Management Accounting: Systems, Techniques, and Reporting Analysis

This report provides an in-depth exploration of management accounting within a business context. It begins with an introduction to management accounting, emphasizing its role in financial information gathering and decision-making. The report then delves into various management accounting systems, including inventory management, cost accounting, and job costing systems, detailing their benefits and applications. It further examines management accounting reporting, covering inventory reports, budgeting reports, and performance reports, along with the integration of accounting systems with reporting. The report also analyzes key management accounting techniques, specifically marginal costing and absorption costing, providing comparative advantages and disadvantages, alongside illustrative examples. This comprehensive analysis aims to enhance understanding of management accounting's role in improving business efficiency and decision-making.

MANAGEMENT
ACCOUNTING IN BUSINESS
CONTEXT

Table of Contents
INTRODUCTION.......................................................................................................................................3
ACTIVITY 1...............................................................................................................................................3
Management accounting and different types of management accounting systems...............................3
Management Accounting Reporting........................................................................................................6
Integration of management accounting systems with management accounting reporting in the
organizational context..............................................................................................................................6
ACTIVITY 2...............................................................................................................................................7
Management Accounting Techniques used by the business enterprise....................................................7
CONCLUSION...........................................................................................................................................9
REFERENCES..........................................................................................................................................10

INTRODUCTION
Accounting related to management refers to the process involving identifying and the
information related to finance is being collected on this. Third is very essential for the business
enterprise to have adequate management control for the preparation of financial reports essential
for decision making. The report covers the management accounting concepts that are essential
for the business enterprise. Report will provide about the management accounting systems used
with their benefits and their application in the organizational context. This will also cover the
management accounting reports used in the business enterprise. It will provide how management
accounting systems are integrated with the management reporting. The study will enhance the
overall understanding of the management accounting systems and reporting.
ACTIVITY 1
Management accounting and different types of management accounting systems.
Management Accounting
It refers to the process involving identifying and collecting the information related to
finance in order to get the end results.. This provides important financial information for
managing the operations of business. This concept is basically related to and support firm in
making better decision. This does not provide reports for external users of the business.
Management accountants have the task of analyzing the events and transaction and converting
them in o useful information (Otley, 2016). They aim at providing the management with detailed
information about the operation of company for increasing the productivity and efficiency of the
company. Financial accounting is concerned with preparing reports that provide in formation
useful for the external users such as income statement, balance sheet and cash flow statement.
MA provides cost accounting report, budgeting reports, management reports and many more for
internal management of the company.
Management Accounting Systems
Management accounting systems are used by business for providing critical information
for the managerial use for making operational decisions. Businesses use these systems for
helping to manage the costing as well as management of their processes. Management
accounting systems vary from company to company based on their functionalities and specific
reporting requirements (Cooper, Ezzamel and Qu, 2017). There are various type of system which
are being involved in this type of accounting. They are also engaged in managing inventory.
Management accounting systems have their own benefits that are explained below.
Inventory Management Systems

The management of inventory refers to the combination of manual efforts as well as
technology for managing the inventory. It is concerned with having proper track record of all the
movements of the stock within and outside the organization. This is used for recording the inflow
of inventory within the organization, to the quantity released for production and the quantity of
finished output. It helps in keeping track of all the inventories within the organization like raw
materials, work in progress, finished goods and their available quantity with the organization.
inventory management has made its possible for the organizations to have a properly structured
method for recording the transactions related to inventory. Inventory management system
involves just in time and material requisitioning process.
Just – in – time - This is an inventory management systems that prevents company from storing
the materials in advance in company. In this process materials are ordered as and when required
on immediate basis. This saves the storage cost of inventory and inventory is made available as
and when required.
Material Requisitioning process - This process involves analyzing the previous trend of the
process and operations and placing the purchase order accordingly. This helps the business in
keeping the inventory in advance assessing the requirements. This is useful for processes where
stocks are not available on immediate basis.
Benefits
 This type of management helps the business to have proper record of all the stock
movement in company.
 It helps the business in making the stock available on time without interruptions.
 Systems help management in decision making analyzing the frequency of inventory
movements.
Application
This is applied in the production and warehouses for recording the consumption and making
timely purchase orders assessing the inventory requirement.
Cost Accounting System
Cost accounting system refers to the process for recording information related with the
cost of products and items. It is concerned with calculating the cost of product and services
produced or manufactured by company. Cost accounting records each and every cost incurred in
the production of any goods such as raw materials, labor, overheads and other costs. Cost
accounting is very essential for business for pricing the products and services (Bromwich, M.
and Scapens, 2016). Cost accounting is not limited to identifying the cost of products and
services but also identifying the areas where costs are increasing. Cost accounting involves
comparisons of budgeted outcomes with the actual outcomes for assessing the areas of

