Fundamentals of Management Accounting: A Comprehensive Report

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EXPLANATION OF MANAGEMENT ACCOUNTING
• Decision- making
• Planning
• Analysis of business
performance
• Interpretation of
financial statements

Essential requirements of management
accounting systems
• Job costing system
• Cost accounting system
• Inventory management
system
• Price optimization
system

Different methods of management accounting
reporting
• Budgeting reports
• Job cost reports
• Performance reports
• Inventory management
and manufacturing
reports
• Accounts receivable
reports

Benefits of various management accounting
systems
• Job order costing system
• Cost accounting system
• Inventory management system
• Price optimization system

Critical integration of management
acocunting reporting and systems
• Cost accounting system
produce cost reports
• Inventory management
system produce
manufacturing and
inventory reports
• Job costing system
produce job cost
reports

Principles of the management accounting
• Trust
• Relevance
• Value
• Relevance

Calculations of the various ratios from the
Balance sheet and the Income statement
Gross profit ratio: (Gross profit/ net sales)
*100
Net profit ratio: (Net profit / net
sales)*100
Asset turnover ratio: sales/ total assets
Debt/ Assets ratio: Total debts/ Total assets
Current ratio: Current asset / Current
liabilities

Ratios:
2017 2016
Gross profit ratio 44.14% 42.65%
Net profit ratio 11.27% 9.83%
Asset turnover ratio 0.88 0.90
Debt/ Assets ratio 0.76 0.70
Current ratio 0.73 0.68

Reason for increase or decrease
• Gross profit ratio: This ratio of the
company Unilever is increasing in
comparison to that of the last
year. Possible reason for increase
in the gross profit ratio of the
company can be due to the
increase in the sales revenue of
the company or possible
reduction in the cost of goods sold
expenses of the company.
• Net profit ratio: The possible
reason for the variation in this
ratio of the company can be due
to increase or decrease in the
revenue of the company or
decrease in the operating and the
other expenses of the company.

Cont:
• Asset turnover ratio: This ratio of the
company represents the revenue
generation capacity of the company
from the asset invested in the company.
This ratio represents the worth of the
assets of the company.
• Debt Asset Ratio: This ratio represents
ratio whether the company is operating
on its own fund or the borrowed funds.
Lower the ratio more beneficial provides
the strong financial position for the
company.
• Current ratio: This ratio represents the
liquidity status of the company and
represents the ability of the company to
pay off the current debts of the
company on time.

References
• Ward, K., 2012. Strategic management accounting.
Routledge.
• DRURY, C.M., 2013. Management and cost accounting.
Springer.
• Parker, L.D., 2012. Qualitative management accounting
research: Assessing deliverables and relevance. Critical
perspectives on accounting, 23(1), pp.54-70.
• Morden, T., 2016. Principles of strategic management.
Routledge.
• Vanderbeck, E.J., 2012. Principles of cost accounting.
Cengage Learning.