Management Accounting Systems: A Comprehensive Overview

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MANAGEMENT ACCOUNTING
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Contents
TASK 4............................................................................................................................................ 3
TASK 5............................................................................................................................................ 7
REFERENCES.................................................................................................................................11
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TASK 4
Management accounting system can be defined as the system which allows an organization in
analyzing different sources of organizational information through which the decisions of the
management can be supported. The function of management accounting identifies different
ways through which the information available in different forms within the organization can be
used to analyze the different perspectives and use it so that the managers of the organization
can take relevant business decisions (Kaplan and Atkinson, 2015). The system of management
accounting can be used in all the departments of the organization as it analyzes all the relevant
data to ensure that the decision taken by the manager of the organization is highly effective
and produces highest possible efficiency.
In an organization, there are various types of management accounting systems that can be
used, some of which have been listed and explained in the following:
Cost Accounting System
Cost accounting system is a part of management accounting system through the organizations
reviews the costs that have been incurred for production of goods through assessment of input
costs and comparing them based on the output costs. The system of cost accounting operates
through determining the various costs that the organization has incurred while production
process and use the information to determine the level of profit that has been gained by the
organization (Schaltegger and Zvezdov, 2015). Cost accounting system is being used by the
organization so that costs of the production process can be controlled and higher profitability
can be ensured. Through this system, costs area allocated to all the factors that have been
inputted in the formation of finished goods so that actual profitability can be determined.
Inventory Management System
The system of inventory management is another essential part of the management accounting
system which allows an organization in increasing the efficiency of its manufacturing processes.
Through inventory management system, an organization ensure that inventory which is
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required for production of goods is timely available during the process of manufacturing so that
it can be completed within required time and the goods are made available to the customers
for consumption (Bauer et al., 2012). There various process of inventory management system
through which the inventory managers ensure availability of sufficient raw materials so that the
manufacturing process is not affected and the goods are delivered to the customers.
Price Optimization System
Price optimization system is another part of management accounting systems through which
the organization is assisted in determining the response of customers based over the different
price levels so that the profitability of the organization can be determined (Veit, 2012). In this
type of management accounting system, the information of the organization is critically
assessed so that the response of customers over different prices of the produced goods is
estimated and based upon which the products are being priced. The main purpose of price
optimization system to ensure that the organization gains higher profitability and the costs can
be minimized.
Job Costing System
Job costing system is another type of management accounting system through which the
manager of the organization allocates costs to different jobs that are being performed so that
costs can be monitored and controlled and the profits can be examined based upon each job
that has been performed (Laudon and Laudon, 2016). This system of management accounting
allows the organization in allocating costs to each level of output that has been produced so
that variations in the costs can also be examined and income generated from each job can be
determined.
In an organization, the concept of management accounting is being sued to analyze the
relevant information so that decisions can be taken effectively. Thus, the analysis of data is
being done and has to be reported in appropriate forms so that it can be understood by the
manager and can be used to make the decisions wisely. Thus, for representation of different
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information, different forms are being used by the manager, some of which have been
represented in the following:
Budget Reports
Budget reports are the documents that are formed in the process of management accounting
to represent the estimate of costs that can be made by the organization for conducting
operations within a specified period of time. Budget reports assist the managers in
understanding the level of expenditure that can be made in through the different process
(Busco et al., 2013). Budgets also assist the organization in estimating the risks that have been
attached to the functioning of the organization and estimate their impact over the profitability
of the operations of the business. Budget reports also provide an overview of the profits that
can be generated from the estimated level of costs by the organization. Budget reports are
used right from the beginning of the functioning of the organization and are used even after
completion of the activities so that efficiency of the budget report which has been made can be
identified.
Cost Reports
Cost reports are the form of management accounting reporting through which the organization
reports of the estimated costs of the manufacturing products that can be made during a
specified period of time. It represents the costs that have been incurred in different phases of
the production process and also represents the wastes so that the decisions of the costing of
the products can be taken wisely by the managers (Schaltegger and Burritt, 2017). Along with it,
the cost reports represent the overhead costs that have been caused in the manufacturing
process so that its causes can be understood and the future planning can be made likewise.
Performance Reports
Performance reports are one of the most essential types of management accounting reports
which assist the managers with an understanding of the performance of activities that have
been done. The performance reports reviews that activities that have been performed by the
employees at the end of the period and determines the productivity of the organization
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(Parker, 2012). Through the performance reports that are made under the management
accounting systems, the working of the organization can be represented and an insight over the
working of the company can be provided.
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TASK 5
Performing the functions of management accounting stands of huge importance within an
organization because they assist in critical decision making by the manager. In the following,
the benefits of using the management accounting functions effectively have been represented:
Efficient Planning
Through analyzing the different sources of information of the organization, effective
management accounting assists an organization in making efficient plans through which the
organization can meet its objectives. The process of management accounting evaluates the
given information through which the future estimates can be made and based on which the
managers can frame an efficient plan (Soin and Collier, 2013). Planning process which is done in
an organization based on management planning tools is considered to be highly efficient as it
considers all the factors that shall be impacting the organization’s profitability and use the
information in the required places so that the impact of uncertainties can also be reduced.
