Management Accounting Report: Systems, Costs, and Budgetary Control

This report provides a comprehensive overview of management accounting, focusing on its essential requirements and various systems. It explores the role of management accounting in financial planning, forecasting, and profit maximization within an organization. The report delves into different types of management accounting systems, including price optimization, inventory management, cost accounting, and job costing, highlighting their applications and benefits. It also examines cost calculation methods, such as marginal and absorption costing, and the use of planning tools for budgetary control, along with their advantages and disadvantages. Furthermore, the report assesses the effectiveness of management accounting systems in resolving financial problems and concludes with a comparison of different systems to enhance decision-making within organizations, using Eastern Engineering Co Limited as a case study.

Management accounting

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
P1Management accounting and its essential requirements of different types of management
accounting systems.................................................................................................................1
P2 Methods used for management accounting reporting.......................................................5
P3 Calculating costs using suitable methods of cost examination to make an income
statement using marginal and absorption costs................................................................6
Absorption costing..................................................................................................................7
P4. Several types of planning tools applied for budgetary control along with benefits and
drawbacks...............................................................................................................................8
P5. Management accounting system effectiveness to resolve problems................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is described as the component of an organization that is directly
responsible for managing the accounting information system's provisions and assisting
stakeholders in determining the organization's present financial situation through the
management of various types of accounts (Zeng and et. al., 2021). This current report is going to
illustrate about the company which is known as Eastern engineering co Limited organization.
Along with this, report going to explain about the management accounting concept and the need
of several kinds of Management Accounting system in the organization. in addition to this there
is a description and use of practical electrician in order to describe about the absorption and fixed
cost which is implement by the company. In the end of this current report there is an explanation
which is associated to the advantages and disadvantages of several budgetary control equipments
and also there is a comparison among system in order to respond several financial problems by
using two organizations.
MAIN BODY
P1Management accounting and its essential requirements of different types of management
accounting systems
Management accounting is the process and described as the procedure of the organization
which is associated to the identification and valuation of several accounts in order to identify
about the financial position of the organization. Along with this Management accounting is used
for management of sunrise in the organization. In context of choose an organization Management
Accounting can be described as a concept and system that provide appropriate procedure towards
the company in order to record their several account so that the company analyze about their
current position in order to achieve their goals and objectives.
According to the CO Limited organization Management accounting is the department of
management that is associated with management of financial and about cost account of the
company that support the company to take several kinds of decisions which is associated to
planning and in improving the performance of the company (Adam, Soliman and Mahtab, 2021).
This kind of system is linked with the current position of the company because it caters the
evaluation and analyzation and financial accounting system of the organization that our prime
standard for the company in order to identify about the financial condition of the company.
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Management accounting is the procedure which also used and associated with the controlling
and monitoring the cost of several products and services which are provided by the company.
Management Accounting is the process of recording information about the organization in order
to make appropriate and effective decision in the organization. By monitoring analyzing and
determining data to manager it support the company to achieve their goals and objectives in an
appropriate manner. There are few characteristics of Management Accounting which are very
important for the organization.
Assisting in forecasting the future: It provides assistance for the organization in order
to forecast their decision. Forecasting is the concept that supports the organization to take
decisions and provide solutions to the questions of their consumer. There are several questions
which are like this organization is spending more money on their quality? It is important and
mandatory for the company to expand their organization operations and areas and many more
Profit maximization: Management accounting aids an organization in maximizing profits since it
is concerned with the company's cost management, which it employs in a variety of operations.
With the aid of cost organization management, the true quantity of profit as a financial position
of the firm within the market may be simply identified (Antonelli and et. al., 2021).
Forecasting of cash flow: Financial planning and the impact of working capital on a
company's bottom line cannot be emphasized. Considering where a company's future
expenditures and earnings will aid in choosing the next steps.
As the organization owners using Management Accounting in order to take effective
decisions in the organization first of their practices and activities of analyzing and monitoring
information towards the management system support the organization to achieve their goals and
objectives in an appropriate manner. Management accounting also known as cost accounting.
Financial manager using but this in order to identify the company business scheduled.
Performance measures are adopted by the company in order to monitor the gap among the actual
and allocated funds and reserve (Cuadrado-Ballesteros and Bisogno, 2021).