improvement. This helps the businesses in reducing the cost and expenditures that are
unproductive and are not adding value to the process.
Standard Cost – This is the costing method where the organisatations prepares budgeted cost
based on the standards and compares them after production with the actual output.
Direct Cost – It is a costing process where only direct costs associated with the process are
recorded. This is also known as variable costing method in cost accounting system.
Benefits
 Cost Accounting systems helps business in calculating the cost of product and services.
 It helps the business in measuring the variances between the actual and budgeted output.
 It also helps the business in implementing new strategies that are cost efficient reducing
the manufacturing costs.
Applications
Cost accounting system is applied in the production process for recording the cost
information for determining the profit margins of product and services.
Job Costing System
It is a type of finance related system that is concerned with identifying the cost of each
job separately. This is the process involving accumulation of information of the costs which are
associated with specific productions or service job respectively. It may be useful for providing
the cost information to customers for submitting them to customers under contractual
agreements. This involves providing informations such as raw materials, labour cost and other
overhead incurred for producing the job specifically (Granlund and Lukka, 2017). This being
applied by organizations for identifying the specific cost of job.
Benefits
 This systems helps the business enterprise to identify the cost of different type of jobs
and too separately .
 This is useful for organizations having many operations in the production process.
 This helps in providing detailed information related to each cost separately of the job.
Application
Job costing system is applied for identifying the cost of job when special orders are
placed by the customers and also to determine the profit margins to be charged by the business.

Management Accounting Reporting
Reporting involves preparation of the reports that are used by the management of the
organization is decision making. MA reports are not prepared based on some specific concepts
and frameworks. They are prepared by the organizations according to the requirements of
business operations.
Inventory Reports
Inventory reports contain information about the stocks of company. They provide
detailed information about all the movements of stock in the production process, their
consumption and remaining stocks of raw materials as well as finished goods (Christ and Burritt,
2017). This provides management essential information for decisions making. Management
analyze the trend and frequency of inventory movements through these reports. The items that
are moving fast are promoted and steps are taken for slow moving goods and services. Orders for
the inventory are also placed by management using the inventory reports.
Budgeting Reports
Budgeting reports refers to the reports that are prepared based on the projections. Budget
reports are prepared by the management on the previous budgets or budgeted reports of last year.
Company makes budget for current year my making adjustment as per the current requirements
and trend. All the adjustments related to the inflations, market conditions are made by the
management in reports. This involves making forecasts about the income and expenditures of
company. It helps in keeping the business on a defined direction minimizing the costs and
expenditures. They help the business in taking cost control measures analyzing the variances
between the actual and budgeted figures.
Performance Reports
Every organization is required to measure its performance for improving the productivity
and efficiency. Performance report is prepared by organization for measuring the performance of
activities, operations and even the employees. It involves setting achievable and practical goals
and benchmarks to be achieved within the given time period and specified resources. This helps
the business in analyzing the level to which it has been able to accomplish its goals and
objectives. Management can assess the efficiency of organization in achieving its targeted
objectives with the available resources. Performance reports drag the attention of management
towards operations that are required to be enhanced for increasing the productivity.
Integration of management accounting systems with management accounting reporting in the
organizational context.
Management accounting systems are used by organizations for having proper
management of the business operations and activities. Management reports are used for having
information of the business activities. Both systems and reporting are integrated with each other

