Management Accounting Systems and Techniques Analysis Report

This report provides a comprehensive analysis of management accounting systems and techniques, focusing on Capital Joinery Ltd., a UK-based manufacturing enterprise. The report begins with an explanation of management accounting and explores various systems, including cost accounting, inventory management, job costing, and price optimization. It then details different management accounting reports, such as accounts receivable, performance, budgetary, and cost managerial reports. The report includes calculations of cost analysis techniques, preparing income statements using both marginal and absorption costing. Furthermore, it examines planning tools for budgetary control, comparing the adaptation of management accounting in response to financial problems. The report evaluates the benefits and applications of management accounting systems, critically assessing their integration within organizational processes. The analysis highlights the importance of management accounting in strategic planning, efficient decision-making, and enhancing overall business performance, providing valuable insights for students and professionals alike.

Management Accounting
Systems and Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Explanation of management accounting and essential requirements of various types of
management accounting systems:................................................................................................3
P2 Explantation of different methods that are used in management accounting reports:............5
M1 Evaluating benefits of management accounting systems along with their application in an
organization:................................................................................................................................6
D1 Critical evaluation of management accounting systems and reports and its integration
within organizational processes:..................................................................................................7
TASK 2............................................................................................................................................7
P3 Calculation of techniques of cost analysis with preparation of income statement by utilizing
both marginal and absorption costs:............................................................................................7
M2 Application of management accounting techniques for producing financial reporting
documents:.................................................................................................................................11
D2 Producing financial report which accurately applies and interprets data for business
activities:....................................................................................................................................11
TASK 3..........................................................................................................................................12
P4 Explanation of advantages and disadvantages incorporated with various types of planning
tools that is used for budgetary control:.....................................................................................12
M3 Analysis of different planning tools and its application in preparing or forecasting budgets:
....................................................................................................................................................13
TASK 4..........................................................................................................................................14
P5 Comparison of adaption of management accounting as a response to financial problems of
an organization:..........................................................................................................................14
M4 Analysing response of management accounting in context to financial problems which
leads to the success of an organization: ....................................................................................16
D4 Analysing affect of planning tools of accounting on solving of financial problems which
ultimately leads to success of entity:.........................................................................................16
CONCLUSION..............................................................................................................................17

REFERENCES..............................................................................................................................18

INTRODUCTION
Management accounting system refers to a technique of preparing, analysing and
interpreting financial informations and developing report for the same. Motive of analysing
finance related information states internal use by management for the purpose of efficient
strategic planning and enhanced decision making (Alsartawi, 2018). Application of management
accounting systems and techniques is vital for understanding financial data of an organization
and incorporating appropriate strategic management in business. Basis of this report is analysis
of management accounting techniques and systems of Capital Joinery Ltd. It is a medium-sized
enterprise that is based in UK. Entity deals in manufacturing industry. It manufactures doors,
windows etc.
This report consists demonstration of management accounting systems. Various
techniques of cost analysis are calculated and income statement is prepared with the use of
marginal as well as absorption cost. Further, various tools of management accounting is
explained. Along with it, different ways of calculation of management accounting in relevance
with financial problems are compared.
TASK 1
P1 Explanation of management accounting and essential requirements of various types of
management accounting systems:
Management Accounting can be explained as a practice of identification and
interpretation of company's financial information and further communication of interpreted data
to the managers of company. With the motive of enhance management activities in an
organization and pursuing organizational goals (Beckford, 2020). In context to Capital
Budgetary, intention of this implementing management accounting practice is incorporation of
adequately informed decisions in business and assisting internal planners of company.
Management accounting systems indicate internal system of firm that measures as well
as evaluates deals of financial accounting in an organization. It is an effective system for
providing critical information to the mangers of Capital Joinery Ltd. which ensures value making
for stakeholders. Following are various types of systems of management accounting along with
its essential requirements:

