Management Accounting Systems: Adapting to Financial Challenges

This report provides a detailed analysis of management accounting systems, financial reporting methods, and planning tools used for budgetary control. It covers the essential requirements of different management accounting systems such as inventory management, cost accounting, job order costing, and price optimization. Various methods for management accounting reporting, including budget reports, accounts receivable reports, cost management reports, and performance reports, are discussed. The report also examines the advantages and disadvantages of different planning tools, such as capital budgets, operating budgets, and zero-base budgets, and how organizations adapt management accounting systems to respond to financial problems, emphasizing the integration of accounting systems and reports in organizational processes to achieve sustainable success.

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1...............................................................................................................................................1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.................................................................................................1
P2 Different methods used for management accounting reporting.............................................2
D1 How accounting system and reports are integrated in organization processes......................4
Task 2...............................................................................................................................................4
P3 Calculation of cost by using appropriate technique of cost analysis .....................................4
M2 Application of range of technique that produced to financial reports ..................................4
D2 Produce financial reports that are applying accurately and interpretation of data for running
business........................................................................................................................................4
Task 3...............................................................................................................................................5
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control. .......................................................................................................................5
M3 Analyse the use of planning tools and their application that can help in forecasting ..........6
Task 4 ..............................................................................................................................................7
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems........................................................................................................................7
M4 How financial problems can be resolve and management accounting system leads to
sustainable success ......................................................................................................................8
D3 How planning tools for accounting respond uses to solve financial problems......................9
CONCLUSION................................................................................................................................9
REFERENCE.................................................................................................................................10

INTRODUCTION
For every business organization accounting is the important aspect which uses by
organization for the purpose of managing all information and developing the business. This is
important for industry to focus on accounting information by recording, identifying and
managing the financial information that can help to make the right business decision by
operating all functions and activities (Bui and De Villiers, 2017). The main purpose of using
management accounting is to analysis the business situation and make the effective decision
which can help to continue the all activities and functions. This organization considered in
reports is Capital Joinery Ltd that is manufacturing organization selling products and services.
The management of such company plays important role by collecting and recording the
information. Topics are discussed in report are type of management accounting system, reports,
tools that uses for budgetary control, and system that uses to solve the financial problem
effectively.
Task 1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
Management accounting define as the action of building the organisation goal through
identifying, analysing and communicating data information to higher authority is known as
managerial accounting. It focuses on accounting goal at informing administration about
operational enterprise prosody. It include the data which is related to the monetary value, cost,
goods and services which is bought by the organisation. Budgets are also used the quantify
decisions, which is made in production planning. Management accounting used in internal
elements which is related to the account for business transactions.
There are different types management accounting system.
 Inventory management system: It is a chronological sequence approach to sourcing
and storing and selling inventory along with raw material, finished products. It also
defined as correct stock at up to the level, in right place, at the correct time and the actual

cost along with price. It is essential for Capital Joinery Ltd, to know about inventory and
manage the all functions effectively. This increases the business performance in
competitive environment (Quinn and Hiebl, 2018).
 Cost accounting system: This system is also known as product costing system, it is a
structure which is used by the organisation to approximation the cost of their goods for
profitability investigation, inventory rating and cost control. Capital Joinery Ltd is using
such system to analyse the cost that incurs while operation and manage the all functions
accurately.
 Job order costing: This process is also used for determination of cost for
manufacturing each goods. This method is used when business concern produce a variety
of goods which are antithetical from others and it calculate the cost for particular job. It is
important for selected organization by accumulating the cost and managing the all
performance effectively (Alawattage, Wickramasinghe and Uddin, 2017).
 Price optimization: In this process, use the mathematical justification, how consumer
will respond to different prices of its goods and services. This is appropriate and suitable
system for chosen organization which uses to set the prices of their products and services
after manufacturing and producing the products.
In the context of Capital joinery Ltd used these system on monthly basis or as per the
requirement which includes the variables and differences in term of financially aspects. Which
shows the overview of the financial management.
P2 Different methods used for management accounting reporting
For management of organization it is important to know how a business can be operated
and manage the all functions by developing the activities. Accounting reports are special
document of organization which is prepared by management by analysing the financial
information and situation of business. This provide the good understanding and information how
a business can be operate and manage the all functions. The selected organization is using
different types of accounting reports that are as explained below:
Budget report: Budget accounting report are very complicated in measuring
organisation outcome and also generated as complete micro enterprises and according to