Principles of management accounting
Compiling and designing: This activity supports accounting data declaration and many
kinds of information which is associated to the Future present and past result should be collected
and Design by the organization in order to meet the requirements of every company and every
problem. This kind of things implies the accounting information system is set up in appropriate
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manner which is displayed. This method is used by the organization in order to meet the
requirements of the company and get more success.
Exceptional management: When communicating with management, the term
"administration by exception" is utilized. It denotes the use of a financial management system in
addition to traditional costing methods in management accounting. The actual performance is
compared to a predetermined one in order to discover discrepancies.
Costs of Overhead Absorption: Expenses for overhead are subtracted on a regular
basis. Indirect supplies, indirect costs, and indirect expenses make up the operational costs. As a
result, the strategy or strategies for absorbing overheads adopted must fulfill the intended goals
in the most equitable manner feasible.
Accounting Control at the Source: Reduce expenses at the place of occurrence is the
most efficient technique (source accounting). Individual worker efficiency, material issues, and
the use and abuse of money such as machinery, electricity, maintenance and repairs, vehicles,
and so on are all collected using primary and secondary data. Employees, materials, and
production equipment may all be monitored using this approach.
Accounting for Inflation: For a profit to be considered realized, the money must be kept
in actual terms. It indicates that the value of money changes over time. As a result, revaluation
accounting is anticipated to assess the amount of capital provided by the company's shareholders
in terms of current market value. When evaluating a company's real performance, the pace of
growth is taken into consideration in this way (Damerji and Salimi, 2021).
Difference between Management accounting and financial accounting
Financial accounting Management accounting
Financial accounting is a procedure that aids in
the production of reports that are commonly
utilised by other parties, such as consumer’s
lines and many others.
Management accounting is a procedure that
involves the creation of a report that is utilized
by management to make more reasonable and
better decisions in the business.
The accounting process in an organisation is
what financial accounting is all about.
It is a broad notion that is more difficult to
apply in a corporation's parts or divisions..
Management accounting systems come in a variety of forms
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Price Optimization system: This is the system of Management which is used by the
organization in order to calculate instrument which are directly associated to the managing the
performance of the accounting system in the organization. Price of the messaging system is
adopted by the organization in order to analyze about the response of the customer behavior and
use the customer behavior in order to manage the prices of the goods and services which are
provided by the company (Hansen, Mowe and Heitger, 2021). It is the appropriate method for
the organization because it supports the company to analyze about the price of the goods and
services and also analyze the actual cost and expenditure which is engaged in manufacturing of
products and services. The aim of the price Optimization system is to enhance the profitability of
the company by adopting and using several effective pricing Strategies and Framework for the
goods and services which are provided by the company. Use and implication of the Price
optimization system can be made by Eastern engineering co Limited organization as keeping a
check on the level of demand is vital for this firm as it helps in focusing on how the demand
varies as per the change in price level which is effective in facilitating a perfect balance between
cost and price of the product offered by Eastern engineering co Limited organization which will
provide the maximum level of profits (Pavlatos, Kostakis and Digkas, 2021).
Inventory management system: Inventory management system is the concept which is
very essential for the company in the marketing accounting system because it is associated to
concentrating on organization products by managing their inventory and categories the inventory
into finished and final products and services. Under this kind of services the organization is using
investor system by adopting several Software and Hardware. This kind of software include pre-
determined procedure in order to manage the inventory and several kinds of methods like FIFO
and LIFO which is stand for first in first out and last in first out. This kind of methods is used by
the company in order to manage the inventory management system in the company. An analysis
can be made that the sue of inventory management system is also vital and effective for the
Eastern engineering co Limited organization as provides and ensure an effective check on the
supply of material and resources to ensure improved services and better product for clients and
customers.
Cost accounting system: Cost accounting is the method which describes the path and
portion of the management accounting which is associated to identification of the entire cost of
the product identification of several factors within the company. It is important and necessary
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portion of the company in order to adopt a cost accounting system in the organization it support
the company to analyze about the entire manufacturing cost by adopting different kind of cost
method (Levantesi, Nigri and Piscopo, 2021). There are several different method of costs like
operating cost absorption because variable cost fixed cost them several more. Management
accounting is the concept and style which engage several kinds of diagram and charge. The
management accounting system and the cost accounting system includes says chat marginal cost
that support the complete to analyze about the cost which is associated to the goods and services
and manage the performance of the company by identify the cost. It is also an vital form of
accounting system for Eastern engineering co Limited organization as it provides and supports a
vital framework for calculation of proper cost of a product and services with the help of proper
inventory valuation that ensures better analysing the profitability and cost efficiency level of the
organisation.
