Critical Evaluation of Management Accounting Systems Report

This report delves into the realm of management accounting, exploring its significance and various systems. It begins by defining management accounting and outlining its essential requirements, contrasting it with financial accounting. The report then examines different methods used in management accounting reporting, including financial planning, cost accounting, and budgetary control. A key focus is on evaluating the benefits of different management accounting systems and their practical applications, particularly within the context of an organization like Dell. The report further analyzes costing methods, specifically comparing absorption and marginal costing, detailing their calculations and the preparation of income statements. It also assesses the advantages and disadvantages of planning tools used for budgetary control, using Dell as a case study. Finally, the report compares Dell with HP, examining how they adapt management accounting systems to address financial challenges and achieve sustainable success.

Management
Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1.......................................................................................................................................1
P1 Management accounting and essential requirement of different types of management
accounting systems......................................................................................................................1
P2 Different methods used for management accounting reporting.............................................2
M1 Evaluation benefits of different management accounting systems and their application.....3
D1 Critical evaluation of management accounting systems ......................................................4
TASK 2............................................................................................................................................5
P3 Calculating cost per unit under both absorption costing and marginal costing by stating the
difference between both of them. Explaining the way in which the income statements are
being prepared from both of these measures...............................................................................5
TASK 3............................................................................................................................................7
P4 Advantages and disadvantages of different types of planning tools used for budgetary
control.........................................................................................................................................7
A. Calculation of standard cost of PVC sheet.............................................................................8
B. Calculation of material price variance....................................................................................9
M3 Use of different planning tools and their application for preparing and forecasting budgets
in the context of Dell...................................................................................................................9
D3 Way in which the planning tools respond appropriately to solving problems in the context
of Dell, leading to sustainable business development...............................................................10
TASK 4..........................................................................................................................................10
P5 Comparison of Dell with HP to establish the way in which the organisations are adapting
management accounting systems to respond to financial problems such as lack of view of
what deals had been sold from a budgetary perspective...........................................................10
M4 How responding to financial problems, management accounting can lead an organisation
such as Dell to sustainable success...........................................................................................11

CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is basically preparing accounts and reports which are essential
for the managers to make decisions on the basis of statistics and financial data . This report
defines management accounting and provides different types of management accounting systems
and its requirement. The report focuses on different methods, benefits of various management
accounting systems and integration with organization processes. In this report shows the uses for
preparing income statements using the marginal and absorption costing, its calculation and
differences. This kind of reports producing financial report. It has also discusses different types
of planning tools that are being used for budgetary control.
TASK 1
P1 Management accounting and essential requirement of different types of management
accounting systems
The management accounting is the process for creating and maintaining financial report
in a particular systematic format for providing accurate and statistical data which is essential for
the organization's manager to create decisions on the daily basis (Bebbington, Unerman and
O'Dwyer, 2014). This management accounting consists of making and supplying statistical and
financial information to the enterprises managers for generating daily basis decisions. Financial
accounting is used by organization’s stakeholders for generating financial reports for the
enterprise and it is different from management accounting. Management accounting reports are
like periodical reports that are mostly used by the company’s owner and managers. Report of
management accounting consists of dell and other firms cash and funds which is available in
company like sales revenues, current position of accounts etc. These all things are calculated on
the requirements of an organization requirements . For maintaining growth of Dell firm it is
important for the businesses to calculating the accounts. Report of management accounting is
different from the financial accounting because financial accounting reports are generated on the
basis of historical information and these reports are used to look forward side of business.
For individuals and businesses, various types of management accounting systems are
available. The decision is taken from the account's data and its accounting systems price and
values for selecting an accounting system in the future . The ability of person for accessing
management accounting system is important for the system. Several types of accounting systems
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helps in making organization decision (Bodie, 2013). Like entry system, computerized and
manual system. Entry system: This is single and double for entry system. In single, this is used by the
small enterprises and it includes some few steps and very easy operations. So this entry
system is not considered any kind of entries for journal (Christopher, 2016). Book and
journal is created for balancing the accounts of business. In double entry system, this is
accurate but at the same time it is difficult and complex. This system consists of debit and
credit and it must be equal. This will help in identifying the errors in an accurate way. Manual: In this system, the accountant keeps records and makes accounts in the journal
and he/she is responsible for records of accounting (Dalton and et.al 2014). Accountants
should create and calculate the statements for financial accounts.
