Management Accounting Report: Methods, Benefits, and Integration

This report delves into the core concepts of management accounting, emphasizing its crucial role in organizational decision-making and performance management. It defines management accounting and highlights the necessity of robust MA systems, including cost accounting and inventory management. The report explores various reporting methods, such as job cost reports, inventory management reports, and budget reports, detailing their functionalities and benefits. Furthermore, it discusses the advantages of a well-implemented MA system, covering planning, controlling, accounting reports, and efficiency improvements. The integration of MA reporting and MA systems is also examined, showcasing how these elements support informed decision-making. Finally, the report analyzes the usage of planning tools like benchmarking, activity-based costing, and cash flow budgeting, demonstrating their significance in optimizing organizational performance and profitability. The report concludes by summarizing the key takeaways, reinforcing the value of effective management accounting practices.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
A. Management accounting and the requirement of MA system in the organisation.................1
B. Methods of management accounting reports..........................................................................2
C. Benefits of MA system and their application in organisation................................................3
D. Integration of management accounting reporting and management accounting system.......4
PART 2 ...........................................................................................................................................4
Usage of planning tools in management accounting...................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Management accounting is the tool of using financial accounting information to gather,
sort, analyse and manage to take the advantage of information and provide the support to take
the effective and efficient decision to manage and control the organisation performance and its
function. The report present the MA function and the requirement of MA system in the
organisation. It explains the various methods of management accounting report to record the
transaction such as account receivable report, budget report, performance report etc. in the
company. It also explains the benefits of management accounting to achieve the organisation and
goal and objectives and the integration of management accounting system and report. It
highlights the different planning tool such as benchmarking, activity based costing, cash flow
budgeting and break even analysis method to manage and control the organisation performance
and profitability.
PART 1
A. Management accounting and the requirement of MA system in the organisation
Definition : According to IMA (Institute of Management Accountants) MA is the technique or
method to participation in management decision making process and develop the plan and
strategy to measure the performance of management system and provide the expert knowledge
and skills to prepare and control the financial reports. Management accountants also known as
managerial accountants.
Requirement of MA system
The aim of financial accounting is to prepare financial information for the external users such as
lenders, suppliers, creditors etc. whereas management accounting use the financial information
for the internal and confidential purpose to take the effective and efficient decisions to improve
the performance of the company (Kaplan and Atkinson, 2015). The management accounting
system are :
Cost accounting system : It was also known as product costing system. Cost accounting system
is required by the company to estimate and interpret the cost of the product and services to
analyse the inventory, profitability and to control the cost of the company (Weetman, 2019). The
estimation of accurate cost help the company to achieve the target and objective of the company
1

more effectively and efficiently. Controlling the cost of the organisation also help in optimal
utilisation of resources.
Inventory management system : It helps the company to manage the inventory level in the
organisation and regulate the inventory to order the quantity when it needed. Inventory
management system is supply chain management component (Inventory management, 2017). It
works to regulate the flow of products to the manufacturing units to warehouses. The main
function of the system is to record all inflow and outflow of inventory from the factory of
warehouses.
Price optimising system : The system was used by the organisation to analyse the behaviour
and respond of customer towards the different prices of product and services via the different
channels. The analysis of customer behaviour help the company to change the price level and
compete in the market against their customer (Kurniawan and et.al., 2017). It helps to improve
the profitability of the organisation.
B. Methods of management accounting reports
Management accounting report is used to present the financial information for decision making
process and control the cost of the company to manage the organisation productivity and
performance. The different management accounting reports are :
Job cost report : It was used to present the expenses of the company for particular project. It
helps to provide the current position of the job by presenting the cost and revenue of the
particular project (Ammar, 2017). The aim of job costing report is to provide the bucket of
information of each job so the company can analyse that which job is more profitable and which
are not. It helps to focus on t eh job which gives the higher profit to the organisation.
Inventory management report : It is used by the company to record all the inventory level,
labour cost, inventory wastage etc. to measure the performance of each department and compare
the different assembly lines to suggest the essential changes and provide the incentives and
bonuses to that assembly line which perform better in eh company.
Account receivable aging report : It helps to measure the unused credit memos and unpaid
customer invoices. It helps to determine the invoices which are overdue. This report break down
the customer balances to measure the time period of unpaid invoices and credits (Virkkunen,
2017). The balances of the customer are record in different columns like late 30 days, late 60
days etc. It helps the manager to find the obstacles in the collection of debt and account
2

receivable form the customer and help to improve their strategies to manage the accounts more
effectively and efficiently. The regular analysing of report also help the account department to
control and measure the old debts.
Budget report : It is and internal report used by the management team to compare the estimated
budget of the company to standard budget. It helps to analyse that how effectively or closely a
company is able to achieve the target within the predetermined budget. The comparison of the
budget help to focus on the activity which create the higher difference and manage them to
achieve the target within the cost and budget.
C. Benefits of MA system and their application in organisation
Planning : MA accounting system helps to plan the activity execute them into the same manner
to accomplish the organisation target. To prepare the plan of the organisation various
departmental budget are also prepared. It helps the company to performing the task section wise,
department wise and within the proper plan so the company can achieve the mission of the
organisation. The planning function of the MA system help the company to prepare the strategy
and execute them to get the exact result what they want from their employees and customer.
Controlling : Management accounting also help to control the cost and expenses of the
organisation. The comparison of budget and performance provides the variation in the activity
and help to focus on the different aspects to enhance the productivity (SUHAIMI and et.al.,
2016). Standard cost and budgetary control help the company to control the activities and cost.
Accounting reports : MA system prepares the different accounting report such as budget report,
account receivable report inventory and manufacturing report etc. which help to support the
decisions of manager and take the initiative to develop the different strategies and plan to
improve performance. MA system is also useful for preparation of reports and provide the brief
knowledge to the stakeholders of the company.
Efficiency improvement : MA system eliminates the various kind of wastage, defectives and
production and control the activity to improve the efficiency of the organisation and their
employees (Akkermans and Van Oorschot, 2018). It also motivates the employees to work
toward the organisation goal and increase their morale by providing the rewards and incentives
on the basis of their performance.
3