 Cost accounting systems: This framework is used by organization for the purpose of
estimating costs incurred in business at several stages of production. It tracks the cost
involved in converting raw materials into finished goods. In this system, utilization of
raw materials by crediting the its account and similarly, it debits the account of goods in
process (Busco and Quattrone, 20Management Accounting Systems & Techniques18).
Essential requirement: Application of this system in Capital Joinery Ltd. Enables firm to
analyse its profitability. As, it helps firm in identifying and monitoring cost and eliminate
unnecessary or irrelevant expenditures which ultimately leads to improvement in profit generated
by company. Hence, cost management activity is critical for profitable operations. And in this
way, this system also enables cost control activities in enterprise. Implementation of such control
activities enhances organizational structure of an enterprise as required information is adequately
provided through this platform. It also guides in context to management style that should be
persuade for productivity enhancement. Inventory management system: It states tracking of inventory related activities in an
organization. It monitors supply chain of company as well as entire procedure of
purchasing to selling products. It is a technology that monitors and maintains stock
products, raw or supply materials and finished products in Capital Joinery Ltd.
Essential Requirement: Implementation of inventory management system in Capital Joinery
Ltd. Provides opportunity for entity to ensure optimization of inventory. Inventory optimization
refers to maintenance of right or required amount of inventory in firm. Further, it provides
platform for barcode scanning which assembles easy identification and tracking of products.
Utilization of this system provides stock notification facilities to firm which leads to avoidance
of extra cost and wastage of time incorporated with under stocking or over stocking activities
(D'Ancona and et.al., 2019). This system of management accounting is useful for gathering
information about position of stock which guides through adoption of effective style of
management for improvement of profitability and reduction of costs. Job costing system: This process accumulates information related to cost associated with
production or service activities in firm. That indicates estimation of expenditures or cost
of business in accordance with different operations of company. Three essential
information is track with the use of this system, that is, direct materials, direct labour and
overhead.

Essential requirements: It enables Capital Joinery Ltd. To track performance of various business
activities. It ascertains providing necessary information to management to evaluate the
performance and productivity of various departments (Chandra, 2020). It provides flexibility of
an organization for calculation of indirect costs. And, also system of job costing implements high
level of accuracy in directing specific cost types towards its appropriate accounts. This tool
ensures tracking of expenditures in relation to each job or activity of Capital Joinery which
suggests organization about adoption of organizational structure which is best suited for
increasing efficiency of company. Price optimization system: This system is utilised for setting price of products of
company. It evaluates variations in customer demands at various price level.
Essential requirement: Combination of this data with information related to cost incurred in
producing goods helps management of Capital Joinery Ltd. in recommending or setting optimum
price that matches expectations of both company and customers as well as improves profit.
Information requirement of customer expectations and variation in demand in context to change
in price is helpful for management to set adequate price for increment in sells of company
products.
P2 Explantation of different methods that are used in management accounting reports:
Management accounting reports showcase the financial status of an organization. It
involves collection of financial data which helps in monitoring of business operations. This
reports present them in a way that financial information of company can be understood and
interpreted effectively(Davis and Davis, 2019). It helps business in making informed decisions.
In relevance to Capital Joinery Ltd., preparing reports of management accounting helps
organization in improving its financial performance. As it provides platform for regular
monitoring and analysing for monetary information.
Various types of management accounting reports and its utilization is described below:
 Accounts receivable reports: This report records information about amount of fund that
firm have to receive from debtors as well as time period taken by company for collecting
the same. Preparation of accounts receivable report in Capital Joinery Ltd. Plays a vital
role as firm has to extend credit to its customers for maintaining and enhancing customer
relationship. But if amount is not timely received by an organization that cash flow in

business will be hindered. Hence, constant monitoring of receivable activities sets alarm
for company and ensures timely collection of receivables.
 Performance reports: It reviews performance of staff members in firm, hence,
ultimately it reviews performance of enterprise. This report assures comparison of
estimated performance of company with the actual performance. Applying this tool in
Capital Joinery Ltd. Ascertains managers in identifying any loopholes in firm and prepare
strategic plan efficiently for enhance of enterprise's performance (Drechsler, 2019).
 Budgetary reports: This includes forecasting of company's expenditures and expected
revenues. This tool provides opportunity to implement cost control activities in business.
For the purpose of preparing budgetary report, organization utilizes data of expenditures
incurred in previous year and further evaluates business situation. It is crucial for
measuring performance of Capital Joinery Ltd. As it lists down the sources of expenses
and earning for business and caters unforeseen situations. All this activities is utilised to
set a benchmark for activities of company and enhance monitoring of its performance at
various levels.
 Report of cost managerial accounting: It computes the costs related to manufacturing
in an enterprise. In this report, raw material costs, overhead costs, labour costs and other
similar expenditures are recorded, along with information about level of output produced.
Preparation of management accounting report in Capital Joinery Ltd. Offers opportunity
to managers to evaluate capacity of business by comparing cost of producing with its
selling price. It states the clear picture about profit margin of company.
 Job cost report: it showcase the specific expenses of different projects or activities of
business. It helps Capital Joinery Ltd. In identifying areas of high earning so that firm can
direct its focus more to that areas. It will result in improvement of efficiency of an
organization. Further, it also provides chance to company to rectify performance of low
earning areas.
M1 Evaluating benefits of management accounting systems along with their application in an
organization:
Management Accounting Systems: It refers to a system that firm internally uses to track
data related to finance along with its affect or influence on business (Hanif, Rakhman and
Nurkholis,2019).

