Management Accounting Systems, Techniques, and Financial Problems

This report provides a comprehensive overview of management accounting systems and techniques, focusing on their application within organizations like Jeloa Ltd. It begins by explaining various management accounting systems, including cost accounting, inventory management, and job costing, detailing their essential requirements. The report then discusses management accounting reporting methods such as budget reports, accounts receivable reports, and job cost reports. It further delves into costing techniques like marginal costing and absorption costing, outlining their advantages and disadvantages. The report also examines planning tools such as operating budgets, zero-base budgets, and master budgets, highlighting their respective benefits and drawbacks. Finally, it compares how organizations can use management accounting to respond to financial problems, using Jeloa Ltd. as an example, and suggests techniques like KPIs and benchmarking to address issues like excessive costs and inventory mismanagement. Desklib provides more solved assignments for students.

Management Accounting

INTRODUCTION
Management Accounting refers to the use of methods and techniques through which a
proper management of the financial data, facts and information which is available can be done in
the right manner so that the appropriate decisions can be taken in the future quite effectively and
efficiently (Ciambotti and et.al., 2020). Therefore, in this way the proper attainment of the goals
and objectives in the future can be done which will be quite helpful in ensuring that the overall
level of efficiency and effectiveness can be enhanced. This report is based on Jeloa Ltd. It is a
manufacturing company which manufactures a product and provides it to the customers in the
market. In this assignment, a detailed and specific focus will be made on the use of Management
Accounting in a proper manner.
TASK 1
P1: Management accounting systems
There are a wide range of Management accounting systems which are used by an
organization (Hutaibat and Alhatabat, 2020). An explanation about them is provided as follows-
Cost accounting system- It is a system which is quite important as it leads towards a
proper and accurate assessment of the various types of costs (Johnstone, 2020). Therefore, it
becomes quite important that an organization like Jeloa Ltd. Is able to make its use to accurately
determine the level of costs effectively and efficiently so that the ascertainment of the costs can
be made.
Essential requirements-
 In it, there is a requirement of ensuring that the use of methods and techniques is made
for accurately determining a range of costs within the organization in a proper manner.
 In this system, there is a use of proper way of ensuring that a reduction in the overall
costs can be carried out.
Inventory management system- In this particular system, it is quite important that the
the right assessment of the inventory level can be made in a proper manner. In this way, it can be
particularly helpful in ensuring that the management of a wide variety of stock items can be done
in quite a proper way which will be very useful. For Jeloa Ltd., it is therefore quite important to
make sure that the use of this particular system can be made effectively and efficiently.
Essential requirements-
1

 This system should be quite useful in ensuring that a proper track on the inwards and
outwards movement of the inventory items can be kept which will help in ensuring that a
right management of stock can be done effectively and efficiently.
Job costing system- In this system, an appropriate management of a wide variety of job
orders can be carried out which will be useful in ensuring that the management of the job costs
can be done effectively and efficiently in the future (Kapiyangod and Gooneratne, 2021). In the
context of Jeloa Ltd., it is quite important that the use of this system can be made so that the
management of the job costs can be done in a proper manner.
Essential requirements-
 In this system, the various types of job orders are managed by keeping a database of the
various types of job orders.
 This system should be able to assess the various types of ways through which the
management of a wide variety of job costs can be carried out so that they can be reduced
effectively and efficiently.
2

