Management Accounting Systems: Cost Analysis and Integration

This assignment provides a detailed overview of management accounting, emphasizing its role in organizational control, decision support, and profitability. It differentiates between cost accounting, management accounting, and tax accounting, highlighting the utility of cost management tools like inventory management and job costing in reducing costs and boosting profits. The report also explores budget control techniques, financial governance, and internal/expense audits for policy monitoring. It includes practical cost calculations using marginal and absorption costing to prepare an income statement, along with cash flow forecasts and sales variance analysis, demonstrating the application of these techniques in real-world business scenarios. The document emphasizes how management accounting systems and reporting integrate within organizational processes to enhance planning, control, and decision-making effectiveness.

Management Accounting
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Table of Contents
Task 1..............................................................................................................................................4
P1.................................................................................................................................................4
P2.................................................................................................................................................7
M1................................................................................................................................................9
D1..............................................................................................................................................10
P3...............................................................................................................................................11
M2..............................................................................................................................................14
D2..............................................................................................................................................15
P4...............................................................................................................................................16
M3..............................................................................................................................................18
P5...............................................................................................................................................20
M4..............................................................................................................................................22
D3..............................................................................................................................................24
Conclusion....................................................................................................................................25
References.....................................................................................................................................26
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Introduction
The assignment determinate management accounting and the use of management accounting for
the business organizations. Management accounting techniques are very useful in a business
organization for effective control, decision support, and profitability. Management accounting
tool provides modified and appropriate data for comparison and generates two-way
communication system for the flow of quality information. This assignment also defines the rules
and types of cost accounting, management accounting, and tax accounting. Various cost
management tools like inventory management and job costing help to reduce the cost and the
same will increase the profit of the company. For the efficient management of business process
management tools explains the budget control techniques. It also explains the advantage and
disadvantages of budgetary control. Various reports are prepared under budgetary control for
reporting purpose. Financial governance and the use of financial governance are also included in
this assignment. Internal audit, expense audit are some tools which are used for monitoring the
policy of management.
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Task 1
P1. Explain management accounting and give the essential requirements for different types
of management accounting systems.
Management accounting can be defined as the procedure for the preparation of the reporting
through the information available financial as well as the statistical data further facilitating the
decision making of managers (Fullerton, et. al. 2013). The management accounting systems are
used for the organization in recording and interpretation of data. It helps the managers to identify
and modify the data that is available as per the factors surrounding the organization. The
management accounting system is useful in facilitating the control and coordination of the
managers.
There are various accounting systems other than management accounting systems:-
Financial accounting systems:- The financial accounting systems are used in making the
organization comply with the rules and procedures. It is useful in setting up of internal control
system facilitating the analysis of the data. These are helpful in the presentation of the reporting
and recording of the financial transactions occurred (Osadchy, and Akhmetshin, 2015).
Cost accounting systems:- The cost accounting techniques are used to determine the cost and
minimize the same for an effective management. The cost accounting system includes product
costing and activity-based costing. Activity-based costing analysis the cost involved the
particular activity whereas the product costing calculates the cost incurred for producing the
product.
Tax accounting:- Tax implication liability is different depending on the structure of the
organization. The company, individual everyone must follow the various tax liabilities which can
be effectively evaluated with the help of tax accounting. Tax accounting can facilitate the
disclosure and following of the liability arising for the company (Warren, et. al., 2015).
There are different types of management which can be classified as follows:-
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The management accounting systems are very much useful for the organization. It helps the
organization in overall development and growth. The other benefits of the Management
accounting systems are as follow:-
Job Costing – It is useful for the organization in the measurement of the profitability job wise as
well as for the whole of the organization. The organization is able to determine the key areas
where the company must focus and make them effective and efficient (Ingram, 2017).
Inventory management – It is important that the company is minimizing the variable cost
which can be possible with the effective management of the inventory. Inventory management is
useful in maintaining an optimum level of stock so that neither funds are occupied nor there is
excessive cost of storage.
Price Optimisation – The price is an important aspect of the generating of the profitability. The
price optimization technique is useful in setting up of the price after evaluation of the factors
surrounding the organization (Yuan, et. al. 2014).
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Mangeemnt
accounting
systems
Cost
accounting
Inventory
management
Price
optimisation
Job and
process
costing