 Computer based: In this accounting there is an expert and do accounts internally but for
this firms needs an accountant for operating this kinds of software's who knows
accounts in computer.
P2 Different methods used for management accounting reporting
There various methods used for management accounting reporting and these are under :
 Planning for financial: Firm main aim is to increase the profit. So this profit can
be retrieved by a systematic planning of financial data in firms.
 Analysis of financial statement: Balance sheet and accounts of loss and profit are
important in the financial statement (DRURY, 2013). Rate of growth can be
known with the help of financial statement analysis .
 Account for Cost: This displays the cost of information shows in order of products
value and quality, process, and department.
 Analysis of Fund flow: The movements of funds in an organization shows in order
of time period that can be found on the analysis of fund flow.
 Analysis of cash flow: The movements of cash in an organization shows in order
of time period that can be found on the analysis of cash flow. Costing: This
involves two things marginal and standard for costing (Fullerton, Kennedy and
Widener, 2014). In standard, Preset or previously planned cost are alike. It
provides stick for yard for identifying the performance of the actual firm. In
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marginal, it consists of selling fixed prices, use of resources and material in the
best way for making decisions of buying and selling, orders movements, etc.
 Control of budgetary: The assumption of financial requirements for future is
figured out (Galliers and Leidner, 2014).
 Accounting of revaluation: It helps and used for fairs which are returning on
capitals by the employees.
 Accounting for decision making: For business profit, the best profitable decision
is made and taken by comparing the costs and related things.
 System of information management: The flow of communication must think free
for firms and this is important for operations of business.
 Techniques using statistical: Like regression, control quality and least squares etc
are many techniques in statistics for deducing problems of management.
 Cost accounting for historical: This consist of comparing preset plans costs for
evaluating the performance (Ionescu, 2014).
 Analysis of ratio: This is used basically for discharging operations like planning,
communication, controlling, and forecasting.
M1 Evaluation benefits of different management accounting systems and their application
Mangers and CEO of the firm s uses management accounting for keeping records and
reports for viewing financial and managerial information. There are many benefits using of
management accounting like expenses reduce, improvements of cash flow, return of financial
increase and decisions of business.
For reducing the expense, this helps and ensures that lower level of firms and operational
expenses must be reduce (Ismail and King, 2014). The CEO and managers of the firm uses this
data and helps in understanding the business expenses and cost of surviving firm.
In improving the cash flow, it helps to know budgets for future expenditures because
budgets plays major role in management accounting.
Increase in returns of financial , this is also used for increasing the financial cash
returns . Management accounts are made for financial calculation regarding client’s requests,
sales or changes in price in the marketplace of economic.
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The decisions for business is improving the growth and solutions which is taken by the
CEO and managers. This can be also used like a kit of tool.
D1 Critical evaluation of management accounting systems
Various management accounting systems like for manual system can teach the peoples of
inside and outside for the balancing credits as well as debit. But this also consumes lot time for
accounting. Because in manual there is no computer for summarize and categorize the
information , peoples have to do by their own side. In computerized system it gives benefit for
auto summation and other related things (Kothari, Mizik and Roychowdhury, 2015). This
computerized system the learner can not do by their side of work. In single entry there is big
disadvantage that if any single entry is missed in journal or book so it will be loss that entry and
balance will show the incorrect amount. But double entry has advantage that if any one entry is
missed but there is a another same entry which written on other side but this consume a double
time. In single entry this is saving time from two times entry of record. For the companies and
organizations they use computerized system that gives accurate result of accounting.
Various methods for management accounting helps organizations to know and increase
the growth ,process and productivity and services. Like using planning for financial method
helps to reach their aims by planning the financial things for firm.
