Management Accounting: Systems, Reporting, and Problem Solving

This report provides a comprehensive overview of management accounting systems and techniques, including cost analysis, financial reporting, and budgetary control. It explains management accounting and its essential requirements, different reporting methods, and evaluates the benefits and applications within an organizational context. The report also calculates costs using marginal and absorption costing, analyzes planning tools for budget preparation, and compares how organizations adapt management accounting to respond to financial problems, ultimately aiming for sustainable success. The integration of management accounting systems and reporting within organizational processes is critically evaluated, highlighting the interrelation between systems, reports, and organizational departments.

Management accounting
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Table of Contents
Introduction........................................................................................................................4
LO1: Demonstrate an understanding of management accounting systems.....................5
P1 Explain management accounting and give the essential requirements for different
types of management accounting..................................................................................5
P2 Explain different methods used for management accounting reporting...................7
M1 evaluate the benefits of management accounting systems and their application
within an organizational context.....................................................................................8
D1 provides a critical evaluation of how management accounting systems and
management accounting reporting are integrated within organizational processes.....9
LO2: Apply a range of management accounting techniques..........................................10
P3 Calculate costs using appropriate techniques of cost analysis to prepare an
income statement using marginal and absorption costing...........................................10
M2 Apply a range of management accounting techniques and produce appropriate
financial reporting documents......................................................................................12
D2 Produce financial reports that accurately apply and interpret data for a range of
business activities........................................................................................................13
LO3: Explain the use of planning tools used in management accounting......................14
P4 Explain the advantages and disadvantages of different types of planning tools
used in the budgetary control.......................................................................................14
M3 Analyze the use of different planning tools and their application for preparing and
forecasting budgets......................................................................................................15
LO4: Compare ways in which organizations could use management accounting to
respond to financial problems..........................................................................................16
P5 Compare how organizations are adapting management accounting systems to
respond to financial problems......................................................................................16
M4: you should analyze how, in responding to financial problems, management
accounting can lead organizations to sustainable success.........................................18
D3: how planning tools for accounting respond appropriately to solving financial
problems to lead organization to sustainable success:...............................................19
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Conclusion.......................................................................................................................20
References.......................................................................................................................21
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Introduction
In the changing environment, there are various aspects which will have to be taken into
consideration by the company. All of the factors by which the accounting of the
company is affected will be considered and then they will be taken into consideration so
that proper accounts are prepared. In this report, the management accounting will be
discussed and there will be an explanation of the systems and reports which are used
under this. The company will be using various methods for the making of the income
statements and they will be discussed. Together with them, the planning tools which are
there will be taken into account by which it will be possible for the company to attain the
sustainable success. The issues which arise in the business will have to be resolved in
an effective manner and the tools which will be used in this context will be described.
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LO1: Demonstrate an understanding of management accounting systems
P1 Explain management accounting and give the essential requirements for
different types of management accounting.
The business is undertaken with the aim of maximizing the returns and for the
achievement of the same, there are several functions which are performed such as
organizing, planning and controlling. It is required that they shall be performed in the
most effective and efficient manner. There will be a requirement of the information for
the carrying out of them and that will be collected with the help of the systems which are
available under management accounting. The data which will be collected will be used
by the company for the making of the plan and also various decisions will be taken with
the use of them (Legaspi, 2014). Zylla will be using them so that all of the functions will
be undertaken in the most effective manner. All of this will also be requiring the use of
the principles of causality and analogy.
The business will be required to focus on the financial aspect and for that financial
accounting will also be taken into use which is having some of the differences from the
management accounting and they are as provided below:
Management accounting Financial accounting
The information which is tee under them
will be used in the internal processes of
the company.
The company will be providing the
information to the third parties so that they
can make the decisions on the basis of
them.
There will be the inclusion of all the data
which is related to the company.
Only the financial data will be incorporated
under this.
The reports under this will be prepared by
considering the policies which are
formulated by the company as there are
no specific formats which are there.
They will have to be prepared by the use
of the standards which are set by the
authorities and board.
The accounting will be made in the context
of any particular department of the
business.
There will be the consideration of the
complete organization which will be done
under this.
The process will be performed with the use of several systems and an understanding of
them is provided below:
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Cost accounting systems: The manufacturing process of the company will be
requiring various costs and it will be required that they are calculated at the appropriate
time. For that, there are several approaches which can be used and in that various
aspects will be taken into consideration. There will be actual costing in which all of the
amount spent in actual will be considered. The standard costing is another method in
which all the target cost which is set will be included. There will be normal costing also
in which all of the actual amounts will be taken except for the overheads.
Inventory management systems: The stock of the company will be required to be
maintained in the best manner and for that, it will be required that the need of the same
shall be ascertained so that they can be arranged by the company in the best possible
manner. In that, the techniques such as Just in time approach and economic order
quantity will be taken into use (Lopez-Valeiras, et. al., 2015). The company will be
required to perform the valuation in an appropriate manner and for that method such as
FIFO, LIFO, and weighted average will be used.
Price optimizing systems: The Company is undertaking various operations with the
aim of the maximization of the profits and for that, it will be needed that such price shall
be calculated which will be making this possible. For that various practices which are
available shall be taken into use (De Toni, et. al., 2017). There are basically two
categories in which they are divided and they are based on the cost and based on
market factors. In that, some of the most important is market skimming, price
penetration.