Job costing system: It is a kind of Costing system which engage identification of the
costs and expenses which are incurred by the company. These kinds of expenses are associated
to the enhancement of the goods and services in context of activities which are conducting in the
company. This kind of practices include sales of goods buying of goods and several more
operations and practices in the company. It Act as an essential system in the management
accounting system because there are several Industries like manufacturing which are highly rely
on the job costing system. In context of job costing system The Chosen organization is using this
in order to analyze about the cost which is engaged in particular practices this kind of activities
support the organization to decide the price of the goods by maintaining the compensation
towards the labors and other factors which is in guest in the practices. Adoption of this, job
costing form of accounting by Eastern engineering co Limited organization provides an effective
method which are adopted by the company are helping the company to analyze the actual profit
of the company by analysing the revenues and expenses and product and services which are
offered by the company (Du, 2021). Management accounting is the process with great impact on
the company and represents the appropriate system within the Management Accounting in order
to identify the actual position in the Marketplace.
P2 Methods used for management accounting reporting
Management accounting reporting
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Accounting reports can be described as an important part of the company with describes
the performance of the organization. In context of the chosen organization it is very important for
the company to produce appropriate accounting reports in every department so that they can
analyze the current position of the organization. The accounting reports can be described as a
financial status of the company which is associated to the presentation of the data over a specific
period of time. These kind of reports rely on definition information which is adopted by the
company in order to fulfill the data which is associated to the transactions operations cost
product and many more. These kinds of reports are very important for the company as well as for
the managers in order to take the decision in an appropriate manner. There are several kind of
accounting reports which are mentioned below:
Budget report: This is the report which can be described as the most important report
within the company which includes managerial accounting system. These kinds of reports are
very important for the company’s owner in order to analyze and control the cost and overall
enterprise (Gilbert, 2021). These kinds of reports provide appropriate data which is associated to
the unified company or several fields in an effective manner so that the company can take
effective decisions. Under the budget report there is a assessment and estimation of the expenses
according to the prior years so that the company can made effective decision and formulate
overall budget for the particular air. This is very useful for the company in order to maintain their
and formulate a proper budget according to the department and identify the every aspect of the
department by estimation of their cost.
Performance reports – Use of these reports are mainly made to measure the
performance of any task or any people who are working for the organisation in order to evaluate
its success and efficiency over a specific time frame. This reports mainly includes the
preparation of annual performance reports for each and every employee or each and every
department of the organisation in order to help to effectively manage and met the standard
requirements based on in analysing efficiency and productivity. Thus, use of performance
management reports by the Eastern engineering co Limited organization ensures improved future
growth and better opportunity through creating a sense of an internal motivation in employees
based on high level of performance check and control which helps in increasing their efficiency.
Along with this, use of the Performance reports are also effective for the Eastern engineering co
Limited organization as it helps in disclosing inefficient working as well as also helps in
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detecting the flaws in performance and business operations, therefore it provide adequate time
and efficiency level for Eastern engineering co Limited organization to ensure better
management and taking some corrective action to resolve the problem. Thus, an analysis can be
made out that preparation of the Performance report are vital and effective for Eastern
engineering co Limited organization as it provide a better control and check on overall
productivity of company and also ensure production of adequate amount of products and check
on its quality and performance level to effectively meet the demand of customers.
Account receivable aging report: these Kinds of reports are those reports which are
associated to providing the side-by-side overview about total cost which is implemented in a
single project and as compared to the total expected revenue of the project. It is very important
report in context of the company in order to perform in the manufacturing company. It provides
assistance towards the leader in order to evaluate and analyze about the profitability of the
particular project and made the season accordingly. It also supports the company and helps them
to use appropriate resources in order to get more success and enhance their profitability so that
the company can take appropriate decisions (Mohammad, 2021).
Inventory and manufacturing report: This kind of reports are very important for the
company in order to identify about the inventory and manufacturing process where it support the
company to centralize the data of invent tree and about the costly were which are engaged in the
process of production. It support the company to identify and analyze the production process in
order to provide raw data and manage the Assembly of machinery so that the company get
appropriate knowledge about the several aspects of process which is associated to the inventory
and manufacturing of goods and services.