Easy Coordination
Management accounting when performed efficiently assist in coordination among different
activities that are performed in an organization. The concept of management accounting uses
various types of information through which all the departments of the organization can make
effective decisions. Based on the analysis of information done by management accounting, the
managers are able to coordinate among the different activities performed in an organization so
that better results can be derived through them (Otley and Emmanuel, 2013). Also, efficient use
of management accounting helps the managers in applying the relevant process at the
production so that the risk of failure is reduced and the further activities are coordinated
among one another which also facilities saving time of completion of the production process.
Facilitates Management Control
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Effective management accounting also facilitates efficient control over the management of the
activities through analyzing the past data and recognizing the key areas that have been leading
to deviation. The efficient management accounting allows the organization in analyzing the past
records and comparing the results that have been received by the organization over different
period of times so that the most efficient way can be highlighted and used in the organization
(Hilton and Platt, 2013). Through understanding the best way of performing activities, the
managers of the organization are able to maintain better control over the management
activities and are able to implement decisions over large scale of operations. Efficient
management accounting systems also help the managers in determining the key areas that
have been causing issues in efficiency so that protective actions can be taken likewise in the
organization.
Increases Productivity
Through the use of efficient management accounting systems, managers of the organization are
able to facilitate higher productivity through the activities that are being performed through
the employees (DRURY, 2013). The use of management accounting systems allows the
employees in optimizing the use of resources that have been implanted in the production
process and ensure that maximum utilization is being made through them. Along with it, the
efforts of the employees are also framed through the system of management accounting in a
manner so that they hold a clear view of what has to be attained through the activities they
have been performing and frame them for the attainment of the organizational objective.
Evaluates Performances
The management accounting systems deals with analyzing of past data which has been
gathered through different measure over a specific period of time. Through efficiently applying
the management accounting systems, managers of the organization are able to evaluate the
activities that have been performed and determine the performance of the employees. Also,
the efficient application of management accounting system includes preparation of various
reports through the evaluation of which performance of the employees can be evaluated and
the areas in which higher efforts are required can be determined and worked upon
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(Wickramasinghe and Alawattage, 2012). Management accounting system’s efficient
applicability also allows the manager in determining the efforts of the employees as well as the
machines that have been implanted so that overall productivity can be determined.
Increases Customer Satisfaction
Efficient management accounting system also allows the organization in increasing the
satisfaction that is being provided to the customers through providing them high quality of
product at an affordable price (Ward, 2012). The system of management accounting allows the
organization in minimizing the costs while keeping high focus over high quality of the products
that are produced. Thus, the application of efficient management accounting system allows the
manager of the firm in leading to higher customer satisfaction through the products that are
being produced.
Maximizes Profitability
The managers of the organization are also assisted by the efficient management accounting
system as it increases the profitability of the organization. The use of management accounting
systems allows the organization in allocating costs to the different areas and ensuring that
highest efficiency is derived through the same (Malmi, 2016). Along with it, efficient
management accounting system helps the managers in controlling the overhead of costs that
might occur due to uncertain situations. Also, efficient management accounting system assists
the firm in preparing various form of budgets through which the costs can be monitored and
controlled. Thus, the application of management accounting system assists the manager of the
organization in leading the firm towards higher profitability.
Minimizes Risks
Management accounting system deals with preparation of various forms of reports that
represent the different decisions that have been taken in the past and ensure that the plans
that are framed for the future period consider the same while framing so that the risks attached
to the next period can be minimize (Otley, 2016). The efficient application of management
accounting systems allow the managers in highlight areas of high risk so that they can prepare
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contingency frameworks for the organization so that its negative impact over the attainment of
objective of the organization can be minimized and the firm is able to gain higher profitability.
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REFERENCES
1. Bauer, D.G., Campero, R.J., Rasband, P.B. and Weel, M.D., Sensormatic Electronics Corp,
2012. Inventory management system. U.S. Patent 8,321,302.
2. Busco, C., Frigo, M.L., Riccaboni, A. and Quattrone, P., 2013. Integrated reporting.
Concepts and Cases that.
3. DRURY, C.M., 2013. Management and cost accounting. Springer.
4. Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
5. Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
6. Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson
Education India.
7. Malmi, T., 2016. Managerialist studies in management accounting: 1990–2014.
Management Accounting Research, 31, pp.31-44.
8. Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.
9. Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
10. Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables
and relevance. Critical perspectives on accounting, 23(1), pp.54-70.
11. Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues,
concepts and practice. Routledge.
12. Schaltegger, S. and Zvezdov, D., 2015. Expanding material flow cost accounting.
Framework, review and potentials. Journal of Cleaner Production, 108, pp.1333-1341.
13. Soin, K. and Collier, P., 2013. Risk and risk management in management accounting and
control.
14. Veit, T., SAP SE, 2012. Method and system for price planning. U.S. Patent 8,165,910.
15. Ward, K., 2012. Strategic management accounting. Routledge.
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16. Wickramasinghe, D. and Alawattage, C., 2012. Management accounting change:
approaches and perspectives. Routledge.
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