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P2 Explain different methods used for management accounting reporting.
The company is required to make the relevant decisions and for them, it will be needed
that they are having all of the information in an appropriate manner. For that, there are
various reports which are formulated and some of them are explained below:
Variance report: The Company is required to identify the variances which arise in the
business among the amounts which are there in the budget and the ones which have
been incurred in actual. For that, all of the values will be compared and then the
deviations which are determined will be recorded in this report (Wang, et. al., 2015). By
that, it will be possible for the company to make the correct decisions and then the
changes will be incorporated into the business so that they can be properly dealt with.
Budgets: This is the report in which all of the incomes and expenses which are related
to the business for any particular period will be taken into account. They will be
estimated and then on that basis standards will be set which will be entered in them.
The Zylla will be required to consider them and carry on the operations in accordance
with them. By that, it will be possible for it to attain the targets which are specified in the
business and establish a proper control.
Performance report: The employees in the company will be working in an appropriate
manner when the proper check is established and they are providing with the
appropriate motivation and incentives. For that, some of the aspects will be identified on
the basis of which it will be possible to evaluate their performance ( De Jong, et. al.,
2012). This report will be including all of them so that they can be followed by them and
they can achieve them to achieve the goals and establish their position.
Job cost report: This will be prepared by the company so that the cost which is
incurred in respect of all of the jobs which are undertaken is ascertained. They will be
determined and then reported so that can be used in the process of decision making.
The jobs will be including batches, processes which are included in the business and
the expenses will be ascertained in accordance with them so that all of the components
of the process will be included in the calculation.
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M1 evaluate the benefits of management accounting systems and their
application within an organizational context.
The Zylla will be using all of the systems and with the help of them it will be possible for
them to attain various benefits and they are as follows:
 The improvement in the overall performance will be obtained as the employees
will be provided with the appropriate incentives and motivation.
 The company will be able to use the information which will help in making the
best decisions which will be beneficial for the entity.
 There will be the identification of the entire factor which will be affecting the
business and so it will be possible to take the corrective actions on time.
 The company will be experiencing the decline in the cost of the business which
will be beneficial for the long run.
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D1 provides a critical evaluation of how management accounting systems and
management accounting reporting are integrated within organizational
processes.
The management accounting systems and reports which are used in the company will
be related to one another and this can be said as the company will not be able to use
the reports without the help of system which will be provided with all the information that
is needed in the making of reports (Watts, et. al., 2014). The data will have to be
collected from various departments of the company and due to this fact organization will
also be integrated into this process and all of them will be interrelated.
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LO2: Apply a range of management accounting techniques.
P3 Calculate costs using appropriate techniques of cost analysis to prepare an
income statement using marginal and absorption costing.
In the business, there are various types of costs which are incurred and they can be
classified as the variable and fixed. They will have to be identified and then it will be
needed that correct treatment shall be provided to it. For that, there are two approaches
which are described below and will help in making the income statements in the
company.
Absorption costing: In this method, the proper allocation of the fixed overhead will be
made which are spent in relation to the production. They will be apportioned among all
the units which are prepared. In this, the classification of the cost will be made in terms
of the activities. There will be a proper treatment which will be provided in this so that
the over and under absorption can be identified and included in the calculations.
Marginal costing: This will be the approach in which all of the expenses are classified
as variable and fixed. All of the variables will be considered first and then by considering
them the contribution will be identified (Aurora, 2013). The fixed overheads will be
considered from this and this will be helping in the calculation of the net amount of the
profits which have been earned.
The company is preparing the income statements with the help of both the approaches
and they are provided below:
Income statement as per Absorption Costing 2017
£ £
Sales (50 x 1200) 60000
Cost of Sales :
Opening Stock 0
Cost of Production (5 x 1500) 7500
Fixed production cost 3000
Variable Production cost (3 x 1500) 4500
Add Closing Stock (10 x 300) 3000
Gross Profit 48000
Less Fixed Cost
Administration cost 1500 1500
Net Profit 46500
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Income statement as per Marginal Costing 2017
£ £
Sales (50 x 1200) 60000
Cost of Sales :
Opening Stock 0
Cost of Production (5 x 1500) 7500
Variable Production cost (3 x 1500) 4500
Cost of Goods Sold 12000
Less Closing Stock (8x 300) 2400 9600
Contribution 50400
Less Fixed Cost
Administration cost 1500
Production overhead expense 3000 4500
Net Profit 45900
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M2 Apply a range of management accounting techniques and produce
appropriate financial reporting documents.
The Zylla will be using various such tools and techniques which are available under
management accounting. By the help of them, it will be possible for the company to
make the appropriate reports so that they can be used in all of the processes which are
undertaken. For that cost will have to be ascertained and that will be carried with the
help of the target costing, standard costing and activity-based costing (Vasile and
Croiteru, 2013). Then with the help of them, it will be possible to make the proper
budgets and they will be helping the improvement of the actions which are undertaken.
By the use of them and the variance analysis, it will be able to determine the deviations
which are present so that it can also be reported to be considered for the coming period.
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