P2. Explaining management accounting reporting and different methods
Management accounting reporting is delineated to mechanisms used for planning, decision
making, measuring along with regulating performances (Kharlamova and et.al., 2020). These are
important element to ensure that managers have complete image about ways in which available
resources are performing. Within Jeloa Ltd, comprehensive managerial accounting reporting are
produced each year to have holistic view of finance of the company. Some types of methods that
are adopted by deputy accountant of Jeloa Ltd are explained below:
Budget report: It is most fundamental report that assist owners of business concerns to
understand together with control costs within enterprise. Through evaluation of expenses of past
accounting year, deputy accountant of Jeloa Ltd prepares budget report for upcoming accounting
year by effective estimation of budgets and finding places so to cut unnecessary costs. Moreover,
the method helps in analysing organisational performances and providing required financial
resources to each department for carrying out operations successfully.
Account Receivable report: The reporting method is crucial for entities which offers
products on credit to consumers. In Jeloa Ltd, account receivable report provide an overview
concerned with credit balances as per age and separate categories for commodities which as 15,
30, 45, 60 along with 90 days late. With this, deputy manager makes necessary adjustment in
credit policies in order to align policies with payment potential of consumers. Moreover, using
this method, managers of the establishment recognise invoices which are open and keeping them
on top list of slow paying clients.
Job cost report: Managerial accounting reporting which provides side by side view of
total cost accrued in individual project as compared with expected revenue that are yielded by
the specific project. Using job cost report, deputy accountant of Jeloa Ltd evaluates profitability
of particular jobs addition to optimise operations through emphasising on jobs which are most
profitable overall. It provides an analysis of project’s actual costs, projected income addition to
estimated costs that are created regularly for tracking progress of project.
All the explained methods of management accounting reporting are adopted by deputy
accountant of Jeloa Ltd to have sense of financial state and insights to capture opportunities in
marketplace. Right kind of managerial accounting reporting is essential to achieve goals in more
efficient manner.

TASK 2
P3: Calculation of costs
Marginal Costing- It is a technique where the variable cost is charged to the units and
the fixed cost is written off against the contribution. Therefore, it is an effective way of
ascertainment of the overall level of profitability in a proper manner. For Jeloa Ltd, it is quite
important to make sure that the use of this particular technique can be made so that the
management of the particular level of needs and requirements can be made.
Advantages-
 It is quite simple to use and understand. Therefore, in this way it can be said that this
ensures that it can be easily applied.
 It is quite useful so that the ascertainment of the level of Break-Even point can be done
which can be useful in Decision-Making.
Disadvantages-
 In this technique, the ascertainment of the level of overheads is not made in a proper
manner. Therefore, this creates a disadvantage for the organization.
 There are some difficulties in making the use of this particular technique because in it the
complete information is not given.
Absorption costing-
Absorption costing is a technique through which the ascertainment of the level of costs which are
related with the organization in a proper manner (Modell, 2020). Therefore, for an organization
like Jeloa Ltd. It is quite important that its use should be made to determine the costs in a proper
way.
Advantages-
 When the use of this technique is made a proper ascertainment of the various types of
costs can be made which will be quite useful in ensuring that the management can be
made in a right manner.
 The use of this method should be made in the organizations for ensuring that the
treatment of the overheads can be made in a right way.
Disadvantages-
2

 This technique is not simple to use and understand and thus if its application is not made
in a proper manner it can create problems and difficulties for the organization.
 The use of this technique can create an impact on the organizations if the workers are not
competent enough to use this technique appropriately in a proper manner in the
organization.
3

4

TASK 3
P4: Advantages and disadvantages of planning tools
Budgetary control is defined as financial jargon which is prepared by management for the
purpose of managing the income and expenditure (Napitupulu, 2020). For organization it is
important to have good knowledge about budget and controlling activities which can be used to
developing the business performance and productivity. In organization budgets are prepared by
accountant by analysis the income and expenditure that occurs in business organization. In
relation to Jeloa Limited, different types of budgets are prepared for controlling the expenses that
are defined below:
Operating budget - The operating budget is explained as estimation of the income and
expenditure that relates to a company under a set period. This is mainly used to keep records of
day to day activities which are important to have in business industry. Budget outlines the funds
that helps to make their business more efficiently and successfully in decided period of time.
This consist expenses and revenues of company that expects to use for operational work. In
relation to Jeloa Limited, operating budget is prepared by management team by showing
expected income and expenses that affected the organization productivity.
Advantages: An operational budget is the financial plan which is prepared by Jeloa
Limited for the purpose of meeting with organization obligation and objectives. This keep the
records of all transaction.
Disadvantages: This create the burden on management of managing daily activities.
Zero base budget – This is budgeting method in which all expenses are justified and
started fron new period. This budget is prepared by Jeloa Limited by starting the process of zero
base and used to analyze the cost from fresh period.
Advantages: The management should is playing the important role who conduct the
analysis and introduce the products and services accordingly by preparing the Zero base budget.
This also helps to keep the legacy expenses in check.
Disadvantages: In relation to Jeloa Limited Zero base budget can reward short term
thinking by generating revenues. There is intensity of organizational resources.
Master Budget - This can be explained as project income statement that covers financial
information of all expenses and shows to attaining the business objectives. The management of
5

