Management Accounting System, Reporting, and Cost Analysis Report

This report provides a comprehensive analysis of management accounting, focusing on its critical role in organizations, particularly in financial consulting firms like Equilibrium Asset Management. It explores the significance of management accounting in decision-making, encompassing financial and statistical information for effective short-term and long-term strategies. The report delves into various management accounting systems, including inventory management, cost accounting, price optimization, and job costing, detailing their applications and benefits within the context of Equilibrium Asset Management. It further examines different management accounting reporting methods, such as budget reports, accounts receivable aging reports, performance management reports, and cost managerial accounting reports, highlighting their importance in evaluating financial performance. The report also discusses the integration of these systems and reports within organizational processes, providing a thorough understanding of how management accounting drives organizational success and efficiency. This report is valuable for students seeking to understand the practical applications of management accounting principles.

MANAGEMENT
ACCOUNTING

Table of Contents

INTRODUCTION
In today, management accounting plays important role in an organizations and it is
helping to managers regarding to decision making to create and develop good management
accounting information (Amidu, Effah and Abor, 2011). It is the process of preparing
management reports and accounts in accurate way to present all financial information in front of
managers. These information are categorised in financial and statistical information which can
help to take effective decision to managers related to short term and day to day decision. In the
subject to good management accounting include all responsibility for manage all accounting
information and apply in management accounting system and management accounting
techniques. In the particular report selected company Equilibrium asset management which is
medium sized financial consulting firm that lends variety of services to it's clients. The company
incorporates different forms of system in order to maintain information concerning organisation
to efficiently achieve goals of an organisation. The company has provided advise regarding to
investment and health management. In the particular report consist of management accounting
and their requirements in the reference of management accounting system, different methods of
management accounting reports. Furthermore, calculate cost using appropriate techniques of cost
analysis to prepare income statement using marginal and absorption costs. Different planning
used in management accounting and compare organisation to another organisation to sort out
financial issues with the help of management accounting system.
TASK 1
Management accounting system and their different types
Management accounting is the systematic process of a business where prepare and mange
all financial report to present top management to provide accurate position of a company. In
other words it is the process of planning, organising, staffing, directing and controlling all
management information for present in the front of top level management. It is providing all
detailed information regarding to position of a business which can help to decision making
process to obtain success and growth.
Management accounting system is internal part of an organisation that can analysis of
management and the main objective of this system to manage all business activities in different
sections to coordinate with each other regarding to management information. The Equilibrium

asset management can use different accounting system to manage their business as well as daily
routine operations. These system can useful for better performance of fulfil the requirement of
their business. With the help of these system a company can develop strategies in the order to
achieving their objectives and gaols. The manager of Equilibrium asset management adopt
several system of management accounting to improve performance in effective way and achieve
their goals (Brigham and Ehrhardt, 2013) ).
Different types of management accounting system
Inventory management system – The particular system or software which is used by
different companies in order to manage their inventories at each level and measure on regular
basis. There are including different functional activities like transportation of stock, so this
system can record the data regarding each transaction. As a service provider the company keep
all records relating to their clients on the daily routine basis. In Equilibrium asset management
can follow the system of inventory management to record all detail information regarding to their
customers. It will help to access data any time and provide relevant information on time. Mostly
companies use different software for this system to manage and control their clients in effective
way. If number of customers decrease so the manager can responsible for identify the reason.
These information available through inventory management system or software and it is
important for a company to measure their inventory.
Cost accounting system – This system helps to company for know the cost of products
which is related to their operational activities. Cost accounting system can adopt by company to
identify actual amount of products and services which is delivered by company. In the context of
Equilibrium asset management, the manager can follow the system to know about price of
different financial services which is supply by company to their clients. In this system mainly
consider time or money because on the basis of money an advisor can provide services
immediately. The particular system can provide the help in order to know actual price of their
financial services and after that set right price for their financial services. Cost accounting system
important for manager to provide help in decision making process. In addition, cost analysis
develop specific plan of action which help to increase their consultancy services among the
customer.
Price optimization system - This system based on price analysis which can help to
business to identify different customer's perception according to price of products and services.

