Pearson BTEC HNC Business Unit 5: Management Accounting Task 1

This report delves into the core aspects of management accounting, beginning with an introduction to the subject and its significance in financial transaction analysis. It explores management accounting systems, emphasizing the use of both quantitative and qualitative data for internal decision-making, including the importance of budgets. The report outlines key principles such as proper record design, management by exception, control and source accounting, and accounting for inflation. It then examines the role of the management accountant in stewardship, developing management information systems (MIS), long-term and short-term planning, and control. A comparison between management and financial accounting is provided, highlighting differences in focus, outcome, information, and format. The report further discusses various management accounting systems, including cost accounting, inventory management, and price optimization. Finally, it covers management accounting reporting, analyzing cost allocation, cost-benefit, cost-volume, and inventory costs, concluding with references to relevant academic sources.

MANAGEMENT
ACCOUNTING
TASK 1.

TABLE OF CONTENT
 Introduction
 Management accounting systems and principles
 Role of management accounting
 Difference between management and financial accounting
 Types of management accounting systems
 Management accounting reporting
 Conclusion
 References

INTRODUCTION
Accounting is a major aspect for any firm as it helps in
recording and analyzing financial transaction, Management
accounting is the essence of accounting, it is accounting
reports prepared for the help management of the company,
so internal sources of the company uses the management
accounting. The goal of the reports prepared is to find out
the performance and current position of the company

MANAGEMENT ACCOUNTING
SYSTEMS
Quantitative and qualitative data is gathered under management
accounting so that the accountant can prepare the internal reports.
This report help the organisation to make comprehensive internal
decision. It is prepared for the company internal usage, it does not
concern external stakeholder. Like, Budgets are the important part
of management accounting which is accountable to carry out better
operation planning and promote desirable decision making in order
to promote smooth business process. Basically the system of
management accounting emphasize on accounting the significant
business metrics that helps in better operations and preparing the
decision.

PRINCIPLE OF MANAGEMENT
ACCOUNTING
 Designing and compiling: all the records and quantitative
data should be designed properly and should compiled in a
way to meet the need of the company when required.
 Management by exception: it is followed while providing
information to the management. It include budgetary control
and standard cost techniques.
 Control and source accounting: the principle state that
control can be exercised at source. Monitoring employee
performance, analysing machine performance, saving power
etc can be done to save cost from source.
 Accounting for inflation: the company take rate of inflation
to judge actual success of the business. As rate keep on
fluctuating with respect to time.

ROLE OF MANAGEMENT
ACCOUNTANT
 Stewardship accounting: All the financial report are
prepared by the management accountant. The reports are
prepared in routine basis which help management to take
finance based decision.
 Developing MIS: All the reports whether routine or long
term nature are forwarded to personnel to take corrective
decision.
 Long term and short term planning: All the quantitative
data related to economic changes in future or reports related
to financial nature is prepared by management accountant
which help in making all type of managerial decision.
 Control: management accountant prepare report and analyse
them. It give them idea where business is not doing well and
they need to control those factors so that an improvement can
be made on those factors.

DIFFERENCE BETWEEN MA AND FA
Basis Management accounting Financial accounting
Essential Management accounting
focuses on providing
information to management for
forming policies, plan and
strategy to run business
effectively.
Financial accounting prepares
data for interested party, external
or internal.
Outcome Management accounts is for
the ease of the management,
its optional.
Financial account need to be
prepared, its compulsory.
Information management accounting talks
about monetary as well as non-
monetary aspects also.
Financial accounting talks about
monetary information only
Format management accounting is not
specified.
The format for financial accounts
is specified and the format of
management accounting

MANAGEMENT ACCOUNTING
SYSTEM
Cost accounting system: Accounting system which is used to
prepare revolutionary budgetary forecast. It provide all the
estimates and make work easy for the firm as it tell how much
need to be allocated to which project so that cost can be
minimised. This accounting system helps the company to utilise
their funds in the best way and helps in bringing down the cost
by eliminating unwanted expenses. Prime furniture use cost
accounting to keep cost lower than the actual projection.

CONTINUE…
Inventory management system: Stock is monitored under
this accounting system , all the analyses related to the stock
is done and Prime furniture make sure that there is less cost
of storage by keeping as less idle stock as possible and at
the same time they make sure the shortage of stock is also
avoided and customer get the product as per their demand.
Price optimisation system: It is a management system
which works on processing price of goods and services.
Every aspect of price structure is analysed whether it is
customers or competitors. Price is set for various product
depending upon areas and client. Prime furniture also keep
price according to market trend and customer behaviour.

MANAGEMENT ACCOUNTING
REPORTING
Accounting of reports is essential as it helps in telling where
the business is headed and all the quantitative information
about the business. It is also known as management and cost
accounting. It focuses on inside information received from
the accounts. It is used for planning, organising and decision
making for the welfare of the business. It is prepared
according to the required of the firm and can be needed by
the management anytime when they are in need.

CONTINUE
Cost allocation analysis: basic information is provided to
the company under this analysis. Cost allocation provides
the basic information required for more sophisticated
cost-effectiveness analysis or cost-benefit analysis. Cost-
allocation analysis requires budget information, but also
information about program participants and services
delivered. It can help the company to use the resources in
the best possible manner so that cost can be minimised.

CONTINUE…
 Cost benefit analysis: Economic value of the program
is evaluated by using this analysis so that resources can
be best allocated. CBA is the most comprehensive type
of cost analysis, and as such it takes more time, effort,
and resources to conduct. However, it is important to
note that most policymakers are interested in seeing
the monetary benefits of a particular program before
deciding to invest in it any further.
 Cost volume analysis: It tells the company how the
change in cost and volume can affect the company
profits, operating or net. There are certain assumption
made while performing the analysis which are sales
price per unit, variable price per unit.