Analysis of financial statements helps to know the growth of firm. Analysis of fund flow
helps to know the firms fund movements. Analysis of cash flow useful for the organization to
know the movements of cash. Like investments. So this all methods and systems of management
accounting is majorly integrated with an organization.
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TASK 2
P3 Calculating cost per unit under both absorption costing and marginal costing by stating the
difference between both of them. Explaining the way in which the income statements are
being prepared from both of these measures
Calculating cost per unit based on the method of absorption costing:
Calculating cost per unit based on the method of marginal costing:
It is where the total number of units that are being produced is 50, 000. It is however on
the basis of the enumerated cost using both the costing measures of absorption and marginal, as
depicted below-
 Absorption cost= 42*50000 which is equal to 2100000, and
 Marginal cost= 32*50000 which is equal to 1600000.
Wherein, the total cost per unit is assumed on the basis of above carried enumeration.
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 Use of marginal costing approach to create income statement:
 Use of absorption costing approach to create income statement:
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It is therefore on the basis of above carried computation, the costing approach using
absorption is more assistive for Dell where it has accurately identified the significance of
involving the cost of fixed production. Where it has also made a correct determination of
production cost as per an appropriate policy of pricing (Lind 2017). Also, the costing based upon
the method of absorption pricing together supports in assuring the recovery of all relative costs
where such type of costing is also acceptable in source of variable costs. Although, it is apparent
to necessitate Dell to concentrate upon the preparation of pertinent reporting that is indicating the
involvement of various costs while undertaking this particular approach of costing.
On differentiating both these measures, it is apparent that the cost recognition of both
these methods are distinct from one other. It is where in the marginal cost approach, there exists
total two distinct type of costs namely product and period costs. Herein, the variable costs are
assumed as product costs and the fixed costs are interpreted as period costs. Whereas, the
absorption approach of costing refers to only a single cost where both fixed and variable costs
are considered as product cost.
However, both these methods are useful for the creation of income statements and has a
greater contribution in the decision making procedure of the organisations like Dell (). However,
on referring to the present case of Dell, it has been identified that the approach of absorption
costing is more beneficial for them and will duly support them to take cost related decisions.
TASK 3
P4 Advantages and disadvantages of different types of planning tools used for budgetary control
Budgetary control is referred to be a foremost consideration of the organisational bodies
to make an effective utilization of their funds by constantly monitoring their undertaken budget
and making its prompt usage in an undertaken time period of accounting . This process is usually
undertaken using distinct tools of planning with several benefits and drawbacks of each- Incremental budgeting- It is referred to be one of the essential component of accounting
system that duly assists the delegates to make an effective management of their funds
and investments. This type of budgeting is usually done by making small alterations in
the existent budget to create an entirely new budget (Otley and Emmanuel, 2013). A
significant benefit of this method is its easy execution with no complex computation.
However, its incremental nature is a leading drawback where it assumes a prime
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requisition of marginal budgets each year. Dell can together refer to use this approach
to build the value of all its department to balance it all.
 Zero- based budgeting- This type of budgeting is created using a new budget by
initiating from zero. The previous annual budget is not at all considered to administrate
another year of budget. It is also referred to be a justified measure initiating from zero
where the historical numbers are not considered to make an expeditious allotment of
resources (Renz, 2016). A leading advantage of this method is an improved level of
communication among the departments with a coordinated outlook that in turn assists
the workers to effectively manage their work. However, it together has a major
disadvantage where it increases the cost of training and development where the
employees are hereby required to train about this method comprising complex tasks.
A. Calculation of standard cost of PVC sheet
B. Calculation of material price variance
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M3 Use of different planning tools and their application for preparing and forecasting budgets in
the context of Dell
Dell is hereby referred to make a prompt use of the incremental budgeting where their
budget is being prepared and forecasted by making smaller changes in their existent budget
(Way, Nabiha and Jalaludin, 2014). This in turn leads to an effective utilization of their fiscal
resources with no wastage of time as well.