Jeloa Limited use Master budget by considering all lower level budget and formulating the
financial plan that can help to develop the organizational performance and productivity.
Advantages: This helps to formulate the long term plan and motivate the employees in
Jeloa Limited that develop the business performance. This provide the summary of divisional
budget and used in planning. By using master budget, management can introduce the continuous
improvement process that can help to attain the business goals and objectives.
Disadvantages: To prepare the master budget is rigid as it involves various accounts and
transaction that occurs in organization. This become difficult for people to update that might be
affected the organizational productivity and profitability in the changing environment.
TASK 4
P5: Comparison of organizations
Financial Problem- It refers to a particular situation where the organization faces
financial difficulties (Taschner and Charifzadeh, 2020). In this situation, an organization can be
impacted. Like other organizations, Jeloa Ltd. Also faces financial problems. The financial
problems which it is facing are as follows-
 Excessive costs- The costs of the organization are on the higher side which is therefore
creating problems and issues as the profitability level is being affected as a result.
 Mismanagement of inventory items- The inventory items of the organization are
getting mismanaged and therefore this is creating a particular level of impact on the
overall profitability level because this increases the overall inventory costs.
Techniques for solving these problems- A wide range of techniques can be used so that
these problems can be solved. Therefore, the following techniques can be used in the
organization for this particular purpose-
 KPIs- These are Key Performance Indicators. It is quite important to make their use so
that the assessment of the level of performance can be carried out in a proper manner.
Their use can therefore help in ensuring that Jeloa Ltd. Is able to solve the problem of
costs in a right way effectively and efficiently.
 Benchmarking- It refers to the way in which the various types of benchmarks and
standards are set. Its use can help Jeloa Ltd. To be able to solve the problem of inventory
in a right way.
6

Comparison of organizations
Basis Tesco Sainsbury's
Financial problem It is facing the problem of
mismanagement of job orders.
It is facing the problem of
setting of wrong price.
Management accounting
system used
Job costing system Price optimization system
Application of the system It can be done by ensuring an
appropriate management of a
wide variety of job orders
effectively and efficiently.
It can be done by ensuring that
the appropriate management of
the level of price can be done
in a proper manner.
From the above discussion, it is clear that the managers of Jeloa Ltd. Should make use of
Management accounting systems to solve financial problems. The financial problem of costs can
be solved through using Cost accounting system. Also the financial problem of inventory can be
solved through the use of Inventory management system.
CONCLUSION
From the mentioned information, it is concluded that management accounting serves
purpose of using data along with making accurate decision to control business activities and
adding on developments. Management accounting systems enhances financial visibility,
minimises errors, provides real time information and gives flexibility to track financial
information. Job cost reports, account receivable report and budget report are certain methods
that are opted in management accounting reporting. Management accounting techniques such as
absorption and marginal methods are effectual to calculate costs and prepare income statement
for an institution. Planning tools assist in achieving financial objectives through certain methods
that are zero based, operational budgeting and master budgeting. All organisations irrespective of
size and scope, faces certain financial problems which they further resolve through using suitable
management accounting techniques.
7