Price optimization system can help to know actual price of different products and services to
achieve organisational goals and objectives (Carlsson-Wall, Kraus and Lind, 2015). With the
help of this system company can increase profitability and stay long time in market. Equilibrium
asset management company can provide different types of financial services to their customer
and take feedback time to time. The company has followed this system to fix rate of their
services which is charged by the clients. The company fix the rate of services according to
clients reviews which can cover the overall cost or provide the decent profit margin to the
Equilibrium asset management. This system followed by the manager in the subject to evaluate
the reaction of the clients for their prices according to services. In hence, it will help to develop
effective strategies for making decision.
Job costing system – This type of management accounting system is used by an
organisation to know allocation and optimization of cost to their job. The company has used to
this system for track the work which is done by employees and it is also used to evaluate the
performance of individual as well as organisation performance. In the context of Equilibrium
asset management the company has adopted this system for to identify performance of top level
managers and individual cost of production for specific financial services to different clients. The
job costing system can take record performance of each employee.
Various methods used for management accounting reporting
Management accounting reports used by the several organisation to evolute the financial
performance of an organisation as well as employees. These reports are part of internal analysis
and provide information to each section performance. The requirement of management
accounting reports to present internal and external stakeholders to show position. The company
Equilibrium asset management follow various accounting reports which can help to measure
performance of a company which is discussed below:
Budget Report – These types of reports prepared by an organisation in order to estimate
the performance of employees. These types of budget report used by an organisation in large ass
well as small type business to determine the future income and expenses. It is related to each
department for the effective work. Equilibrium asset management can adopt this report to know
costs of each department and compare their budget with other organisation to know how much
our budget report is effective. In particular budget report include financial and statistical
information to provide help to manager regarding to decision making process. With the help of

this report predict the value of revenues, expenses and optional strategies which is helping to
complete task in particular time duration. The company has compare actual performance with
standard performance to know where is need to improve.
Accounts Receivable Agin report – This report used by an organisation to done their
transaction in credit mode so they are vital to prepare it. With the help of this report the
managers can identify those peoples who can include as defaulters so company take appropriate
step towards them. For a company need to maintain and prepare receivable agin report and these
types report mostly develop by medium to large sector organisation. To maintain data related to
all defaulters in different way so company as compile way keep records all defaulters and if in
future repay any person of money so details can be changed according to their information.
Manager of Equilibrium asset management use this report to maintain data of this report for
defaulter clients who can not pay in exchange of financial services. On the other hand it will help
to increase efficiency of their work to increase the profitability and reduce the number of non
payment customers (Dražić Lutilsky and Dragija, 2012).
Performance management Report – These types of report prepared by the company to
determine the performance of a company. Performance report can help to achieve organisational
goals and objectives. On the other hand this report can help to management to take effective
decision regarding to reward system such as bonus, gift voucher and promotion for their
impressive performance. In the context of Equilibrium asset management can follow and develop
this report to provide all detailed information and help to stay long time in market. With the help
of this report measure the performance and provide promotion and demotion to their departments
If employees are provided good services to their customers and they are satisfied them so it will
good for company.
Cost managerial accounting reports – this report can include all types of cost of
different products and services and it is managing according to customer perspectives. It can
provide over all summary of these element like fixed cost, variable cost and overhead cost. Cost
accounting managerial report provides help to manager of Equilibrium asset management to
evaluate the cost of their services to fix the charges of consultancy. It is beneficial for company
in order to estimate profit margin, revenues and turn over of a company. The report consist of
manpower cost, infrastructure cost, maintenance charges and other expenses. The report of

Equilibrium asset management companion to manage their cost in respect to increase their
profitability which lead to achieve their business goals and objectives.
Advantages of management accounting system and their application
Different Management Accounting system Benefits
Inventory Management System  With the help of this system evolute the
updated information of their clients
regarding to develop new strategies
according to available data.
 The inventory management system
beneficial because it can save money as
well as time of company.
 It can provide detailed information any
time related to particular client (Granlund,
M., 2011) .
Cost Accounting system  The system can beneficial for an
organisation to control the cost according
to budget report and it will compare with
previous reports
 It can provide all type services which is
related to finance to their customer.
 With the help of particular system provide
different service in order to detect amount.
It will help in future regarding to profit
margin.
Price optimization System  The system can to manager for build
several types of strategies as per the
demand of clients and they also compare
their competitors price policy which is
related to services.

