Management Accounting Report: Systems and Techniques Review

This report provides a comprehensive overview of management accounting, detailing its principles, systems, and techniques. It begins with an introduction to management accounting, emphasizing its role in providing relevant information for effective decision-making and considering the time value of money. The report then explores key principles such as accounting for inflation and absorption overhead costs. It delves into various management accounting systems, including Inventory Management Systems (IMS) and Cost Accounting Systems, highlighting their requirements and roles. Furthermore, the report discusses Job Costing Systems and Price Optimization Systems. It covers management accounting reporting techniques like Cost Accounting Reports, Inventory Reports, Debtors Ageing Reports, and Performance Reports. The report then compares and contrasts marginal costing and absorption costing, providing income statements for each. It concludes by discussing the integration of management accounting within an organization and its benefits, such as improved inventory management and cost control. The report concludes by emphasizing the vital importance of management accounting for organizational success, supported by references to academic sources.

MANAGEMENT
ACCOUNTING

Table of Contents
• Introduction
• Report
• Conclusion
• References

Management Accounting
• Management accounting provides useful and only relevant information to
the management, so they can make fast and more efficient decision.
• It also considers the time value of money so the future of any project can
be estimated.
• It will help to make optimum utilization of resources analysing cost per
unit and reducing the wastage by proper forecasting.

Management Accounting Principles
• Accounting for inflation and forward-looking
approach - In management accounting, when a new
project is prepared it always considers time value of
money with inflation rate.
• Absorption overhead cost- Overhead cost are
absorbed on any predetermined basis. So the rate for
the absorption is fixed and the overhead cost can be
allocated accordingly.

Role of management accounting systems
Inventory Management System
• IMS is important MA system that enables the company to keep record for every movement of
inventory within and outside the organisation that has not been sold.
Requirements
• IMS is required for tracking all the stock movement to and from production house to
warehouse and sales.
Cost Accounting System
• It refers to the tool that helps to determine actual cost associated with manufacturing of
products or providing services.

Role of management accounting systems
contd..
Job Costing System
• JCS is referred as process that accumulates information about costs and expenses that are
associated wit particular products or services.
Required
• It is required to compute all the costs such as raw materials, labour and production related
with particular job.
Price Optimisation System
• The process is used to find sweet spot pricing or the maximum prices against customers that
they are willing to pay.

Management accounting reporting
techniques
Cost Accounting Reports
• It contains the information related to all the costs incurred by firm over the period.
• Report provides detailed lists of variable and fixed expenses that are incurred
related to products.
Inventory Report
• Report comprises of all the details and information regarding the stock.
• It helps the management to identify the purchases, consumption and the closing
stock.

Management accounting reporting
techniques contd..
Debtors Ageing Report
• The report states about the debtors of company over the period.
• The report states the debtors based on their time period.
Performance Report
• The report states about the performance of employees in organisation.
• The report is prepared based on the benchmarks and targets that are kept by
company to be achieved within given time frame.

Different cost accounting techniques
Marginal Costing
• Marginal costing is a part of costing techniques where the marginal cost(variable
cost) is charged to the coat per unit and the fixed cost of the period is written off
against the contribution.
Advantages
• Marginal costing helps in the preparation of the budgetary policy of the company.
Disadvantages
• Excluding fixed cost is not relevant for the inventory that is in work in progress.

Marginal Costing
Income statement as per Marginal Costing
Particulars May June
Sales Revenue 25000 18750
Marginal Cost of Sales
Direct Materials 6000 4800
Direct Labour 4000 3200
Variable sales commission 500 375
Variable Production Overheads 2000 1600
12500 9975
Add:
Opening Stock 0 0
Less:
Closing Stock 0 600
12500 9375
Contribution 12500 9375
Fixed production overheads 2000 2000
Fixed selling cost 1000 1000
Fixed administration cost 3000 3000
Net Income 6500 3375

Absorption costing
• Absorption costing is the process in which all the cost that are included in the production
are merged together to find out the overall cost of production and the level of the
inventory
Advantages
• It shows the relationship between increase of revenue and decrease in cost of sales.
• Best for smaller company.
Disadvantages
• It will make cost volume profit (CVP) analysis difficult to use because it inculcated the
fixed cost.

Absorption costing
Income statement as per Absorption Costing
Particulars May June
Sales Revenue 25000 18750
Cost of Sales
Direct Materials 6000 4800
Direct Labour 4000 3200
Variable Production Overheads 2000 1600
Fixed production overheads 2000 1600
14000 11200
Add:
Opening Stock 0 0
Less:
Closing Stock 0 700
(Under)/over absorbed Fixed prod o/h 0 -400
14000 10900
Gross profit 11000 7850
Fixed selling 1000 1000
Fixed administration cost 3000 3000
Variable sales commission 500 375
Net Income 6500 3475

Integration of management accounting within
organisation
• The MA play an important role in the operation of organisation.
• It involves number of processes and systems that allow the company to
efficiently manage the activities.
• The integration of MA with other organisational operations is essential to
increase the efficiency of each process.
• For example, the Inventory management system generates report about the
inventory periodically as per requirement that is used by the management
to make business decisions.

Benefits of functions to organisation
Inventory management System
• The system provides a simplified version of the inventory
management through software.
• Use of IMS enables the company to reduce the risk of overselling.
Cost Accounting System
• The system enables company to identify the profitable as well as
unprofitable company.
• Management uses the cost reports to prepare budgets for future and
reference.

CONCLUSION
• It could be concluded from the above report MA has vital importance in
the success of organisation.
• It allows the firm to manage all its operation and process in defined and
structured manner.
• The reports generated by MA allows the management in making informed
decisions essential for the growth and success or organisation

REFERENCES
• Abdusalomova, N., 2020. Principles of ties of internal control and management accounting
systems at the enterprises of black metallurgy. Архив научных исследований. (2).
• Novas, J.C., Alves, M.D.C.G. and Sousa, A., 2017. The role of management accounting
systems in the development of intellectual capital. Journal of Intellectual Capital.
• Laguecir, A., Kern, A. and Kharoubi, C., 2020. Management accounting systems in
institutional complexity: Hysteresis and boundaries of practices in social
housing. Management Accounting Research. 49. p.100715.
• Amara, T. and Benelifa, S., 2017. The impact of external and internal factors on the
management accounting practices. International Journal of Finance and Accounting. 6(2).
pp.46-58.

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