Management Accounting and Types of Reports: A Comprehensive Analysis

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MANAGEMENT ACCOUNTING & TYPES OF REPORTS
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MANAGEMENT ACCOUNTING & TYPES OF REPORTS
Table of Contents
Introduction......................................................................................................................................3
P1: Explanation of management accounting and its detail requirements........................................3
Management accounting..............................................................................................................3
Difference between management and financial accounting........................................................3
Types of management accounting Systems.................................................................................4
P2: Explanation of different methods used to prepare management report.....................................6
Business reports...........................................................................................................................6
Types of Reports..........................................................................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9
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MANAGEMENT ACCOUNTING & TYPES OF REPORTS
Introduction
Management accounting is one of the most essential components required to perform business
operation in an effective manner. The study mainly focuses on the explanation of the detailed
methods used in the management accounting system. Furthermore, explanation of different
methods used to develop a management report will be discussed in the study in an efficient way.
P1: Explanation of management accounting and its detail requirements
Management accounting
Management accounting is the process, which includes systematic preparation of a financial
report that is related to the management process of the organisation. Management accounting is a
necessary method, which plays a pivotal role in the decision-making process of the managers in
the organisation. Mainly the management accounting is related to the calculation of the cash that
is remaining in the internal accounts of the company (Labro and Hemmer, 2017). Moreover, the
sales revenue and the cost of production are also noted and calculated in the management
accounting system. This helps the top management to get a clear Idea about the exact situation of
the company. Budgeting, resource allocation and formulation of different strategies may be
performed by the managers based on this data in an efficient manner (Bromwich and Scapens,
2016). Furthermore, management accounting helps the managers to get a clear Idea about the
debt amount or the cost of raw materials required to perform the business operation in the
organisations.
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MANAGEMENT ACCOUNTING & TYPES OF REPORTS
Difference between management and financial accounting
It is seen that management accounting is mainly performed with an internal focus to manage the
internal budget and various process involved in the organisation. On the other hand, it is seen
that the financial accounting mainly focuses on the external parameters like the sales and the
marketing cost of the organisation (Malmi, 2016). In management, accounting there is no
definite rules it may be formulated according to the structure of the organisation. Financial
accounting is mainly a structured process and the structure is mainly made by the audit agencies
to perform the calculation based on the accounts data of the department. In management
accounting financial, human resource management and other subjective data are reported and
accounted. It is seen that in financial accounting the only focus is to calculate the financial
transaction of the organisation in a proper way.
Types of management accounting Systems
There are different types of the management accounting system that helps the managers to get
clear ideas about the different process included in the management system.
Job Cost accounting- Job cost accounting is mainly a systematic process that helps to account
the financial and human resource required to perform a specific job for the organisation in an
effective manner. It includes different kinds of accounting that are related to the direct cost of
materials that is required for production in an organisation. Additionally, labor costing is also
included in the job accounting system (Jermias, Gani, and Juliana, 2018). It helps the
management to have a clear idea about the charge of the employees. The formulation of internal
human resource budget may be done based on previous labor accounting report. Furthermore,
job cost accounting involves the calculation of the overhead costs related to the production
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MANAGEMENT ACCOUNTING & TYPES OF REPORTS
procedure of the company. It helps the manager to comply with the overall budget of the
projects.
Process cost accounting- The process cost accounting is one of the essential systematic
approaches that includes collection and proper assigning of the manufacturing cost to the units of
the organisation. The process cost system is mainly used when nearly identical units are
manufactured on a mass scale. The process accounting system is used in mass production where
the production process involves several units (Soderstrom, Soderstrom, and Stewart, 2017). The
cost of unit 1 is added to the holistic cost of the second unit to calculate the overall production
cost of the company.
Inventory management system- The inventory management system is a systematic approach to
track the supply chain of the organisation in a prominent way. Moreover, the inventory
management system includes the overall retail warehousing and shipping cost of the
organisation. Inventory management system helps the managers to see the detailed cost of every
operation related to the supply chain of the company.
Price optimization system- Price optimization is an essential process that is included in the
management accounting system. This process is used to maximize the price of the product
according to the customer’s willingness to pay for the product. After effective accounting, the
managers may set the optimize price for the product so that the demand for the product may set
high according to the market demand (Jermias, Gani, and Juliana, 2018).
The essential requirement for different types of management accounting system
There is some essential requirement to perform the management accounting system in an
efficient manner. One of the essential criteria is the presence of a committee, which may be able
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to perform the management accounting system in a proper way. Moreover, sophisticated
software’s are needed to perfectly perform the different accounting management system.
Statistical analysis and database management system are essential requirements (Sunarni, and
Ambarriani, 2019).
P2: Explanation of different methods used to prepare a management report
Business reports
Managerial accounting mainly focuses on the internal information of the organisation. The
reports are an important and essential document that helps the managers to get the idea about the
exact situation of the organisation. Reports help to analyses the business operation of the
organisation and effective decisions may be made based on the data of the report. The reports
include financial statements, balance sheet and cash flow calculation of the company. Moreover,
the reports help to optimize use of the resource in the organisation( Bu, Wen, and Banker, 2015).