From the above mentioned report it has been analyzed that there are several kind of
accounting reports which are used by the company in order to manage their function as well as
their opportunities within the Marketplace
P3 Calculating costs using suitable methods of cost examination to make an income statement using
marginal and absorption costs
Income statement: Income statement is the procedure which can be described as the
document which is associated to the financial position of the company for a particular time
period. It represent about the revenues of the company that how the revenues of the company are
transformed in the net income and net profit by adjusting every expenses. The aim of the income
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statement is to represent the manager, investor and also represent the financial position of the
company in context of profit and loss during particular period (Manchiraju, Pandey and
Subramanyam, 2021)
Absorption cost: Absorption cost can be described as the cost which engages the full cost
of manufacturing of the product and services of the company. This kind of Costing is the
manufacturing overhead and fixed or variable cost of the company. Each cost center's cost can be
direct or indirect, with direct costs being easy to identify within particular cost centres and
indirect costs being difficult to identify inside a cost centre.
Marginal cost:
This type of costing can be defined as the one where the difference between the variable
cost and fixed cost is properly defined and present where all expenses are bifurcated as fixed and
variable cost. Thus, marginal costing is focused on the different elements and cost of operations
such as manufacturing expenses, office and administration cost, etc. Further, use of marginal
costing also helps to make profit plan with the help of break even charts and profit graphs (Feder
and Weißenberger, 2021).
Absorption costing
Absorption technique: It comprises of that form of costing where the all the fixed and
variable costs are assigned to cost centre where by the consumption patterns are seemed to be
compensated for. Use of absorption technique means and leads to recovery of the reasonable
expenses that are done from the quality of the services sales rate. Thus, use of absorption costing
helps in measuring the exact cost of the operations of the company which leads to improvement
in the competitiveness of the firm.
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P4. Several types of planning tools applied for budgetary control along with benefits and
drawbacks.
Budgetary control is undertaken as the way for managing monetary as well as non
monetary performance across various budgets. Within respective dimension of budgetary
control, business managers considered appropriate measures for developing many outcomes
through manners of such monetary plans. In another term, it may be described as procedures of
formulating budgets based upon accumulated last year’s monetary data. Within this, essential
budget range is incorporated that drives towards effectual decision making. In addition to this,
there are various budgets that can be prepared by respective firm (Di Pietra, Gebhardt and
McLeay, 2021). Some of them are discussed below:
Operational budget: This is considered as the type of budget which is associated with
performing the forecast of whole income as well as expenses. With assistance of respective
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budget, Eastern engineering co Limited’s manager may able to anticipate resource volume
needed for implementing several practices in much effective and efficient way. In addition to
this, the objective of respective budget is to manage practices as well as operations of business in
appropriate way (Crocco and Culasso, 2021). Additionally, this becomes potential through
appropriate anticipation of upcoming revenues and expenditures of specific time duration. In
respect of Eastern engineering co limited. It undertakes effective actions for handing various
kinds of operations. Also, the specific tactics are applied into respective budget such as:
Variance analysis: This is associated to distinguishing among exact outcomes and anticipated
one.
Standard costing: It is a kind of method which is related with computation of incremental costs
as well as utilised in comparison to its measures.
 Advantages: Respective budget is essential for firm to observe its exact continuous
expenditures. Also, this is helpful for entity like Eastern engineering co Limited to assure
appropriate usages of resources as well as capital within several practices.
 Disadvantages: The main disadvantages of respective budget is it is much time taking as
well as cost that is impossible for attaining firm objectives.
Flexible budget: It is undertaken as the monetary plan which changes in respect of output as
well as quantity. Moreover, respective budget is broadly utilised into that firms where practices
are anticipated to modify in upcoming times. Additionally, one of the main features of respective
budget is that this is user friendly as it may be upgraded whenever firm required (Zeng and et.
al., 2021). Eastern engineering co Limited may develop this budget for potential fluctuating
practices through accountants.
 Benefits: Respective budget is much simple to utilise as firms may able to track its day to
day expenditures as well as incomes. Also, this particular budget can be used into any forms
of business. In addition to this, there is not any specification for using specific budget even
firm may also adapt respective budget.
 Drawbacks: The key drawbacks of respective budget are that this adds to information theft
as users may steal data through changing it daily. Additionally, respective budget required to
be upgraded upon continuous or monthly basis which drives towards complexities.
Master budget - Under this form of budgeting all the budgets that are prepared by different
departments of an organisation are integrated in a single budget which is known as master
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