Management Accounting Report: Types, Methods, Benefits, and Tools

This report provides a comprehensive overview of management accounting, delving into its various types, including cost accounting systems, job costing systems, and price optimization systems. It examines different management accounting (MA) reporting methods, such as budget reports, account receivable aging reports, performance reports, and cost managerial reports, highlighting their significance in strategic decision-making and performance evaluation. The report further analyzes the benefits of a management accounting system, emphasizing cost control, profitability analysis, and efficient resource utilization. It also critically examines the role of management accounting in budgetary control, with a focus on planning tools such as benchmarking and activity-based budgeting, discussing their advantages and disadvantages in enhancing organizational performance. The content underscores the importance of management accounting in providing internal stakeholders with crucial financial insights for effective business operations and strategic planning.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
PART 1........................................................................................................................................3
P 1. Types of management accounting........................................................................................3
P 2. MA reporting methods..........................................................................................................4
M1. Benefits of management accounting system........................................................................6
D1. Critically examine the management accounting system and reporting.................................7
P4 Planning tools used for budgetary control..............................................................................7
M3 Preparing and forecasting the budgets...................................................................................9
D3 Evaluating the effectiveness of accounting tools to solving the financial problems...........10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is a process of effectively determining the cost and operation s
of the business. It is very useful in preparing various internal financial records and reports which
in turn aids to strategic decision making. This study focus on determining the different types of
management accounting system and various methods used for MA reporting. This study will
further analyse the various planning tools which are effectively used in MA.
TASK 1
PART 1
P 1. Types of management accounting.
Management accounting
Management accounting (MA) is referred to as the process of evaluating the internal
functioning of the business in order to make strategic decision by effectively interpreting the
various management accounting reports (Shields, 2015). It is very crucial for internal
stakeholders like managers, employees, boards of directors, etc. in order to attain set goals and
objectives of an organization.
Management accounting systems
It is an effective system which helps in devising plan, take decision and provides
expertise in controlling and assisting management in order to attain higher operational goal and
sustainability (Nitzl, 2016). These systems are integral internal financial reports which in turn
helps in strategic decision making. Therefore, this is the accounting application which
maintained the records of company transaction and helpful in measuring the profitability and
revenue turnover. Besides that, it is grateful and provoking the accounting system and also give
the accurate results. Management accounting system calculate the internal transactions that uses
to measure and evaluate the its processes for the management of the organisation.
Cost accounting system: This MA system is also known as product costing system. It is
very useful in effectively estimating the cost of the particular product. It is very useful in
controlling cost, inventory valuation and profitability analysis (Hall, 2016). It helps in providing
up to date data related with the cost of the particular product. In other words, cost accounting is
the useful system which mainly taken by the manufacturers to record production activities.
Therefore, it also assist in tracking the flow of inventory continually through the various stages

of production. Further this system divided into parts Job Order costing and Process costing
system.
Job costing system: This system is useful in determining the cost of manufacturing
particular unit of output. It helps in keeping track of the particular revenue and cost in order to
assess the profitability of the particular job. It is very useful in accumulation of cost related with
the labour, material and other expenses in order to determine the cost of the particular job. Job
order costing is a system for assigning and accumulating manufacturing costs of an individual
unit of output (Ax and Greve, 2017). This system of accounting use when the company produced
the multiple products with significant cost. Such system or information kept as the subsidiary
ledger. This system is useful to measure the important measure activity and analysing the best
formulation task.
Price optimization system: This technique is useful in effectively analysing how
customers will respond to the change in the price for the particular products or services
(Bobryshev and et.al., 2015). It is a mathematical analysis which is carried by the company in
order to critically analyse the demand of the product and services in the market. Price
Optimization is the use of mathematical analysis by a company to determine the how consumers
will help to respond to different process for its products or services. This system helps in the
prediction of behaviour of potential buyers to different prices of a product or services. This
system is highly useful to measure the product demand at different price standards which is very
fruitful for the business to know and take corrective action plan in this context.
P 2. MA reporting methods.
Management accounting reporting is useful in providing all the necessary information
which helps managers in taking necessary decision. It is very useful in regulating the activities of
the employees in the organization and measure performance in order to attain set goals and
objectives (Christ and Burritt, 2017). It is very useful for managers in highlighting certain
patterns by analysing the particular data.
Budget report
This MA reporting is useful in effectively analysing the actual budget with the pre-
determined budget plan. A budget report is prepared by critically taking into consideration past
experience of the particular project. Budget report is useful in listing out all the sources of
earning and and expenses (Malina, 2017). An effective budget report is useful in catering