departments for big industry. It estimates depend upon previous aspects which create unforeseen
circumstances that may be originate (Arunruangsirilert and Chonglerttham, 2017).
Account receivable report : This report break down the remaining balance of its
consumer into certain period of time which allows the higher authority to justify the defaulters
along with the issue of organisation collection process.
Cost managerial accounting report: This report include the summary of information
which is material cost, overhead, labour and other cost. This report recognize the cost of products
with their selling amount. This uses by Capital Joinery Ltd for the purpose of maintaining cost of
their products and services which they are providing. This can help to increase the organizational
performance and performance by managing all activities and functions effectively.
Performance reports: This reports include the overall outcome of the organisation
along with the employee at end of period of time. Higher authority uses this report to make a
strategy decision about the upcoming goal of the company. Employees are awarded for their
commitment, or their volunteer to the organisation. The performance report for any organisation
measure the accurate data of their strategy towards their mission and objectives (AlKhajeh and
Khalid, 2018).
Other managerial accounting report: this report consider the information reports for
competitor justification and other reports are critical to every enterprises. The action is based
upon employees capabilities to maintain the reporting requirements of an organisation.
Benefits of system
System Uses
Inventory management This system uses by Capital joinery Ltd for knowing
about availability of inventory that can help to make the
order of re-purchase so work being in continue process.
Cost accounting This system is uses to track the cost of organization as it
involved in various functions that supports to manage
the all activities.
Price optimization The uses of system is required for setting the prices of
products and services which provides the higher benefits
by influencing number of customers.

Job order costing The use of system is allocating the cost in to different
section and managing the all performance by making
right decisions.
D1 How accounting system and reports are integrated in organization processes
Accounting system and reports are important part of business organization as it helps to
manage the all functions and activities in running organization and helps to operate the business
effectively. The management is responsible for all activities as it analysis the all financial and
accounting information then prepare the report which helps to attain the business goals.
Task 2
P3 Calculation of cost by using appropriate technique of cost analysis
Absorption costing – This indicates as all of the manufacturing cost which have been
assigned to the units of goods produced by involving direct material, direct labour, variable
manufacturing overhead and fixed expenses that can help ton operate the business and generate
profits.

Marginal costing – This means cost that is based on production expenses which are
variable and direct that helps to determine how an organization is getting the profitability by
managing all incomes and expenses.

M2 Application of range of technique that produced to financial reports
Financial information are important for each business organization as it involves income
and expenses that occurs in organization and manage the all activities which increases the
productivity as well as profitability. Standard costing, marginal costing and absorption costing
are technique of management accounting which are uses by management to prepare the financial
reports and develop the activities in changing environment so that all functions can be managed
properly. Capital Joinery Ltd uses different techniques and activities by using the functions
which can help to manage the functions and develop business performance.
D2 Produce financial reports that are applying accurately and interpretation of data for running
business
The aim of organization is to operate the business by using different technique and toll
that can help to analyse the cost which occurs in organization and develop the business
performance. If all financial data and information are collected by management then it should be

prepare financial reports that can help to increase the all activities as well functions by managing
activities. This also increases the performance and profitability in competitive environment.
Task 3
P4 Explain the advantages and disadvantages of different types of planning tools used for
budgetary control.
Budget can be defined as estimation of income and expenses that occurs in organization
while operating the business. This is important for management to focus on spending by
preparing the different types of budget and managing the financial information that can help to
increase the productivity and profitability.
Capital Budget – This can be explained as budget which is prepared by management by
considering capital receipts and payments in order to set right budget and operate the all
functions accurately (Prihastuti, Wahyuni and Ramadhani, 2018). Capital receipts are loans that
are raised by government from public borrowings by government and funds are arranges in
organizational functions and activities which can help to increase organizational performance
and profitability. In context to Capital Joinery Ltd. Management can use this business effectively
and manage the performance.
Advantages – Capital budget helps chosen organization to understand the various risk
that are involved in an investment opportunity and it affects the returns of the company. This
also helps to make long term strategic investment and maintaining higher performance in
changing environment.
Disadvantages – The budget decision are for long term and majorly irreversible in
nature. This can help in the estimations and assumptions that does not provide accurate results.
This is time consuming activity that has created the problem to get right results.
Operating budget – This can be defined as containment of all revenues and expenditures
which occurs on daily basis in order to operate the business activities and functions. This mainly
concentrate on expenditures that are related to operation by involving cost of produce that are
sold in the market and increases the performance. In relation to Capital Joinery Ltd. Operation
budget is prepared by management by identifying and considering daily basis expenses which
increases the all productivity and profitability (Kasasbeh, 2018).