D. Integration of management accounting reporting and management accounting system
Management accounting system is an important part for the management accounting report. MA
system provides the various information to record and maintain the transaction and analyse the
performance of the company (McVay, Kennedy and Fullerton, 2016). It helps to take the
effective and efficient decisions and prepare the various plans and strategies to provide
appropriate information to the internal stakeholders. The preparation of management accounting
report help the company to evaluate the company position in market in regular intervals. MA
system provides controlling tool to the MA reporting to control and measure the cost of the
company. It also provides various techniques such as benchmarking, cash flow budgeting etc. to
control organisation activity. It also helps to compare the performance by the setting various
benchmark (Laudon and Laudon, 2016). Management accounting report such as Budget report,
account receivable aging report etc. help the accounting system to provide the information to the
stakeholders about each and every transaction for different accounting period which help them to
compare the performance and growth trend of the company. The different kind of information
such as sales, revenue, profit, cash flow help to estimate the cash position, expenses and real
situation of the company that it is able to manage the expenses or not.
Management accounting system gather the information from different sources and sort them to
provide the brief knowledge about the company to save the time and cost of the management to
prepare the plan and strategy and make the effective decision to accomplish organisation
objectives and growth.
PART 2
Usage of planning tools in management accounting
Benchmarking : It is the process of comparing the performance, procedure, policies and
products of the company to the other company standard and performance. Benchmarking system
provides the different opportunities to improve the performance of the company and its
employees. The difference in the standards and actual performance or process provide the
various subject area to focus on them and develop the performance improvement plan. The
benchmarking system help to analyse that whether a company is able to manage the activities
and control the cost to improve the performance or not. Benchmarking system is also used when
the company perform the similar operation. Company can evaluate the performance of each
location and place and rank them according to their performance. It helps to develop the team
4

building and motivate the employees to accomplish the standard or benchmark to get the higher
result.
Activity Based Costing : This method is used by the company to identify the various activities
perform by the company and assign the cost of to each activity or all product and services
according to their consumption level. It helps to focus on the cost driver or the activity which
generate the higher cost in the company. It can be used as an alternative of absorption cost which
aims to provide the useful data to the managers to evaluate product performance and net profit of
the company. It provides the more accurate pricing decisions and product or service costing
method. The elimination and allocation of overhead can be done by appropriately by using the
ABC method. It supports the different performance management tools and techniques such as
scorecard, benchmark etc.
Cash flow budgeting : The aim of cash flow budget is to estimate all cash expenditures and cash
receipts which are occurred in particular time period. It helps to estimate the finance required by
the company to fulfil the organisation objectives. The cash flow planning helps to avoid the short
term debt and manage the organisation activity by regulating them in proper tome intervals. The
aim is to focus on the money movement rather than to income or profitability. It helps to
focusing on the organisation plan and produce the income to meet the requirement of cash. It
provides the information regarding the operating profit and credit and the requirement of loan to
accomplish the project (Weygandt and et.al., 2018). Cash flow budgeting help to communicate
the project accomplishment plan to the money lenders or the internal management like the
employees and workers to achieve the target and goal on time.
CONCLUSION
It can be concluded from the report that the different accounting system such as cost accounting,
inventory management, job costing etc. help to improve the performance of the organisation by
assigning the cost to the different activities and evaluate their performance by different measures.
The accounting reports like budget report, inventory management report, job costing report help
to prepare the plan and record the transaction in the report to take the effective measure for the
decision making process. The MA system provide various benefits to the organisation to
calculate the accounting information and take the decisions on the basis of information. It can
also be concluded from the study that the different accounting tools help the company to prepare
the plan and control and measure the productivity of the organisation.
5

REFERENCES
Books and Journals
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Weetman, P., 2019. Financial and management accounting. Pearson UK.
Kurniawan, Y., and et.al., 2017, November. Accounting information systems implementation:(A
case study approach). In 2017 International Conference on Information Management
and Technology (ICIMTech) (pp. 294-299). IEEE.
Ammar, S., 2017. Enterprise systems, business process management and UK-management
accounting practices: Cross-sectional case studies. Qualitative Research in Accounting
& Management, 14(3). pp.230-281.
Virkkunen, J., 2017. Surpassing Functional Bureaucracy with Management by Results–
Experiences in Finnish State. New Frontiers in the Public Sector Management: Trends
and Issues in State and Local Government in Europe, 69. p.271.
SUHAIMI, A., and et.al., 2016. Impact of Enterprise Resource Planning on Management Control
System and Accountants’ Role. International Journal of Economics &
Management, 10(1).
McVay, G., Kennedy, F. and Fullerton, R., 2016. Accounting in the lean enterprise: providing
simple, practical, and decision-relevant information. Productivity Press.
Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson Education India.
Akkermans, H.A. and Van Oorschot, K.E., 2018. Relevance assumed: a case study of balanced
scorecard development using system dynamics. In System Dynamics (pp. 107-132).
Palgrave Macmillan, London.
Weygandt, J.J., and et.al., 2018. Managerial Accounting: Tools for Business Decision-making.
John Wiley & Sons Canada, Limited.
Online
Inventory management. 2017. [Online]. Available through :
<https://searcherp.techtarget.com/definition/inventory-management>
6