Management Accounting System and Its Application for Decision Making

This report delves into the significance of management accounting within the context of Williams Performance Tenders, a medium-sized boat manufacturer. It emphasizes the role of management accounting in enhancing decision-making processes and improving company performance. The report explores various management accounting systems, including job costing and budget reports, and critically evaluates their benefits and applications. It includes a practical section with profit and loss statement preparation using absorption and variable costing methods, along with reconciliation. Furthermore, the report compares and contrasts planning tools used in management accounting and examines how these tools increase business effectiveness. The analysis covers relevant cost analysis, make-or-buy decisions, and activity-based costing, highlighting their importance in strategic financial planning. The report provides a comprehensive overview of management accounting principles and their practical applications in a business environment.

Management Accounting
system and its application

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
SECTION 1......................................................................................................................................1
1. Explaining importance of management accounting in decision making process for
improving performance of company...........................................................................................1
2. Explaining different types of management accounting systems used for management
accounting reporting....................................................................................................................3
3. Critically evaluating benefits of types of management accounting systems and their
application...................................................................................................................................5
4...................................................................................................................................................5
a) Preparing Profit and Loss statements using absorption and variable costing.........................5
b) Explaining why profits from both systems are different........................................................7
c) Producing reconciled statements of profits or loss.................................................................7
SECTION 2......................................................................................................................................9
PART A.......................................................................................................................................9
Comparison and contrasting the three planning tools that used in management accounting......9
PART B.....................................................................................................................................11
Different ways in which management accounting will be applied for increasing effectiveness
...................................................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is that process of business which is concerned with making out
profits and loss statements of particular period so that the efficiency of firm could be taken out
by management. This function is majorly concerned with management or highest authority
within business so that they could easily collect and then allocate all funds that are available. The
collection of all the important and relevant data of business which would then be used and
applied in firm so that decision could be taken and they must be appropriate as well. In the
present assignment we would be learning in more depth about what is management accounting
and how its systems are to be used within the context of Williams Performance Tenders which is
medium sized boat manufacturer company. The report would also be including and explaining
reporting systems which are been used and employed by company so that it could tell about how
and what are the reporting systems.
SECTION 1
1. Explaining importance of management accounting in decision making process for improving
performance of company.
Management accounting is very much important for all the business enterprise so that
they could easily understand the meaning and its decision making uses. All the effective decision
regarding business, use and allocation of funds would be related to this process. There are many
factors which would be helping this system to be different from financial accounting (Why
Management Accounting Is Important in Decision-Making, 2018). The role that this system is
playing within Williams Performance Tenders should be related to its main function of helping
in forecasting of future. Management accounting would also be implementing about sales and
cash flow forecasting that how much cash would needed to do or carry out planning and
manufacturing of boats. If company is investing within one particular project then what would be
the rate of return in that project this is also been analysed within framework of manufacturing
firm.
All these are role which management is playing in application of firm now we would be
learning about all importance of it in decision making process which would thus be improving
performance of business of Williams Performance Tenders. In small and medium firm like that
of Williams Performance Tenders it becomes very much important that they are taking correct
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decisions in regard to profit margin or labour utilization. Other importance of management
accounting within the context of manufacturing firm are as under:
Relevant cost analysis- all data which is been collected and used in this management accounting
techniques would be clearly determining that what all should be sold and how would it be sold.
All the marketing efforts which are to be used by business are to b chosen in that way that is
making or lowering down cost of business (Griffiths, Brockelsby and Walshaw, 2018). All cost
which are to be incurred by firm must be included within this process so that owner of that firm
is having quite clear idea about which activity is incurring how much money in this respect. Cost
particularly refer to that part of organisation which relate to value or amount that is invested in
one activity or product of firm to produce it. So management accounting would be able to tell us
about how much amount to be spend on each manufacturing of per unit of product so that firm
could analysis the amount of profits which they should be earning in near future.
Make and Buy analysis- An essential utilization of administrative bookkeeping data is to give
data utilized as a part of assembling. For instance, an entrepreneur might think about whether to
make or purchase a part expected to make the organization's essential item. By finishing a make
or purchase investigation, she can figure out which decision is more gainful. While this system is
surely helpful, entrepreneurs should just utilize these examinations as a factor in the choice.
There could be other non-budgetary measurements that are vital to consider that would not be a
piece of the investigation.