for having effective management. Reports are prepared by converting the information provided
by the accounting systems (Malina, 2017). They together helps the business enterprise in keeping
the costs under control by implementing the strategies for improvement. Integration of systems
and reporting helps the business enterprise in achieving the goals and objectives.
ACTIVITY 2
Management Accounting Techniques used by the business enterprise.
There are two mainly used accounting techniques that are absorption and marginal costing.
Marginal Costing –It is technique used analyzing an interpreting the products and goods which
has ben produced by different type of organizations.. Marginal costing only accounts costs
related to different variables with manufacturing any product or service. In this costing technique
fixed costs associated with the products are considered to be period costs. It do not consider the
fixed costs in calculating the cost of product.
Advantages
 Marginal Costing allows comparison of two products.
 This costing technique is used by the management in decision making.
Disadvantages
 Do not account for fixed costs in the cost of product.
 The costing technique is not accepted for recording the closing inventory by accounting
standards.
Income statement as per Marginal Costing
Particulars Product X Product Y
Sales Revenue (4600*180) 828000 (3200*150) 480000
Marginal Cost of Sales
Direct Materials (5000*30) 150000 (3500*24) 84000
Direct Labour (5000*36) 180000 (3500*24) 84000
Variable Production
Overheads (5000*24) 120000 (3500*16) 56000
450000 224000
Add:
Opening Stock 0 0
Less:
Closing Stock
(400/5000)*45000
0 36000
(300/3500)*22400
0 19200
414000 204800

Contribution 414000 275200
Fixed production
overheads
(210000*5000)/
8500
123529.4117
6
(210000*3500)/
8500
86470.5882
4
Fixed admin. Overhead
(54000*5000)/
8500 31764.70588
(54000*3500)/
8500
22235.2941
2
Variable sell. Overhead (4600*2) 9200 (3200*2) 6400
Net Income 249505.882
160094.117
6
Absorption Costing – This is a costing technique that considers all the costs associated with the
product. It takes into consideration both variable and fixed costs associated with manufacturing
the product (Tucker and Schaltegger, 2016). It is also used for identifying the cost of production
of the given products. It do not consider fixed costs as the period cost as marginal costing.
Advantages
 Costs are calculated after accounting both variable and fixed costs of product.
 This costing is accepted by the accounting standards and reporting frameworks.
Disadvantages
 This type of costing does not help firm in tking major decsisions.
 It is difficult to segregate the variable and fixed overheads.
Income statement as per Absorption Costing
Particulars Product X Product Y
Sales Revenue (4600*180) 828000 (3200*150) 480000
Marginal Cost of Sales
Direct Materials (5000*30) 150000 (3500*24) 84000
Direct Labour (5000*36) 180000 (3500*24) 84000
Variable Production
Overheads (5000*24) 120000 (3500*16) 56000
Fixed production
overheads
(210000*5000)/
8500
123529.411
76
(210000*3500)/
8500
86470.5882
4
573529.411
8
310470.588
2
Add:
Opening Stock 0 0
Less:
Closing Stock
(400/5000)*573529.
42
45882.3529
4
(300/3500)*310470.
58 26611.7647
527647.058 283858.823

8 5
Gross profit
300352.941
2
196141.176
5
Fixed admin. Overhead (54000*5000)/8500
31764.7058
8 (54000*3500)/8500 22235.2941
Variable sell. Overhead (4600*2) 9200 (3200*2) 6400
Net Income 259388.235 167505.882
CONCLUSION
From the above study it could be concluded that the management accounting systems are
very essential for the business enterprise. They helps in managing the business operations
effectively and also in having proper record of all the financial transactions. MA reports provide
the information obtained from accounting systems for effective decision making. There are two
costing techniques that are used by companies for identifying the cost associated with each
product. There is difference between closing inventory of the cost accounting techniques as the
method of inventory valuation in the two techniques is different. Marginal do n ot consider fixed
cost in inventory valuation where the absorption costing includes fixed costs that reprsents the
value of closing stocks appropriately as per the accounting standards. Management accounting
helps the organization in increasing its productivity and efficiency with the advanved
management methods.