D3 Way in which the planning tools respond appropriately to solving problems in the context of
Dell, leading to sustainable business development
This is apart from the above two identified tools for budgetary control along with their
pros and cons, variance analysis is referred to be yet another effectual tool to evaluate the
presentation of managers with proper assessment of their undertaken practices (Kothari, Mizik
and Roychowdhury, 2015). However, this tool is not specific to the value of raw data which is
referred for the process of decision making. It however requires the actual sum of all business
possession in every domain that in turn leads to a sustainable development of business with an
appropriate resolution of finance related issues.
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TASK 4
P5 Comparison of Dell with HP to establish the way in which the organisations are adapting
management accounting systems to respond to financial problems such as lack of view of
what deals had been sold from a budgetary perspective
Both selected organisations namely Dell and HP are apparent to adopt the systems of
managing accounting as a way of administrating their finances and to resolve the issues related
to it. Wherein, both of these organisations are using distinct approaches to determine a similar
thing where Dell is referred to have a more technical approach that has led to various radical
changes in their business (). With the help of which, they have hereby introduced several new
products and services for their users that in turn depicts their innovational context.
It is therefore on comparing both of these ventures, Dell is more involved in the practices
of developing computers by together selling and repairing them and other technical commodities.
On whose basis, it is referred to be one of the biggest technical corporation in the world that
provisions quality service to its clients and users and is extremely beneficial for the end users.
Whereas, HP on another hand is stated to be the king of laptop industry and is the biggest brand
with highly contending commodities. It is basically due to its variety of services for the users that
are also user friendly in nature where they are also active in the online measures of distribution.
On considering their undertaken system of management accounting, it has been
determined that both these brands are known to use the tact of variance analysis for determining
their budgetary prospects (). This in turn assists them to calculate both actual and standard costs
in accordance to their sold products in the market. It is together utilised for planning the actual
outcomes that are later being measured on the comparative base of performance that are distinct
for both of these organisations.
M4 How responding to financial problems, management accounting can lead an organisation
such as Dell to sustainable success
It is on considering the above adopted system of management accounting where Dell is
referred to use the tact of incremental budgeting. This undertaken measure in turn helps them to
assure the re-enumeration of budgetary prospects to follow various methods to manage the funds
(). It is thus apparent to support the administration to manage all their existent operations within
a stipulated budget with no change in investments. This in turn is evident to help them to respond
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to the fiscal issues arising in the organisation by leading them to attain a sustainable success in
the marketplace.
CONCLUSION
The above report has summarised the accounting system of Dell by highlighting its
undertaken measures to manage the allocation of financial resources at the workplace. On whose
basis, it has further entailed the effectiveness of their adopted methods and the loopholes that are
required to be obviated. Overall, this report has discoursed upon the potency of certain
management accounting systems that duly assists the organisations like Dell to frame effectual
business related decisions.
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REFERENCES
Journals and Books
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Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Dalton, D.W., Harp, N.L., Oler, D.K. and Widener, S.K., 2014. Managing the review process in
accounting research: Advice from authors and editors. Issues in Accounting Education.
31(2). pp.235-252.
DRURY, C.M., 2013. Management and cost accounting. Springer.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices.
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strategies in managing information systems. Routledge.
Ionescu, A.M., 2014. The role of the budgetary system in achieving enterprise performance.
Manager. (19). pp.98.
Ismail, N.A. and King, M., 2014. Factors influencing the alignment of accounting information
systems in small and medium sized Malaysian manufacturing firms. Journal of
Information Systems and Small Business. 1(1-2). pp.1-20.
Kothari, S.P., Mizik, N. and Roychowdhury, S., 2015. Managing for the moment: The role of
earnings management via real activities versus accruals in SEO valuation. The
Accounting Review. 91(2). pp.559-586.
Lind, J. and Lind, J., 2017. The role of accounting for managing innovation processes when
relationships matter. IMP Journal. 11(1). pp.7-24.
Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Way, S.P.T., Nabiha, A.S. and Jalaludin, D., 2014. MANAGING ENVIRONMENTAL AND
ECONOMIC PERFORMANCE: A REVIEW OF THEORY AND PRACTICE ON

PERFORMANCE MEASUREMENT. The International Journal of Accounting and
Business Society. 22(1).
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