Activity based costing- Once the organization has figured out what items to offer, the business
needs to decide to whom they should offer the items. By utilizing movement based costing
procedures, independent venture administration can decide the exercises required to create and
benefit a product offering. Inserted in this data is the cost of clients (Ahmetshina, Kaspina and
Molotov, 2018). Choosing which clients are pretty much gainful enables the entrepreneur to
centre publicizing toward the purchasers who are the most productive
Utilization of data- Administrative bookkeeping data gives an information driven take a gander
at how to grow an independent company. Planning, monetary proclamation projections and
adjusted scorecards are only a couple of cases of how administrative bookkeeping data is utilized
to give data to enable administration to control the fate of an organization. By concentrating on
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this information, chiefs can settle on choices that go for ceaseless change and are legitimate in
view of wise examination of the organization information, instead of premonitions.
2. Explaining different types of management accounting systems used for management
accounting reporting.
Management accounting technique is that one which is prepared by firm itself and also
for the use of internal development only not a single part of information could be shared by any
external stakeholders of firm (Talbot and Boiral, 2018). They could only be used by internal
participants of company and information which are to be used include product cost, trend charts,
forecasting budgeting and break even charts. There are number of reports which are to be
prepared by firm in which all kinds of data is been written and mentioned like that about cost of
business, amount of money or fund which company wants to invest and sales or profit
forecasting as well. The Generally Accepted Accounting Practice (GAAP) need to be followed
at the time of recording information and data which is acknowledge by department and whole
organisation.
There are various types of methods that are used by company at the time of reporting of
accounting information. All these reports are been prepared taking important information like
that of budgets, cost, inventory and creditors which are essential part of management accounting
systems. This system majorly depend upon financial statements like those of cash flow, income
statements and balance sheets of company. Which is part of work of accountant of that particular
firm who is also responsible to report all relevant information to higher level of management.
Thus, this level of management would be taking responsibility to make budgets and future
planning of firm so that performance of company within market could be determined (Angle and
Halloran, 2018). The report is majorly formed over certain time period which mainly could be
one financial year.
Job costing techniques:
Cost is that part of production which would be telling business about how much it has
spent upon one per unit at the time of manufacturing. This is also defined to as estimated price of
particular product or investment which will be incurred by that firm. Which part of firm is
getting how much at tits cost and how much each job needs to be given or providing budget need
to be mentioned to higher authority (Types of Managerial Accounting Reports. 2018). As they
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are the one who are responsible for making and allocating budgets so they must be having right
to have knowledge about cost and budget allocated to them. As we all know that manufacturing
firm like that of Williams Performance Tenders which is making boats and then selling them in
market they are having various departments. Which include selling, production, packaging,
marketing and customer service so all of them need to have separate budgets that could be
according to job costing. What would be the cost that should be incurred by each department so
that exact profitability of firm is taken out. After this all cost which are been mentioned will be
compared with each other and with that of last years so that revenue is generated thereafter. This
will b helping management to identify which department or segment is not making profit and
which is not getting sufficient profits. If one or two segments are not giving good amount of
profit or their performance is not that much good then problem should be identified and solutions
should be taken.
Budget Report:
Budgets are the most important part of organisation which will be telling how much
amount would be invested in all projects and form where funds should be collected
(Commerford, Hatfield and Houston, 2018). So reports should be made which is containing
budgets and amount invested in each type of department or products. Report will be telling about
what could be allotted to department that are functioning with in company. Then these budgets
which are mainly produced at the starting point of year need to be evaluated or compared to that
the actual spending on each product or department at the end of that financial year.
Accounts Receivable ageing report:
As the business is dealing with various clients and customer like that of creditors,
vendors, suppliers, bankers or debtors as well. So it is important for firm to keep track of all the
debtors of firm from which they need to recover their amount which is been taken by them all. It
will be containing information like that of how many debtors are there, what are their names,
how much amount is pending, how much more is to b recovered and from how many days they
are pending (What Are Examples of Managerial Reports, 2018). This report is very much
important as will be telling about what is the exact amount of company that is been within
market and from how long.
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3. Critically evaluating benefits of types of management accounting systems and their
application.
According to Morgan and Kamaya, (2018) all these type of accounting report which are
there are having their own benefits and limitations in respect to firm in which they are been
prepared. Like the account receivable report would be letting company to know about what is
that amount which is still pending to all debtors of firm and that too for how much long. With the
help of this information that is mentioned company could easily come to know that to whom in
future company must not be giving product on credit.