Advantages – This is a financial plan which is designed by management to meet the
company's debt obligations and sustain growth over time. This budget allow the owner to see
how their organization spends money and how all functions should be operated effectively.
Capital Joinery Ltd is taking the advantages by arranging day by day income and expenses which
can help to increase performance and profitability.
Disadvantages – This create the burden of keeping records of daily income and
expenses. This create the challenge for organization to control over expenses that has occurred
while operation and reduced the profitability (Tekathen, 2019).
Zero base budget – This can be explained as budgeting method in which all expenses
should be justified for each new period. The process starts from zero base and every functions in
organization should be analysed by identifying needs and cost (Steccolini, 2019). This is useful
for small size organization who are new established and does not have any past financial
information then such budget is prepared which helps to increase business performance.
Advantages – This is providing accuracy and efficiency by preparing the budget which
can help to manage the all functions and activities. This can helps to maintain coordination and
communication between management and employees while preparing the budget. Capital Joinery
Ltd can be use this budget in case of starting a new budget from new period (Ahmetshina,
Vagizova and Kaspina, 2018).
Disadvantages – This is not appropriate and useful for large size organization which has
created the problem while operation as not past period informations are involved in budget. The
management are not having good knowledge that is difficult to find out. To prepare the zero base
budget time consume by information which has created the problems.
M3 Analyse the use of planning tools and their application that can help in forecasting
Tools and technique in relation to management accounting uses to increase the
organizational performance. This is important for all industry to analyse the tools as know how it
can be use to continue the all functions. Budgets are the estimation of income and expenses
which are prepared by management in order to develop the business performance and attain the
higher profitability in changing environment. Capital Joinery Ltd uses different types of planning
tools that are related to management of all income and expenses that occurs while operation and
attain the profitability in changing environment (Bondar, Iershova and Chaika, 2019).

Task 4
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems
While running a business occurrence of finance problem is natural that should be solve
by identification and using appropriate system. This is important for organization to understand
the requirement of industry and bring the change which can help to operate the all functions and
activities. The financial problems are explained as money related problem where management
are not able to keep records and manage the financial information. In relation to Capital Joinery
Ltd, discussion of different financial problems are as explained:
Gaps in cash flow – This type of problem is related to business which means there is
gaps in matching in inflows and outflows that arises in organization. When management are not
able to match their income with expenses then this problem arises which reduced the
organizational profitability. Capital Joinery Ltd can face this problem due to mismanagement of
investment, income, and expenses (Shichkov, 2018).
Improper knowledge of fund allocation - Without availability of sufficient funds and
allocation it will be difficult for organization to operate and manage their business. If
management is not able to allocate the funds in activities then it will be difficult to complete the
project and manage activities. Capital Joinery Ltd cam face this problem as management have
lack of knowledge of allocation of fund in particular activities and arrange them properly.
Identification of problem
Benchmarking: This is effective tool which states that how to formulate the effective
planning for the purpose of solving specific problem. This tool uses by organization for
identifying problem which they are facing. For example, Capital Joinery Ltd can be use this tool
by comparing with other organization that can help to know how it can make effective planning
to run business.
Key performance indicator: This is performance analysis tool that mainly uses by
organization to analyse the performance of their employees who are working by managing all
activities. This involves financial and non financial activities which are analysed by management
of Capital Joinery Ltd to get the problem and managing performance (Wanderley and et.al.,
2017).