unforeseen circumstances. Management accounting budget report is useful for managers in
effectively offering better employee incentive, renegotiate terms and cut cost. Budget report is
very useful in critically evaluating the cost of the business and take necessary measures to
control the cost.
Account receivable aging report
This report is useful in effectively managing the cash flows of the company in a
systematic and accurate manner (Nielsen, Mitchell and Nørreklit, 2015). This report is useful for
the company as it helps in determining the problems associated with the company's collection
procedure. It helps in effectively managing the funds by tightening the credit policies. This
system helps in effectively determining the defaulters of the creditors in the company. This
helps company in critically making decision regarding credit extension for the particular
company. It helps company in keeping the collection department from overlooking the debts.
Performance report
This managerial accounting report is useful in reviewing the performance of the
organization. It helps in establishing in managing the various departments of the company in
order to make strategic decision (Qian, Hörisch and Schaltegger, 2018). Performance related
managerial report helps in offering deep insight on the working of the company. It helps in
determining the operational activities of the organization and it helps in effectively determining
the performance of the employees in order to carry out particular task. This ion turn helps
managers in rewarding them for their exceptional performance. This report is very vital for the
company to keep an effective measure of the strategy towards the set mission. Performance
report is useful to collect and disseminate the performance of the particular project. It helps in
tracking the activity of the employees over a particular period of time.
Cost managerial report
This report is useful in computing the cost of the particular task. It helps in determining
the cost related with labour, expenses and material (Kokubu and Kitada, 2015). This helps in
computing the cost associated with manufacturing of particular products and services. This offers
a summary of all the cost associated with business in order to make necessary decision for higher
operational growth and productivity. Profit and loss margins of the company are estimated,
controlled and monitored. This helps in predicting the overhead cost, inventory waste and hourly

labour cost. They offer an accurate understanding of the expenses which in turn is useful in
optimum utilization of the resources at various departmental levels in the organization.
M1. Benefits of management accounting system.
It helps in determining the various advantages of the management accounting system
which mainly includes:
Cost accounting system
 It helps in controlling cost of the company which in turn helps in critically examining the
factors which leads to higher cost to the company (Granlund and Lukka, 2017) . It helps
in classifying the cost into various factors by effectively controlling the various cost of
the company.
 It is very useful in effectively determining the unprofitable activities of the company. It is
very useful for the company in determining the profitable and non- profitable units of the
company.
 It is very useful in maintaining optimum stock level by effectively controlling the
materials and restocking (Advantages and Disadvantages of Cost Accounting, 2019). It
helps in maintaining economic re-ordering levels and quantities. This MA system helps in evaluating reason for loss which aids in future planning. It is
very critical in determining the cost of the particular manufacturing process.
Job costing system
 This system is very flexible as it helps in assigning cost to particular individual
operations. This system is very useful in effectively handling custom orders in order to
gain detained statistics related with the particular manufacturing operations.
 This system is useful in assessing the performance of the individual employee in terms of
efficiency, cost control, productivity, etc. This tool is useful in analysing the employees
who in turn fail to meet the employee expectation (Lachmann, Trapp and Trapp, 2017). It is very beneficial in accessing the expenses of each job. It helps in effectively
monitoring the production process by effectively identifying potential issues.
Price optimization system
 This tool is useful in determining the effective price for the particular product in order to
gain higher demand for the products and services. This in turn leads to higher
profitability and productivity for the company.

 It is very useful in predicting the most profitable units for the firm in order to make
strategic decision accordingly. It is very useful for the company to demonstrate the
prices of the particular product across various channels with the change in the market
trends.
 It is very useful in automating the task and in turn helps in reducing human error. It is
useful in quick and better decision making.
D1. Critically examine the management accounting system and reporting.
Richardson, (2017) sought to determine the fact that, managerial accounting budgeting
report takes into consideration past historical data and take necessary action to attain the
budgeted information. These managerial accounting information is useful in taking strategic
decision. On the contrary, Coad, Jack, and Kholeif, (2016) argued that, managerial accounting
system is very useful in integrating such system into the company, as it is very useful in
continuous improvement. Companies should focus on measuring the cost of the particular
product and services. It is very useful in effectively measuring the quality related cost in order to
effectively build great products and deliver high quality services.
In other words, management accounting system is a provisions of accounting which kept
in a proper report to maintained the accounting records and business data. It makes the study
more comfortable the more analysing situational context. This is the practical and financial
process to evaluate the data or information with different accounting tools and techniques.
P4 Planning tools used for budgetary control
Benchmarking : It is the process of making comparison of organizational procedure,
policies, processes and products for budgeting with standard measurement and with other
organization of same industry. It identifies the opportunities for improvements in performance
by considering the past results.
Advantages of benchmarking:
 To enhance work quality: By standardizing the organizational operations the chances of
error get reduces and there is improvement in overall quality of output which predicts the
growth of organization while preparing budget(Klychova and et.al., 2015).
 Improves the efficiency: This process of standardization of working of organization
motivates to perform better with fewer mistakes . This enhances the overall efficiency
towards earning higher amount of profit.

