Analysis of Management Accounting Systems and Reports

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Management accounting
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Table of Contents
Introduction......................................................................................................................................3
Part 1................................................................................................................................................4
Conclusion.....................................................................................................................................12
Introduction....................................................................................................................................13
Part 2..............................................................................................................................................14
Conclusion.....................................................................................................................................16
References......................................................................................................................................17
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Introduction
The management accounting can be defined as a process of decision making in which
management of a company critically analysis financial as well as non-financial performance
reports of a company to take important decisions and to carry their day to day business
transactions. This report will be divided into two parts where the first part will be briefly
elaborate techniques of management accounting with the help from techniques of costing such as
absorption costing technique and marginal costing technique. It's necessary for an organization to
use management accounting components to untangle financial problems because this
management accounting is to provide actual performance reports to a company.
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Part 1
The management accounting provides a lot of benefits to a company through that an organization
can simply capture more market share as well as increase their profitability, the process of
management accounting is bring coordination and communication in entire organization through
which a company can easily increase their efficiency so these are crucial principles of
management accounting (Zaleha Abdul Rasid et. al., 2014).
 Influence: the management accounting creates an influence on an entire organization
because management accounting is improved communication at various level of business
through which a company can easily communicate with their subordinate and take
feedbacks from them to take important decisions in the company.
 Relevance: relevance can be the most effective principle of management accounting
because management accounting is collects the most relevant information from different
sources which include past information as well as future information to carry their
business decisions. The management accounting is also collect internal and external
information through which a company analysis their performance, the information about
internal and external business environment provides a complete view about the market
share of a company in a particular market (Azudin and Mansor, 2018).
 Value: management accounting is creating value in the company through systematic
analysis of opportunities and risks of the company. The value is always remain a big
factor for a company so through this tool the value of a company increases.
 Trust: the management accounting is bringing trust in the company through systematic
analysis of financial reports of the company through which a company can bring trust in
their organizational activates.
So these are the four most important principles of management accounting which can be seen
in any company.
The systems of management accounting are playing an essential role in solving financial
problems for a company, the below points are describe management accounting systems.
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 Price optimization system: the price optimization system is critically examined
customers behavior towards the different price structure of the product through that a
company can easily earn higher profits after setting up appropriate price structure for
the company.
 Inventory management system: the inventory management system is examining the
supply chain of a company and takes care of branding, shipping, and packaging. The
inventory management system is to remove supply barriers and responsible for
product safety.
 Cost accounting system: this system is only or particularly includes direct as well as
indirect costs such as material cost, labor cost and overhead cost to accumulate the
overall cost of the product (Zaleha Abdul Rasid et. Al., 2014).
 Job order costing system: the job order costing system is not dependent on the entire
production, it only calculates the cost of a particular unit which is quite important for
a company to determine product prices.
The reports of the management accounting are critically analysis company performance in
various units of the business than reports are prepared to take an exact idea about company
performance, so the below-mentioned points are reports of management accounting (Boubault et.
Al., 2016).
 Performance report: the performance report is critically analysis organization
performance to prepare the report, the performance report includes employee’s
performance, management performance and managers performance to take an exact idea
about the overall performance of the company.
 Budget report: the budget report predicts the revenue and expenses of a company that will
occur in the near future. If a company is operating according to their budget than they can
easily save resources and time of the company which is quite useful for a company.
 Account receivable report: the accounts receivable report provides suggestions to a
company about their dues and through this report, a company is aware of its market dues.
It's quite important for a company to collect its due from the market on a time period of
90 days because if a company cannot collect their dues within 90 days than that can
create a financial burden for a company.
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 Cost accounting report: the cost accounting report provides necessary information about
production costs for a specific time period and that report is compared from the past
production report to take an exact idea about the future production cost of the company.
So the above-mentioned reports are playing an important role in the information collection
(McLarty et. Al., 2016).
The management accounting is an inherent part of any company because management
accounting helps a company in the smooth running of organizational activates or a business
operation which ultimately improves the productivity of the entire company, a firm cannot
improve its productivity without management accounting because management accounting is a
supporting base for a company that improves many things such as coordination, communication,
and efficiency.
The systems of management accounting are making a significant contribution to organizational
productivity and growth because these systems are critically examined management accounting
reports to proceed further. These systems are a revolute business environment than identify
market risks associated with the product than minimize those risks and increase organizational
productivity so ultimately these systems are quite important for a company.
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Marginal costing
The below calculation is done on the basis of given data in the question about expanses and
revenue.
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Conclusion
The management accounting is not only providing useful information to a company but also
critically examine organizational performance to ensure the efficiency of a company. The
management accounting is used various components and techniques to analyze the performance
of the company than provide suggestions to the management on the behalf of reports so if any
mistake found in the activities than through management accounting a company can easily solve
those mistakes.
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Introduction
The second part of the study will be briefly explain planning tool that is used in the management
accounting and the financial problems that a company face in their business operations, the
planning tools, and budgeting process helps a lot to solve financial problems for a company.
There are many types of budgets that a company can use to prepare their reports such as
incremental budget, flexible budget, and zero-based budget, so these budgets are briefly
elaborated in this study with the aim of solving financial problems.
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Part 2
Budgets Advantages Disadvantages
Zero-based Budgeting: A
zero-based budget is always
prepared from the initial stage
where a company is simply
allocating resources from the
initial stage (Koch et. Al.,
2015).
The zero-based budget is to
provide a fresh start to a
company through which a
company can easily save
resources.
This budget is more expansive
and time-consuming than any
other type of budget.
Incremental budgeting: the
incremental budget is done the
inclusion of more resources on
the last budget of the
company.
This budget is saved cost and
time for the company through
fewer efforts so this can be the
prime advantage of this
budget.
Due to these fewer efforts,,
this budget is not successful as
much as other budgets are so
it's better to make some efforts
to prepare a budget (Koch et.
Al., 2015).
Fixed budget: the fixed
budget cannot be changed
according to the requirement
of the company if once a fixed
This type of budget can be
easily implemented and
followed due to a lack of
flexibility (Mavrodin, 2015).
It’s important for a company
to revise its budget according
to the requirement of the
company so if the the budget
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budget is prepared. cannot be revised than that can
be a big problem for the
company (Mavrodin, 2015).
Flexible budget: this budget
is work according to
requirement of the company
so if a company wants change
than they can simply change
it.
The flexible budget is to
remove stress from the
management of a company
because this budget can be
changed at any time.
The flexible budget is more
complex type of process than
any other type of budget due
to flexible nature.
Variance analysis: the
variance analysis is an
important tool for cost
reduction and through this; a
company can easily control
their cost (Mavrodin, 2015).
This budget is quite important
for a company in the
allocation of resources in a
different department of the
company and reduces
operation cost which increases
profitability.
The analysis of variance is a
quite difficult and complex
process for a company so this
can create hurdles in a proper
analysis of variance.
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