 It can provide help to manager of company
to identify the clients perception according
to their providing services and also
analysis the behaviour of customer
regarding to their pricing policy.
Job Costing System  This system can help to track the work of
different employees according to their
services.
 It can provide information of individual
person regarding to job and also provide
organization performance.
Integration of Management accounting system and management accounting reporting with in
organisational processes
In every business can adopt management accounting system in order to manage and
control business activities and different reports also part of the organisation. Both management
system and reports are playing important role in an organization's process. In the process include
different types of activities which is done by company to involve decision which taken by
manager for the provide advantage of an organisation. In the context of company Equilibrium
asset management have to follow different accounting system and prepare reports to show
performance of the company (Johnson, 2013) . These are helping to make easier of
organisational process and make flexible of decision making process. Cost accounting system
and inventory management system can apply in the organisation and help to manage report of
each section. It can reduce cost and increase the profitability so it will help in organisational
process to achieve objectives and goals.
TASK 2
Techniques of marginal and absorption costs
Absorption Cost – The particular method of the costing which is helping to calculate
total cost of production and a manager can determine the cost of each unit. It is also known as
full costing method.

Marginal Cost – It is a method of costing where is changing per unit of production for
each single unit to cover the cost of production in particular time period.
Income statement by Absorption Costing:
Particular Amount
Sale(10000*25) 250000
Less: - Cost of goods sold
Material Cost 50000
Labour Cost 30000
Variable Cost 20000
Fixed manufacturing overheads 40000 140000
110000
Less: - Selling & Administration Expenses 60000
Income from Absorption costing 50000
*Working Notes: -
Price per unit = 25
Sold units = 10000
Selling & Administration Expenses = Variable Selling & Administration Expenses + Fixed
Selling & Administration Expenses
= 30000+30000
= 60000
Income statement by marginal Costing:
Particular Amount
Sale 250000
Less: - Marginal cost

Direct material 50000
Direct labour 30000
Manufacturing overheads 20000
Variable Selling & Administration overheads 30000 130000
Contribution 120000
Less: - Fixed Cost
Fixed manufacturing overheads 40000
Fixed selling & administrative Expenses 30000 70000
Income from Marginal costing 50000
*Workings Note: -
Price per units = 25
Sold units = 10,000
Sale = Sold unit * per unit cost
= 10000* 25
= 250000.
Income statement by absorption costing method ( When 5000 units of radiators are sold)
Particular Amount
Sale(5000*25) 125000
Less: - Cost of goods sold
Material Cost 25000
Labour Cost 15000
Variable Cost 10000

Variables selling and administrative expenses 15000
Fixed manufacturing overheads 40000
Gross profit 20000
Less: - Selling & Administration Expenses -30000
Loss -10000
*Working Note
Sales (5000*25) = 125000
Cost of goods sold = 25000+15000+10000+15000+40000 = 105000
Selling and Administrative Expenses = 30000
(Variable selling and administrative expenses+ Fixed selling and administrative expenses)
Income statement by marginal costing method(5000 units sold):
Particular Amount
Sale (5000*25) 125000
Less: - Marginal cost (5000*13) -65000
Contribution 65000
Less: -
Fixed Manufacturing overhead Cost -40000
Fixed selling and administration expenses -30000
Loss -5000
*Working Notes
Sales(5000*25) = 125000
Variable cost per unit = (50000+20000+30000+30000)/10000 = 13