds of
factors based upon cost which makes structure developed in better manner.
In an organization various kinds of management aspects in relation over accounting is covered
with accounting through helping in developing internal concentration regarding data in internal
manner which is done with financial accounting. This is effective in relation upon decision and
planing making controlling developed upon data and statistics over methods used by AIRDRI
helping for making management accounting done through reporting upon goals and objectives
achieved in effective manner.
Budget Report:
Budget report is based over various kinds of internal reporting that makes management
done upon making comparison and helps in budget estimation done with actual performance
within best manner possible. This provides to be making useful with the actual budget with
performance over actual performance during the accounting period in best manner possible. The
budget is based upon financial reports helping about future projects that makes accurate in
nature. In this accounting period managers and other makes comparison done over budget which
has been preparing period of actual results that has been incurred which makes accuracy to be
developed about future projects that makes accuracy developed within its nature. In this
accounting has been managed with the period of managers through comparing the budget ans its
various number that makes preparing done over actual results that has incurred. In relation over
AIRDRI by making budget reported in organization making prediction to be done about
projections in better and effective way making adoption to be done over importation means.
Performance report:
Performance report helps in making various kinds of analysis done which makes creation
and sending with respective stakeholders in an organization. This involve performance
improvement done through reporting in relation over project in more effective manner (Hilton

and Platt, 2013.). In other words performance makes outcome of an activity achieved which
makes actual results with budget and standards making variance observed through positive
approach. It helps in taking important decisions over various conditions with unfavourable
variance. There are various kinds of examples which is based upon report helping AIRDIR in
making personal get report over annual performance making dealing possible with appropriate
actions making goals and objectives achieved.
Accounts receivable report:
Accounts receivable report these are one of the most important part of an organization
that has been helping in listing about the unpaid consumer invoices and methods not used over
credit as per the data ranges. This is one of the primary tool which has been providing collection
upon making evaluation done with various kinds of credit and collections of functions taking
place within the organization helping in listing about unpaid consumer making collection
personal for evaluating different kinds of overdue that has made undue in nature. The kind of
report makes management to be evaluated with the effectiveness over credits and collection
functions taking place within an organization. The report has helped in estimating all the bad
debts that has been building for allowing over doubtful accounts in more effective manner. In
relation to AIRDRI there are various kinds of budget report which makes accumulation over
right kinds of knowledge with information making reach over desirable outcomes in more
effective. There are different factors helping in making costing of management of tools with
different kinds of factors to be done making cost evaluation with management done over
inventory management for gaining fruitful results.
Inventory management report:
Inventory management report is one of the most important aspect which helps in dealing
with various problems in more effective manner which makes data accumulation and information
regarding management of stock done in efficient manner. It is best method to be used making
understanding about right kind of inventory management making report with accurate results
accomplished. In this accurate dare and appropriate inventory management holds importance for
finding trends, weaknesses and strengths which helps in filling gap in effective manner. This is
required to gain knowledge and information regarding profitability over products through which
assurance developed which makes customers preferences understood in detail. It makes
preparation of budget as per requirement of customers needs.

So all are the important tools and techniques for management accounting reporting to get
potential results in better way.
3. The use of techniques and methods used in management accounting by presenting calculations
for an income statement using marginal and absorption costings to show how these
financial reporting and statements support business growth and success.
Marginal cost- This helps in providing indication upon accounting system that includes
variable cost which has been replaced with cost units and fixed costs over period of time making
accumulation of endeavour done effectively. The cost is known as variable cost including labour
and material cost with computation portion of fixed costs. In this organization develops average
cost which is fairly included over marginal cost equal to average cost. This is most common
kind of costing method underlined by an organization making categorization over expenditure
with fixed variable. It makes undertaking done over per unit calculation which is considered to
be production overheads with method of categorising expenditure or costs. Through such kind of
cost various perspective has been developed making expenditure to be prepared as per the
organizational perspective making organization understand budgeter policies. Also under it cost
incurred upon all kinds of organizational aspect is developed that has been affecting organization
directly. Under it an organization is major focused upon those factors that has been directly
impacting business organizations through making financial perspective to be covered with the
optimum utilization of resources that makes organizations perform various functions.
Absorption cost- As per the method used in accounting dimension over entire cost of
producing and manufacturing done over services. In this methods upon analysing and calculation
of cost with goods and services making manufacturing done by an organization. The method is
used for making analysis and calculation done over cost in relation to goods and services that
makes manufacturing by an organization which is taken into account with indirect expenditure as
well as direct costs. In this method all overheads related to analysis and cost calculation is done
over goods and services which an organization manufactures. It makes overhead related process
of manufacturing done in relation to nature which is replaced by cost of goods. In relation to
AIRDRI the cost can be calculated by management of an organization which helps in making
management calculate of an organization. This is cost per unit making sustainability, labour,
changeable determining about overheads. The fixed overheads per unit is deliberate by dividing
total fixed operation by number of units produced.

As per the above discussed various planning tools like zero budget, flexible budget and
master budget are very useful for the organisation. These budgets provide great benefits to the
organisation as it will help them to identify about the inflow and outflow of the cash. Also, it
help them to know about the financial condition of the organisation that they are going in a
downfall position or rising position. Also, it will help them to enhance their overall performance
and proper flow of the cash in the organisation. The cash budget for the business of AIRDIRis
mentioned below :
Receipts £
Cash sales 450
Credit sale receipts from
debtors 220
Other income earned 200
Total receipts (a) 870
Payments