Management Accounting Report - HND Business, Jan-April 2019

This report provides a comprehensive overview of management accounting, addressing various aspects such as management accounting systems, different methodologies, costing techniques, and planning tools. It explores cost-accounting, inventory management, and performance reporting. The report includes income statements based on marginal and absorption costing methods, along with their workings. It also discusses the advantages and disadvantages of planning tools, benchmarking, and the use of key performance indicators (KPIs). The report concludes by summarizing the importance of management accounting in decision-making and business control, referencing relevant sources. The report is structured to provide insights into how management accounting can be adapted to respond to financial problems, using case studies of INWIDO Ltd. (UK) and AIRDRI Ltd.

Management Accounting

Covered content
• Introduction
• Management accounting system
• Different methodologies used for management
accounting systems
• Several kinds of costing techniques
• Advantages and disadvantages of planning tools
• Adapted management accounting systems to respond to
financial problems
• Conclusion
• References

Introduction
Management accounting refers to the systematic process of
forecasting and decision making in prominent manner in
order to ensure fluid and interrupted running of the business
entity.

Management accounting system
Management accounting refers to the process of analysation
of costs and operations to prepare internal financial report,
records and accounts which are beneficiary for the managers
in order to make needful business decisions as well as for
accomplishing the goals.

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Organization Structure: It examines manager's range of
information required and extent to which they will render
informational data. Structure consists of two natures and
require the management accounting systems according to
different natures.

Different methodologies used for
management accounting systems
There are some types of management accounting system
used for effective analysation of information. Some
types of management accounting system are
described underneath:
 Cost-accounting systems
 Inventory management systems
 Job-costing systems

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Inventory management systems: It refers to the methodical
and standardized process adapted for the motive of
systematic recording of inventory or stock for managing and
organising inventories

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PERFORMANCE REPORT : It refers to the portion of
communicating management plan. Generally it is associated with
the working performance, analysis of it, creation of the report and
send reports to interested parties like stakeholders. Entire reports
require to be clear, compendious and actual reflection of the
informational data.

Several kinds of costing techniques
Costing technique are adapted by business entity like INWIDO
depends over their operations, structures, place of manufacturing,
resources availability, product significances etc. Selecting
prominent approach for calculating costs of production is crucial
for showing accurate position of business entity.

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Income statement on the basis of Marginal costing method:
Working 1: Calculate variable production cost £
Direct material cost 8
Direct labour cost 5
Variable production O/h 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production
Closing inventory
Nil 2000*15 = 30000
500*15 = 7500

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Income statement on the basis of Absorption costing method
Production overhead: In this budgeted cost is £15,000and Actual
cost is £10,000
Selling cost: under this budgeted cost is £10,000and Actual cost is
£7875
Absorption costing working notes
Working Note 1: Calculate full production cost
Direct material ￡ 8
Direct labour ￡ 5
Variable cost ￡ 2
Fixed cost ￡ 5
Total ￡ 20

Advantages and disadvantages of planning
tools
Forecasting planing tool : With the help of this tool an
organisation can make plan for the future expansion and growth so
that business can grow. It can be done through the historical past
records and on the basis of this forecasting can be done for future
purpose

Adapted management accounting systems to
respond to financial problems.
Benchmarking: The bench marking is the process used by the
strategic managements.
Key performance indicators (KPI): These are the indicators or
measurable units helpful in achieving the key business objectives.
Financial Governance:
This is the process by which the company records, manages and
controls the financial information.

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INWIDO Ltd.(UK)
AIRDRI Ltd.
INWIDO uses benchmarking in order to
cover each weak aspects at micro level.
AIRDRI uses Just In Time(JIT) in order
to improve the conditions at broad or
macro level.
KPI is used by this company in order to
indicates the target set up at different
departments like production, to improve
performance.
JIT is used by this company in order to
achieve production and other target
within the time.
Financial governance technique is used
by this company to record, manage,
control the financial data.
Only JIT is used by this company in
order to achieve the target of financial
performance by ensuring better
performance hence increases the
creditability.

Conclusion
On the basis of above report it has been concluded that,
management accounting is a process of that involves partnering
in management decision making and controlling business in
effective manner so that performance, profitability and
productivity of company can be improved.

References
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced
management accounting. PHI Learning.
Ward, K., 2012. Strategic management accounting.
Routledge.
Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit
leadership and management. John Wiley & Sons.

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