Nitzl, (2018) also mentioned that job costing technique would be taking so much time
and efforts of accountant who would be engaged in preparing report. It becomes difficult for
them to determine how much exact amount should be invested in each department or product. As
there are many others more important work of accountant on which more concentration would be
required other than allocating of cost to each department or work.
On the other hand Abernethy and Wallis, (2018) included that preparing budget for all
departments of business and as whole is the best solution under which all cost, name and amount
of debtors could be mentioned. Budget reports which is made will be telling how much amount
should b invested on each and every department so that estimated profits are achieved.
4.
a) Preparing Profit and Loss statements using absorption and variable costing.
Absorption costing- it is that type of costing technique which will be taking both indirect and
direct expense of business into account for calculating particular cost of that time period.
Quarter 1
5

Quarter 2
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Variable costing- while this is used to take out manufacturing overhead that would be taking into
account only the variable cost of company like that of direct labour, material and manufacturing
cost which is variable only.
Quarter 2
b) Explaining why profits from both systems are different
As we have calculated profits in regard to both the methods that is applied absorption and
variable technique of taking out revenue. In former one as both the direct and indirect overhead
expenditure would be used and in latter one only direct cost would be used. So because of this
fundamental profits of same company and that too for same period would not be coming same
(Griffiths Brockelsby and Walshaw, 2018). In absorption one the indirect expenditure like that of
selling and distribution expense would not be used.
c) Producing reconciled statements of profits or loss.
Statement under the variable costing:
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Statement under the absorption costing method:
SECTION 2
PART A
Comparison and contrasting the three planning tools that used in management accounting
In order to develop creative results, there are several operations and activities performed
by manager to operate it. With this consideration, different tools and techniques assists to
maintain financial accounting information at workplace of Nero Ltd. Following are certain tools
implemented at workplace of the chosen organisation:
Budgetary-control: This system consider controlling on the several types of cost to prepare the
budget program. In addition to this, it also helpful perspective that included in the different
department. In this consideration, actual performance could be measure in budget of the
Nero Ltd. Profitability also playing important role to make successful results. Therefore,
goals and objectives will be completing through control and monitor on the performances.
For example, in the chosen business this technique used to compare standard with actual
performances.
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Budget: This is another tool which help to create systematic results at workplace with estimation
of the cost. It is also important parameter in the project that used by manager of the business.
Inflow and outflow of the business will be considered to operate several activities. Budget
help to increasing profitability and performance in systematic manner.
Sales budget: Sales budget helps to set and prepare the statement that estimate cost and produce
systematic results at workplace. It also plays important role to increase sales and revenue of
the company. It helps to manager of Nero Ltd. to find effective economic conditions at
workplace.
Cash budget: Cash budget is the also useful process which help to identify expenses that are
occurs in planning. With the help of effective management activities profitability will be
developing in Nero Ltd. Optimum resources are also helpful consideration that increasing
monetary outcomes at workplace of the business. Cash budget assists to adequate decisions,
allocating cost, management of cash, etc.
Zero base budgeting: Further, management of the selected business need to prepare budget
programs on the basis of zero base budgeting. With this regard, budgeting also develop on
the basis of zero. As results, real figure increase management activities for the future
planning and eliminate extra cost as well. Planning also create proper judgement of the
enterprise in systematic manner.
Fixed budgeting: In the systematic financial plan, changes are determines as the actual and
standard basis. Hence, strategies also applied on the basis of actual performance as well. It
also helpful consideration to target the customers of chosen business. It examines the
business performance with different resources and strategies as well.
Calculation of sales budget
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Interpretation: In order to carry the sales budget analysis, it can be interpret that sales budget
create impact to develop results and outcomes in systematic manner. With this regard, revenue is
also calculated that help to earn more profits through determines several functions and
operations. In the present consideration, it can be stated that revenue of the organisation also
increasing which impact positively towards the Nero. Production budget: Production budget is also useful that develop by more units that are
manufactured in the company. It helps to develop creative results, manufacturer perform
more functions and operations to increasing creative results at workplace. Production
budget also helps to consider systematic activities in the business environment. The
selected business can use it to make innovative products and services in the business.