Price Optimization System: While pinpointing benefits of this system it can be noted
that it leads to maximization of profit generated in Capital Joinery Ltd. As it evaluates cost
incurred in production of unit hence, enables firm to set appropriate selling price.
Cost Accounting System: Efficiency of Capital Joinery Ltd. is improved by
encouragement of cost control measures. Further, cash flow management is another merit that
firm gains by utilization of this system.
Job Costing System: It enables firm to evaluate costs in accordance with different
process or activities of business. Hence, core competencies or high profitable sectors can be
identified.
Inventory Management System: It helps Capital Joinery Ltd. In managing inventory
properly and avoiding losses due over or under stocks.
D1 Critical evaluation of management accounting systems and reports and its integration within
organizational processes:
Management accounting systems provides platform for tracking transaction of finance in
company. And, management accounting reports ensure proper monitoring and administrating of
financial information. This advantageous for Capital Joinery Ltd. as improves controlling
activity of organizational processes. Further, management can analyse coordination among
various activities with its result or impact on business. Any problems which may arrive can be
solved on advance by altering any hindrances in company. This improves the regulation of
activities related to business. On the other hand, while noting its disadvantages it can be revealed
that it is a effort taking and time consuming process. As just notifying data is not enough,
management needs to interpret it for achieving desired result. Along with it, even a slight
mistake in recoding financial information have huge impact on its result on decision making of
business (Ittner and Oyon, 2020).
TASK 2
P3 Calculation of techniques of cost analysis with preparation of income statement by utilizing
both marginal and absorption costs:
Marginal costing: It refers to costing technique that evaluates cost involved in
production of one additional unit of output. It also provides relationship between output
generated by Capital Joinery Ltd. along with its variable costs.

may June
sales 25000 20000
- marginal cost of sales
variable manufacturing cost 2000 1600
direct material 6000 4800
direct labour 4000 3200
total marginal cost of sales 4000 3200
contribution 21000 16800
- fixed cost
fixed selling 1000 1000
fixed production overhead 2000 2000
fixed administration 3000 3000
net profit 15000 10800
Absorption costing: It is a method of managerial accounting that identifies both fixed
and variable costs associated with production of outputs in business. It captures all costs of
Capital Joinery Ltd. that is associated with manufacturing. Hence, it tracks profit of an
organization in an accurate form (Kaur and Lodhia, 2018).
may June
sales 25000 20000
-marginal cost of sales
variable manufacturing cost 2000 1600
fixed selling 1000 1000
fixed administration 3000 3000
direct material 6000 4800

direct labour 4000 3200
total marginal cost of sales 16000 13600
gross profit 9000 6400
-fixed production overhead 2000 2000
net profit 7000 4400

Reconciliation Statement:
Profit/ loss under absorption costing 7000 4400
add/less closing stock 8000 6400
profit/loss under marginal costing 15000 10800
profit/loss under marginal costing 15000 10800
Material Variances:

LIFO (Last In First Out):
Date Receipt Issue Balance
Quantity
Unit
cost Amount Quantity
Unit
cost Amount Quantity
Unit
cost Amount
01/06/20 balance 10 35 350
01/06/09 15 38 570 15 38 570
01/06/15 12 38 456 3 38 114
10 35 350
01/06/20 10 32 320 3 38 114
10 35 350
10 32 320
01/06/23 10 32 320 3 38 114
10 35 350
01/06/27 3 35 105 3 38 114
7 35 245
01/06/30 2 35 70 3 38 114
5 35 175
27 951 8 289
Average Cost Method:
Date Receipt Issue Balance
Quantity
Unit
cost Amount Quantity
Unit
cost Amount Quantity
Unit
cost Amount