Analysis of Management Accounting Systems in TPG Processing

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MANAGEMENT ACCOUNTING
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LIST OF FIGURES
Figure 1: Management accounting systems.............................................................................6
Figure 2: PESTLE framework...................................................................................................15
Figure 3: Porter five forces analysis........................................................................................16
Figure 4: VRIO analysis........................................................................................................... 16
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INTRODUCTION
Management accounting deals with the effective management and use of the financial data
and information such that planned decision making is ensured by effectively monitoring and
controlling the finances within the organisations (Chenhall and Moers, 2015). This report
will lay emphasis on the management accounting systems and principles that help in
effective decision making and helps to respond effectively to the financial problems. The
emphasis will also be laid on the different types of planning tools for budgetary control and
for taking an effective decision regarding the problems faced by the organisation. This
report will, at last, compare the ways in which different type of organisations respond to
financial problems.
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ASSIGNMENT PART A- MANAGEMENT ACCOUNTING PRINCIPLES
INTRODUCTION
As an account clerk at TPG Processing, this report will deal with the role and functions of the
management accounts department and will gain better insights on the management
accounting systems that operate in an organisation. This report will discuss the
management accounting and its benefits for an organisation with the methods that are
applied for reporting of the management accounting.
BODY
MANAGEMENT ACCOUNTING AND ITS PRINCIPLES
According to The Institute of Management Accountants (2008), management accounting is
defined as the process of a cost analysis of the business and operations that helps in
preparation of the internal financial reports and helps in recording and accounting the
information and data so as to guide effective decision making (Atrill and McLaney, 2009).
The management accounting has certain principles which are as under:
Influence
According to this principle, management accounting is based on conversations that enhance
the decisions making of the managers at all stages. Thus through effective communication,
the management accounting influences the business decisions (Atrill and McLaney, 2009).
Relevance
Under this principle, the management accounting scans the resource availability for the
information and then undertakes decision (Bramwell, 2013).
Value
Value is another principle of management accounting as it involves effective analysis of the
information which evaluates the opportunities and lays emphasis on the cost, risks and
value generated by the opportunities (Bramwell, 2013).
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Trust
It is another principle that is created by the accountability and scrutiny and leads to an
effective decision-making process. The management accounting is trusted to be
accountable, ethical and mindful due to the same (Bramwell, 2013).
DIFFERENT TYPES OF MANAGEMENT ACCOUNTING SYSTEMS AND THEIR
BENEFITS AND APPLICATION
Some of the management accounting systems adopted by the business organisations on the
basis of their needs are as under:
Figure 1: Management accounting systems
Source: (Atrill and McLaney, 2009)
Cost accounting system
Cost accounting is a system that involves recording, summarizing and analysing the cost
related to the products and services and the production cost (Surum, 2018). This system
helps in matching the input and output costs to determine the financial performance of the
company. There are different types of cost accounting systems adopted such as activity-
based costing, marginal costing, standard costing and lean accounting and so on (Kenton,
2019).
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Management
accounting
systems
Cost
accounting
systems
Inventory
management
systems
Job costing
systems
Price
optimisation
system

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Inventory management systems
An Inventory management system helps to track the supply chain and the portion of the
business operations. The inventory management systems manage the inventory effectively
which includes the inventory forecasting, reporting tools and barcoding and so on (Marder,
2017).
Job costing systems
This system involves the accumulation of information related to the service job of
production. This system helps in estimation the accuracy of the company and earns a
reasonable profit. A job costing system accumulates the direct labour, overhead, direct
material and so on (Kenton, 2019).
Price optimising systems
The price optimisation system is considered to be the system that helps in responding to the
different prices of the products and services and thus meet the objectives of the company
by maximising the operating profits (Surum, 2018).
DIFFERENT METHODS OF MANAGEMENT ACCOUNTING REPORTING
TPG is a processing firm that needs management accounting to a great extent due to the
extensive need to manage the accounting and report in an appropriate manner. For the
same, the management accounting reporting will be undertaken that will involve a range of
methods to report the accounts of the firm and ensure efficiency (Kaplan and Atkinson,
2015).
There are many methods of management accounting reporting that includes the
departmental reports, investment reports for appraisals, account receivable aging reports,
sales variance, cost variance, performance reports, competitor analysis reports and
budgetary reports and so on (Dyson, 2010).
Budget report
The budget reports are the ones that are generated for the business and its departments
which are finally consolidated in the form of master budget (Surum, 2018). It involves the
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estimates income and expenses based on the previous experience and the unforeseen
circumstances that may lead to any impact on the business. Through the budget reports the
business will be able to keep a track and monitor the performance of the business within
the aggregated budgeted limits (Kaplan and Atkinson, 2015).
Account receivable aging reports
This report is the one that lists the unpaid customer invoices and the credit memos that are
unused in accordance to the date ranges (Crowther, 2018). The aging report, therefore, is a
primary tool that is utilised in collecting the personnel and determine the invoices which are
overdue for payment. This helps in detecting the invoices that pay slowly and thus is a
critical factor.
Cost managerial accounting reports
The cost of managerial accounting reports is a reporting method which aims to capture the
cost of production by undertaking an effective assessment of the input costs and the other
capital equipment costs. This is the method that first measures and records the costs
individually. This method of reporting helps in assessing financial performance (Kenton,
2019).
MARGINAL AND ABSORPTION COSTING OF MANAGEMENT ACCOUNTING
TECHNIQUES
Marginal costing
The marginal costing method is the one that is applied to the cost to inventory so as to
analyse the cost of the individual unit that is produced. In the marginal costing method, the
cost is determined by bifurcating the variable and the fixed costs (Kaplan and Atkinson,
2015). Under this method, the variable cost is charged to the activities of operations while
the fixed cost is not included and they are charged to the profit and loss account for the
particular period (Surbhi, 2018).
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Marginal costing proforma
Absorption costing
Absorption costing is another method of management accounting which is a costing
technique that includes the fixed as well as variable costs (Surbhi, 2018). This method is
utilised for tax reporting and financial reporting. This costing technique is applied to all
production costs.
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Absorption costing proforma
*The results of the test including calculations are attached in the appendix at last (See
appendix 1)
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Integration of the management accounting systems within the organisation
Management accounting systems are finely integrated within every business organisation
which ensures the overall improvement of the business organisation. It renders the
techniques and the tools which help in assisting the effective management accounting
decisions. The management accounting systems are integrated into the business which
helps to mitigate the wastage and overuse of the resources and thus helps in enhancing the
quality of the products and the costs associated with the same. The management
accounting systems are used at every level and at every department of the business which
helps in rendering many benefits to the organisation which bolsters the effectiveness and
efficiency of the business (Dyson, 2010).
CONCLUSION
Thus from the above report, it can be effectively connoted that there is vital importance for
the management accounting systems and the reporting techniques as it helps in bolstering
the effectiveness and the efficiency of the business and helps in boosting the performance
of the business organisations.
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