Disadvantages of benchmarking:
 Lack of information: if sometimes organization not able to collect the adequate
information related to benchmarking then it will cause a improper and inadequate
comparison of performance of organisation with the competitors or standards while
budgeting the process.
 Lacking in understanding: They become fails in understanding their weaknesses because
of adoption of benchmarking or focusing on functioning of their competitors in budgeting
process.
Activity based budgeting: This the costing method which used the records, research and
analysis of activities which leads to the costs in organization. This is the more accounting
method of budgeting recognizes the adjustments in previous budgets by as per the inflation and
business development(Eldenburg and et.al., 2019).
Advantages of activity based budgeting:
 This method creates more control over the activities related to budgeting process. It
helps the management in taking the quality decisions by understanding the nature of each
and every activity.
 Revenues and expenses planed at their precise level which is useful in detailed
projections. This is helpful the management to focus on the value adding activities rather
than non value adding activities while budgeting(Soderstrom, Soderstrom and Stewart,
2017).
.
Disadvantages of activity based budgeting:
 This is very much expensive in implementation and in maintaining the traditional
techniques of budgeting . Those companies which are producing only few or one product
then this method not become applicable on these companies.
 This is the more time-consuming process of budgeting. For preparation of these type of
budgets required some additional assumptions which affect some budgeting accuracies.
Break even analysis:
This is the tool for budgeting the revenues equal to the cost. At which point the organization
recover their fixed cost to earn the revenues. It determines the number of units sale to recover
the costs(Klychova and et.al., 2015).

Advantages of break even analysis:
 This helps in improvement of profit performance. It enables the organisation to measure
the profit and loss of production and sales at different levels. By increasing the volumes
and selling price of products and decreasing the variable cost and fixed costs of product
and services.
 This helps in getting the amount of contribution by deducting variable cost from sales. It
predicts the changes which affect the sale price.(Jamil and et.al., 2015)
 So, the profit earning capacity of the organisation determined. It analyse the relationship
in fixed and variable cost.
Disadvantages of break even analysis:
 It is dependent on some assumptions which are the price of goods remain unchanged
although the fluctuations in cost is considered while budgeting . In break even analysis
not complying any proper policy for classification of costs.
 This creates a disadvantage because the variable cost is not always the same.
M3 Preparing and forecasting the budgets.
 Benchmarking: While preparing budgets through adoption of benchmarking method
organization review the standard budget and competitors budget(Eldenburg and et.al.,
2019). They regularly monitor the finance and performances related to budgetary control.
Organization considers the growth areas, cash flows and profits.
Forecasting the budgetary planning tools is used for better future performances. By using the
trends of past performance projected for future with the changes related as per the internal and
external changes. It helps in taking decisions quickly for maximizing the ability in implementing
and executing the goal of organization(Soderstrom, Soderstrom and Stewart, 2017).
 Break even analysis: when preparing budget based on break even analysis for
determination of the cost structure, the number of required to sold for covering the cost
and making profit. This is the important aspects for business planning.
This method help in forecasting the net profit required as per the total revenues and total cost.
Organization is able to make a forecast of number of units required to produce for zero amount
of profits. Forecasting is made for collecting profits after recovering cost at break even point for
production and sells(Jamil and et.al., 2015). Forecasting of budget is made according to the
amount required to be charged from customers for every unit of product and services. Pre

assessment is made for the sum required for production of first unit of a product. Which does
not vary with the increase or decrease in new capital expenditure.
D3 Evaluating the effectiveness of accounting tools to solving the financial problems.
Accounting tools are useful to develop financial solutions. In other words, accounting is
one of the most important department of any organization which has to be managed in very
proficiently. Accounting tool can helps to secure the time and accuracy which will help in
smoothly process of an advanced system (Watson, 2015). Financial tools and techniques are the
incredible features which helps to get access in anytime-anywhere that helps to manage the
system properly. Such kinds of sophisticated technologies have now made the accessibility to the
entire accounts database for an employee within the organizations. Since there is lot of happen
measure in laws and provision to comply with and involvement of complicated calculations. So
with the help of measuring calculations and tools these issues quickly resolved with high
accuracy. Some online tools can automatically detect the accounting errors. Such kinds of
support can help to be more effective and influencing in different context. Accounting tolls
completely eliminate the necessity of hiring a bookkeeper or additional time for checking the
accuracy of all the books and invoices (Schaltegger and Burritt, 2017). Furthermore, in spite of
being fully accomplished applications and accounting tool it is more influencing and generating
the best productive output.
CONCLUSION
From the above conducted study it has been concluded that, Management accounting is a
process of effectively determining the cost and operation s of the business. It will help in
determining the various budgetary control tools.

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Online
Advantages and Disadvantages of Cost Accounting. 2019. [Online]. Available through:
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