Management Accounting Systems and Reporting in Dunlop Aircraft Tyres

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MANAGEMENT ACCOUNTING

Table of Contents
• Introduction … Slide 3
• Definition of management accounting … Slide 4
• Explain management accounting and give the essential
requirements of 4 types of management accounting systems …
Slide 5
• Explain different methods used for management accounting
reporting … Slide 8
• Evaluation of management accounting benefits and their
application within an organisation ... Slide 10
• Critical evaluation of integration of management accounting
systems and reporting within organisational processes ... Slide 11
• Conclusion … Slide 12
• Reference list … Slide 13

Introduction
• In this presentation, management
accounting systems will be discussed in
detail and various techniques of
management accounting will be applied
in the context of Dunlop Aircraft Tyres, a
tyre manufacturer operating in
Birmingham, UK.

Definitions of Management Accounting
• Management accounting can be defined in various ways. According to
Edmonds et al. (2016), management accounting can be defined as the
provision or the field that provides both advice and financial data or
information to a firm so that it can be used for its development.
• On the other hand, Watts et al. (2014) stated that the procedure
adopted within a firm using which reports and accounts can be
prepared for providing timely as well as accurate information needed
by managers for taking short-term and regular decisions is called
management accounting.
• At the same time, the IMA refers to management accounting as a
profession, which is concerned with partnering with the decisions
that a company’s management makes, improving planning as well as
performance management systems, along with providing proficiency
in terms of financial control and reporting for facilitating
organizational strategy (Institute of Management Accountants, 2019).

Explain management accounting and give
the essential requirements of 4 types of
management accounting systems
• There are four main principles of management accounting
(Drury, 2013). They are as follows -
• Influence - Management accounting is influencing in nature,
as it provides and communicates information that
influences people.
• Value - The value of an organisation is largely affected due
to management accounting
• Trust - Since this field in accounting considers that
‘stewardship’ builds trust; management accounting is also
based on the principle of trust.
• Relevance - Management accounting information, since it is
important, is also based on the principle of relevance.

Contd.
• Planning
• Organising
• Forecasting
• Coordinating
• Controlling
• Communicating
• Decision-making

Contd.
• Cost accounting system - This system is responsible for identifying, measuring
and reducing costs of a company (Drury, 2013). The essential requirement of
cost accounting system in Dunlop Aircraft Tyres is measuring and analyzing its
costs, and reducing them along with measuring profit.
• Job costing system - The system that has the role of identifying, measuring and
reducing a company’s job costs is called the job costing system (Lanen, 2016).
Essential requirements in Dunlop Aircraft Tyres of job costing system involve
reducing excess costs to perform jobs and optimising jobs while reducing the
non-useful ones.
• Inventory management system - A managerial accounting system that is
responsible for managing and controlling an organisation’s inventories is called
the inventory management system (Narsingh et al., 2016). Essential
requirements of inventory management system in Dunlop Aircraft Tyres is
reducing inventory associated costs, manage inventory levels, meet demand of
customers and such other aspects.
• Price optimisation system - Rather than a system, the price optimizing system is
more like a strategy, which sets product prices in a company (Ferreira et al.,
2015). Essential requirements of this system in Dunlop Aircraft Tyres is attracting
customers, retaining them, earning profits and increasing demand of products.

Explain different methods used for
management accounting reporting
• Cost report - The report that summarises the costs that a
company has spent is called the cost report (May, 2017). They
advice a company’s management on how its cost efficiency and
cost capability can be enhanced.
• Budget report - The reports of a company conducting
comparisons of budgeted projections and the performance that it
has actually shown is called the budget report (Braun et al., 2014).
These reports help in making effectual decisions in a company.
• Accounts receivable aging report - A report in which the aging
debtors of a company are listed and their amounts due are
mentioned is called the accounts receivable aging report (May,
2017). Through this report, the debts of a company can be
reviewed and steps can be taken to recover them as soon as
possible.

Contd.
• Balance sheet - The balance sheet of a company
summarises the financial position as well as its capital
structure and provides significant information to improve
financial performance of a company (Chaudhry et al., 2015).
• Earning statement - Also called income statement, the
earning statement of a company provides information
regarding the income earned by it during a specific period
and its production, operations, interest and tax related
expenses (Lin et al., 2017).
• Statement of changes in equity - The report in management
accounting in which the changes in the equity capital of a
company are recorded, classified and summarised in the
statement of changes in equity (Reid and Myddelton, 2017).

Evaluation of management accounting
benefits and their application within an
organisation
• Benefits or advantages of applying management accounting into the
context of an organisation are considerable in nature.
• This is because diverse management accounting systems help an
organisation in diverse ways.
• For example, in of Dunlop Aircraft Tyres, the cost accounting system
is going to be helping it in reducing, controlling, optimizing and
managing costs while the inventory management system will help it
in managing, organizing, controlling and enhancing its inventory
orders, inventory flows and inventory associated costs.
• On the other hand, the price optimizing system will help it in
strengthening its customer base and creating demand in the market
while the job costing system will help it in optimizing its job costs
while increasing profitable jobs.

Critical evaluation of integration of
management accounting systems and
reporting within organisational processes
• Both reporting and systems in management accounting can be
integrated into processes of an organisation.
• For instance, cost reports and budget reports are easily
integrated into the decision-making procedure of organisations
while cost accounting and job costing system can be integrated
into the process of its manufacture of tyres.
• At the same time, the debtors’ receivable aging report can be
integrated into Dunlop Aircraft Tyres’s communication process to
communicate which of its debtors are aging and why debts are
increasing day by day.
• On the other hand, the inventory management system can be
integrated into its supply chain and logistics management
process. In such ways, they can be integrated in diverse
organisational processes.

Conclusion
• Thus, from this presentation, it can be
concluded that management accounting as
well as reporting play a noteworthy role in a
company.