Principles of Management Accounting: A Comprehensive Report (ACCT 301)

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MANAGEMENT
ACCOUNTING

Explanation of management accounting
• Timely decision making
• Analysis of financial
health of the business
• Planning
• Increases efficiency
and profitability

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

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

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

Critical integration of management
accounting system and reporting
• Job order costing system system will
help to generate job cost reports
• Inventory management system will
help to generate inventory and
manufacturing reports
• The performance reports will help in
comparing the performance
• The cost accounting system will help
to identify the cost of different
products

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

Calculation of ratios
Particulars 2018 2017
Sales 18,881,000 17510000
cost of goods sold 11,090,000 10,197,000
Gross profits 7791000 7313000
Net profit after tax 3,152,000 2,606,000
Total assets 42,401,000 40,778,000
Total Liabilities 17,958,000 16,562,000
Current liabilities 9,204,000 8,800,000
Current assets 2,226,000 1,596,000
2018 2017
Gross profit ratio ( Gross profit/ net sales)
*100
41.26% 41.76%
Net profit ratio ( Net profit / net sales)*100 16.69% 14.88%
Asset turnover ratio (sales/ total assets) 0.45 0.43
Debt/ Assets ratio ( Total debts/ Total assets) 0.42 0.41
Current ratio ( Current asset / Current
liabilities)
0.24 0.18

Reason for increase or decrease
• GP ratio- The reduction
in the gross profits ratio
of Carnival can be due to
decrease in the COGS
expense.
• NP ratio- The increase
in the net profit ratio
can be due to increase in
revenue

Continued…
• Asset turnover ratio- The
increase can be due to increase
in total assets and sales.
• Current ratio- The increase
can be due to decrease in the
current liability
• Debt asset ratio- The increase
can be due to increase in total
assets and total liabilities

References
• Adongo, K.O. and Jagongo, A., 2013. Budgetary control as a measure of financial
performance of state corporations in Kenya. International Journal of Accounting and
Taxation, 1(1), pp.38-57.
• Banerjee, B., 2012. Financial policy and management accounting. PHI Learning Pvt.
Ltd..
• Chen, X. and Simchi-Levi, D., 2012. Pricing and inventory management. The Oxford
handbook of pricing management, pp.784-824.
• Cokins, G., 2013. Top 7 trends in management accounting. Strategic Finance, 95(6),
pp.21-30.
• DRURY, C.M., 2013. Management and cost accounting. Springer.
• Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and
control practices in a lean manufacturing environment. Accounting, Organizations
and Society, 38(1), pp.50-71.
• Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a
dynamic business environment. McGraw-Hill Education.
• Parker, L.D., (2012). Qualitative management accounting research: Assessing
deliverables and relevance. Critical perspectives on accounting, 23(1), pp.54-70.
• Ward, K., 2012. Strategic management accounting. Routledge.