The cost-effective manufacturing process may be implemented after the analysis of the reports in
an effective manner.
Types of Reports
The different types of report that are necessary for effective manage the business operation of the
organisation are mentioned below.
System generated report- The system-generated reports are essential for the managers to see
the exact data and their interpretation in an efficient manner. Cost report is one kind of system-
generated data that calculate the total production cost of the organisation in an effective manner.
It is seen that the cost report has enhanced the decision-making capacity of the managers by
almost 10 %. The cost report is essential for the supervisors, branch and area managers as it
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includes updated and accurate information about the holistic cost of the company (Board, 2017).
If database management is properly done then the system-generated data of the manufacturing
cost should be accurate. Moreover, most of the system, generated data are quantitative data and
they can be comprehended in an efficient manner.
Budget report- Budget report is essential that helps in the allocation of the financial resources
according to the exact requirement of the different departments present in the organisation. The
budget is prepared according to the revenue and the manufacturing reports (Van Dooren and Van
de Walle, 2016). It is observed that sales and revenue reports are system-generated reports. This
is prepared from the data present in the database. The budget report is essential to formulate
efficient business goals for the organisation. According to the allocation of the budgets the
staffing and formulation of minute business operation may be done. Effective compliance with
the budget report is an essential step that should be performed by the managers of the
organisation. The budget report helps to implement cost-effective steps in the manufacturing
process of the organisation. Resource optimization strategy may be implemented based on the
budget report.
Performance report
A performance report is one of the most essential reports that is developed by comparing the
budget amount with the output of the employees in the organisation. The performance report is
mostly computed with the help of the sophisticated software's. The performance report in the
organisation is mainly developed in a quarterly or half-yearly basis so that adaptation with the
change may be performed in an efficient manner ( Nussbaum, 2016). The performance report
consists of the detailed performance of the human resource in a proper manner. This report
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assists the managers to plan for the future demands in the production of the company. According
to the trend, it is seen that the production cost of manufacturing is steadily increasing. The
performance report may help the managers to formularize new strategy so optimization of
resource use may be done.
Presentation report
Presentation report is developed by the managers in case of any formal meetings. In the formal
meetings, it is seen that the data from the system-generated report are taken by the managers and
slides are prepared based on the essential information (Turnage, and Goodboy, 2016). This is
mainly done so that analysis of the essential data may be performed in a meeting. Effective
analysis of data may enhance the efficient decision-making process of the company in a proper
manner.
Conclusion
The study effectively discussed different types of managerial accounting in a proper manner.
Moreover, different kinds of reports needed in business management are discussed in the study.
Effective decision-making may be performed by the help of management accounting and
business report preparation. It may enhance the holistic quality of the business operation.
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References
Board, L.B., 2017. Legislative budget board staff reports.
Bromwich, M. and Scapens, R.W., 2016. Management accounting research: 25 years
on. Management Accounting Research, 31, pp.1-9.
Bu, D., Wen, C. and Banker, R.D., 2015. Implications of asymmetric cost behavior for analyzing
financial reports of companies in China. China Journal of Accounting Studies, 3(3), pp.181-208.
Jermias, J., Gani, L. and Juliana, C., 2018. Performance Implications of Misalignment Among
Business Strategy, Leadership Style, Organisational Culture and Management Accounting
Systems. Leadership Style, Organisational Culture and Management Accounting Systems
(January 9, 2018).
Labro, E. and Hemmer, T., 2017. Management Accounting and Operations Management. In The
Routledge Companion to Production and Operations Management (pp. 345-359). Routledge.
Malmi, T., 2016. Managerialist studies in management accounting: 1990–2014. Management
Accounting Research, 31, pp.31-44.
Nussbaum, M., 2016. Assessing resilience: how plans, strategies, and after action reports can
improve our understanding of organisational preparedness. NAVAL POSTGRADUATE
SCHOOL MONTEREY CA MONTEREY United States.
Soderstrom, K.M., Soderstrom, N.S. and Stewart, C.R., 2017. Sustainability/CSR research in
management accounting: A review of the literature. In Advances in Management Accounting (pp.
59-85). Emerald Publishing Limited.
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MANAGEMENT ACCOUNTING & TYPES OF REPORTS
Sunarni, C.W. and Ambarriani, A.S., 2019. The Pricing Practices: Management Accounting
Perspective. Review of Integrative Business and Economics Research, 8, p.84.
Turnage, A.K. and Goodboy, A.K., 2016. E-mail and face-to-face organisational dissent as a
function of leader-member exchange status. International Journal of Business
Communication, 53(3), pp.271-285.
Van Dooren, W. and Van de Walle, S. eds., 2016. Performance information in the public sector:
How it is used. Springer.
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