Cost accounting – The cost accounting techniques are useful in determining the cost involved in
the production of the product and taking steps in reducing it so the profitability of the company is
increased (Guinea, 2016).
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P2. Explain different methods used for management accounting reporting?
The management accounting reporting includes the presentation of the data recorded for the
internal management of the company facilitating the decision making. Management accounting
reporting is useful for analysis of the data by the management and taking decisions accordingly.
The various methods of management accounting reporting are as follows:-
Trading and P&L account – The trading and P&L account is the statement prepared to
determine the gross profit and net profit of the company. The statement includes the expenses
that are incurred by the organization during the year. It is used to determine the profitability of
the company.
Cost of goods sold – The cost of goods sold consists of the expenses that are incurred for the
production of the goods sold. Increase in the cost of goods sold leads to decrease the profitability
of the company.
Income statement – It is a type of financial statement which includes the revenues that the
company has earned and expenses that are incurred by the organization. The net profit earned by
the organization is stated with the help of the income statement.
Balance Sheet – The balance sheet is the statement of the assets and liabilities as on date. It is
the balance of the financial items stated in the organization. It is useful in determining the
liquidity position of the company as well as the individual.
Cash flow statement – The cash flow statement is a presentation of the actual inflow and
outflow of cash that has incurred during the year. The cash flow statement is categorized in
Operating, Investing and financing activities. The company is able to determine the cash spend
on the day to day activities, for the purpose of investment in acquiring of asset or sale of assets
and also in the financing activities.
Inventory management System – The inventory management system consists of various
techniques which can be used for better management of the inventory such as the ABC Analysis.
It helps in proper stock management and the allocation of the funds when there are many
products in an effective and efficient way.
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Cost accounting systems – The cost accounting system are useful in determining the variance
related to the cost. It also includes proper allocation of the funds to perspective heads to analyze
the cost properly. The cost accounting systems are used in appropriate apportionment and
allocations.
Price optimization – The pricing strategy is determined by the organization depending on the
various factors. The pricing is very critical in estimating the profitability that can be earned and
to achieve the goals and objectives of the company. The price optimization helps to set an
effective price which is most beneficial to them.
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M1. Evaluate the benefits of management accounting systems and their application within
an organizational context.
Management information system is the procedures that are being set for the recording of the data
and compiling of the same for the management to understand and take decisions accordingly.
The management information systems help in decision making at all the levels of the
organization. The reports are being formed after there is a collection of the data and recording of
it. The report is produced which is easily understood, a recordable, comparable and measurable
format so that there can be an effective analysis. It is an important tool to make the improvement
in the performance of the company and the utilization of the resources available (Muhsinzoda,
2015).
The decision support system can be defined as the technique that facilitates the decision making
depending on the various factors surrounding the organization. The decision support system is
useful in analyzing the data irrespective of its size. Even the massive realms of data can also be
easily analyzed with the use of the system. In case of large numbers and size of data, it is very
much difficult to come to a conclusion in an effective way but the decision supports helps in
facilitating the same and helping the managers to have an effective and efficient management
(Hartman, 2018).
It can be understood that both the Management information system and Decision support system
are beneficial not only in the decision making but achieving the organizational goal. The MIS is
a tool to record whereas the decision support system analyses the same for an effective decision
making. Both the system complement each other benefiting the organization to grow and sustain.
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D1. Critically evaluate how management accounting systems and management accounting
reporting is integrated within organizational processes.
The decision support system is important tools for the analysis of the data and facilitating the
decision making of the organization. The Executive support system is useful in assigning the
accountability and status access. The decision support system is used by all the level of the
management which is middle, lower and at the executive level but in case of Executive support
system, it is used by the senior executive expediency (Management4all, 2015). The Decision
support system is an important tool and is used wherever there is a requirement of managerial
decision making whereas the executive support system is used for the measurement of the
performance, analyzing of the environment for the opportunities available and problems that can
arise. The decision support is used at a various organizational structure such as the semi-
structured as well as the unstructured decision making whereas the Executive support system
supports high level and unstructured decision making (Management4all, 2015). The use of the
DSS is for the purpose of planning, organizing and controlling whereas the ESS purpose is to
establish an effective control. The DSS uses is the information which is been recorded in the ESS
whereas ESS collects all the information and compress it for the purpose of analysis. The DSS
requires a specialist for the analysis and usage of the data recorded whereas ESS is an easy tool
that can be used after a shorter period of training and development.
The ESS and DSS both are important for the organization in facilitating the decision making in
an effective way so that there are no losses. The DSS helps in an effective analyzing of the data
whereas the ESS is useful in recording the same for the further formulation of report and
analysis. The ESS and DSS both work hand in hand making critical for each and every
organization for effective planning and development.
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P3. Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing.
Cost can be defined as expenses that are being incurred by the organization for the production of
the product that is being sold or for providing any services to the consumers. There are various
types of cost such as the Fixed or variable cost, Direct and Indirect cost. The Fixed cost can be
defined as the cost which does not get affected with the change in the level of production of a
particular product whereas the variable cost can be defined as which changes with the change in
the output of the product. The direct cost refers to which are directly involved in the production
process such as the Direct material, Direct labor etc. The Indirect cost refers to the cost that is
being incurred but is not directly linked to the production process of the units (Sartori, et. al.,
2014). The analysis of the cost is important for an effective management of the resources
available to the organization along with an increase in the profitability.
The cost volume profit analysis states that the volume plays an important role in the profitability
of the company. The CVP analysis is useful in determining the level of volume which is best
suitable for the company in terms of profitability. It is useful for the better management of the
cost incurred at a particular level of output and profitability earned.
Costing plays a crucial role in the development of the pricing strategy. It is important for the
organization to recover the cost so that expenses can be paid timely. The costing techniques help
in estimating the optimum price which can be beneficial for the organization as well the
consumers of the product.
Marginal Costing
The marginal costing techniques consider only the variable cost of the production cost and
charge the fixed cost as the period cost as a whole in the same month or year (Simpson, et. al.
2013).
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Absorption Costing
The absorption costing technique is prepared by charging the variable as well as the fixed cost
for calculation of the product cost. The actual cost is then charged as under and over absorption
for the purpose of calculation of profits.
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