Management Accounting Systems and Reporting: A Comprehensive Overview

Desklib provides past papers and solved assignments for students. This presentation explores management accounting systems and reporting.

Task 1
LO1 Demonstrate an understanding of
management accounting systems.
LO2 Apply a range of management
accounting techniques.

Table of Contents
• Introduction … Slide 3
• Definition of management accounting … Slide 4
• Explain management accounting and give the essential
requirements of 4 types of management accounting systems …
Slide 5
• Explain different methods used for management accounting
reporting … Slide 8
• Evaluation of management accounting benefits and their
application within an organisation ... Slide 10
• Critical evaluation of integration of management accounting
systems and reporting within organisational processes ... Slide 11
• Conclusion … Slide 12
• Reference list … Slide 13

Introduction
• As the world of business has penetrated into the
globalization and technology era, the
complexities of businesses have elevated and
their threats have doubled, which has made it
essential for businesses to adopt management
accounting and its diverse tools and systems.
• This presentation is going to be evaluating
management accounting, its roles, its principles
as well as its systems. The reports prepared in
management accounting will also be discussed in
it.

Definitions of Management Accounting
• Authors have defined management accounting in various ways.
For instance, Edmonds et al. (2016) has defined management
accounting to be the financial and advisory data provision that
helps a firm in its development as well as performance.
• At the same time, Watts et al. (2014) mentioned managerial or
management accounting is not a field but a procedure
according to which accounts or reports within a firm are
prepared followed by providing accurate or timely information
required by managers to make regular as well as short-term
decisions.
• However, the Institute of Management Accountants has defined
management accounting in an entirely different way (Institute
of Management Accountants, 2019). It says that managerial
accounting is not any branch of accounting but a profession that
partner with a firm’s management to improve its planning,
decisions as well as performance management to enhance

Explain management accounting and give
the essential requirements of 4 types of
management accounting systems
• Influence - It influences managers and people
in a firm through providing and
communicating significant information.
• Value - It largely affects the value of a firm.
• Trust - It is established on the principle of
“stewardship builds trust”.
• Relevance - It provides not only significant but
also relevant information to a firm.

Contd.
• Planning
• Coordinating
• Organising
• Controlling
• Communicating
• Forecasting
• Decision-making

Contd.
• Cost accounting system - One of the most significant systems in managerial accounting
is the cost accounting system, which plays the role of evaluating the costs spent in a firm
is called the cost accounting system (Drury, 2013). The cost accounting system’s
essential requirement involves profitability analysis, cost analysis, cost minimization
along with managing the overall costs of a firm.
• Job costing system - It is yet another system related to management of costs of a firm.
However, the job costing system, unlike cost accounting, measures and evaluates job
costs of a firm instead of manufacturing costs (Lanen, 2016). Among the essential
requirements of the system lie controlling a firm’s costs associated with its jobs along
with optimising profit-earning jobs while reducing loss-earning ones.
• Inventory management system - A managerial accounting system helping a firm in
managing stock and inventories is the inventory management system (Narsingh et al.,
2016). Among the essential requirements of this system lie management of a firm’s
inventory orders, addressing consumer demand, control excess stock flow and
replenishment of stock within time.
• Price optimising system - Ferreira et al. (2015) stated that a management accounting
system, which is more likely to be strategy, based on which a firm makes its pricing
decisions and finalises product prices can be termed as the price optimising system. The
price optimizing system’s essential requirement involves creation of a strong base of
clients, enhancing level of sales, retaining clients, gathering new clients and such other
aspects.

Explain different methods used for
management accounting reporting
• Cost reports - A cost report can be defined as the management accounting
report in which the costs spent in a firm are not only recorded but analysed
and summarised as well (May, 2017). This report can be used in AGA
Rangemaster Group Ltd for the analysis of its overall costs along with taking
actions to reduce and control costs.
• Accounts receivable aging reports - The aging debtors of a firm are found and
are listed in the accounts receivable aging report and states the duration for
which the payment has been delayed and such related details (May, 2017). In
AGA Rangemaster Group Ltd, the aging debtors of the organisation are listed
while necessary decisions are made regarding its credit policies, debt
collection and others.
• Budget reports - Another common report is the budget report and in this
report, the actual performance number of the firm are compared against the
estimated and budgeted projections of it (Braun et al., 2014). It helps AGA
Rangemaster Group Ltd in determining how close its budgeted performance
had been with the actual performance in an accounting period.

Contd.
• Earning statement - A financial statement in which the
revenues, the costs, the expenses as well as the
earnings of a firm are calculated and presented is
called the earning or income statement (Lin et al.,
2017).
• Balance sheet - Also called statement of financial
position, the balance sheet of a firm shows the assets
and liabilities held in it and shows its capital structure
(Chaudhry et al., 2015).
• Statement of changes in equity - The changes that
take place in the equity held by the owners of a firm
are listed in this report (Reid and Myddelton, 2017).

Evaluation of management accounting
benefits and their application within an
organisation
• Application of cost accounting system benefits the firm through cost
control, cost management, cost analysis, profit analysis as well as
reducing financial problems due to costs.
• Applying the job costing system in AGA Rangemaster Group Ltd
benefits the firm by measuring job costs, optimising profit-earning
jobs while reducing loss-earning ones.
• AGA Rangemaster Group Ltd benefits from the application of the
inventory management system through optimising its inventories and
their movements, related costs, orders, availability and such aspects.
• Applying price optimising system benefits AGA Rangemaster Group
Ltd through setting optimum prices, acquiring higher customers,
enhancing customer base, creating demand of its products in the
marketplace and such ways.

Critical evaluation of integration of
management accounting systems and
reporting within organisational processes
• Inventory and cost management systems are integrated into the firm’s
production or manufacturing process. While inventory management
systems ensure the availability and flow of inventories to manufacture
final products, cost accounting system helps in managing and
controlling the costs associated to production.
• Price optimising and job costing systems are integrated into its
decision-making process since job costing helps in deciding regarding
the jobs performed in AGA Rangemaster Group Ltd while pricing helps
in keeping deciding how customers can be retained and attracted
towards it.
• On the other hand, budget reports, the accounts receivable aging
reports, and others can be integrated into AGA Rangemaster Group
Ltd’s communication process regarding the operations of a company,
their financial performance, the ways that can reduce budgetary
variances and such other aspects.

Conclusion
• Thus, from this presentation, a detailed
knowledge has been acquired on systems
related to management accounting.
• Their essential requirements have also been
derived.
• Thus, to conclude, it can be said that from
this presentation, management accounting
has been understood in detail.