Calculation of the production budget
Interpretation: Production budget is differ from the sales. Therefore, it reflects to produce
products and services in systematic manner. In this consideration, results are performed and
develop that impact on the enterprise activities. Hence, it also determines that sales increasing to
concentrate on the new activities.
 Capital budgeting: It is the systematic process in which process considered to calculate
the expenses. Investment also design to consider high amount to produce systematic
results. These kinds of expenses assist to ascertain creative results. In the specific time of
period, production system will help to implement new plant, machinery, etc.
 Payback period:
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= 3+40000/100000
= 3+.04
= 3.4 years
Interpretation: In this regard, calculation consider results of investment in different
project. It involves several aspects that are designed and covers in three years and four months of
period. Hence, it could be interpret that it is not suitable for our company.
PART B
Different ways in which management accounting will be applied for increasing effectiveness
In the selected business, there are several activities has been performed to operate
activities and tasks in proper manner. With the help of the management accounting system, it
could be interpret that it promote the different results at workplace. Following are certain ways
exist in which accounting system in Nero will be develops: Cost accounting system: In the chosen business, cost accounting system develop to
assess the price to produce creative results (Schwalbe, 2015). In this consideration,
expenses also assess that make positive impact on the good production. Systematic
activities also assists to identify product effectiveness at workplace. Hence, it creates
benefit to set pricing according to it. Ratio analysis: Ratio analysis is also important tool that help to measure effectiveness of
the business to identify their financial position. There are different ratios exist that could
be used to assess the actual business position (Hornstein, 2015). Different ideas and
activities assists to produce systematic targets and goals at workplace. Hence,
profitability will be increasing easily.
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 Benchmarking: Benchmarking is the creative tool that help to compare and attain
competitive results at workplace. In addition to this, plans are also needed which
determines through different strategies to make strong results. Strategies also indicates
systematic results and performance in the proper manner (Oakland, 2014). In Nero Ltd. it
assists to produce significant results.
 Key performance indicators: It is the another tool which assists to make creative results
at workplace. In this consideration, proper management activities are designed that create
high growth and profitability to produce more profits and revenue at workplace (da Silva,
Linares and Zardini, 2015).
CONCLUSION
From the above part it was concluded that there are many types of management
accounting reports which is been prepared by accountant so that they could easily share
important information to the top management.
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REFERENCES
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Angle, C., and Halloran, M.J., iRobot Corp, 2018. Environmental management systems
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Commerford, B.P., Hatfield, R.C. and Houston, R.W., 2018. The Effect of Real Earnings
Management on Auditor Scrutiny of Management's Other Financial Reporting
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da Silva, H.F., Linares, M.R. and Zardini, L., 2015. PERCEPTION OF PROFESSORS OF A
PUBLIC UNIVERSITY UNIT IN RELATION TO THE APPLICATION OF QUALITY
MANAGEMENT TOOLS IN DAY TO DAY ACTIVITIES BY ENGINEERING
COURSE ALUMNI. Journal of Management & Technology, 3(3).
Griffiths, P., Brockelsby, C., and Walshaw, M., 2018. Diagnostic accuracy of routine coded
versus 72-hour CT reporting in lung cancer. Lung Cancer. 115. p.S14.
Hornstein, H.A., 2015. The integration of project management and organizational change
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Morgan, T.A., and Kamaya, A., 2018. US LI-RADS: ultrasound liver imaging reporting and
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Radiology. 43(1). pp.41-55.
Nitzl, C., 2018. Management Accounting and Partial Least Squares-Structural Equation
Modelling (PLS-SEM): Some Illustrative Examples. In Partial Least Squares Structural
Equation Modeling (pp. 211-229). Springer, Cham.
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Oakland, J.S., 2014. Total quality management and operational excellence: text with cases.
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Schwalbe, K., 2015. Information technology project management. Cengage Learning.
Talbot, D. and Boiral, O., 2018. GHG reporting and impression management: An assessment of
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Types of Managerial Accounting Reports. 2018. [Online]. Accessed through:
<http://smallbusiness.chron.com/types-managerial-accounting-reports-58384.html>.
What Are Examples of Managerial Reports. 2018. [Online]. Accessed through:
<http://smallbusiness.chron.com/examples-managerial-reports-24579.html>.
Why Management Accounting Is Important in Decision-Making. 2018. [Online]. Accessed
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decisionmaking-53947.html>.
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