Management Accounting Systems, Techniques, and Reporting Analysis

This report delves into the core principles of management accounting, defining its role in business decision-making and maximizing earnings. It explores various techniques, with a focus on cost accounting, absorption costing, and marginal costing, illustrated through income statement examples. The report emphasizes the integration of these techniques within a business to control costs, forecast expenditures, and increase efficiency. Furthermore, it highlights the benefits of management accounting, such as improved business efficiency, increased profitability, and a simplified decision-making process. The report concludes by summarizing the advantages of implementing a robust management accounting system within an organization.

MANAGEMENT ACCOUNTING
SYSTEM

PRINCIPLES OF
MANAGEMENT ACCOUNTING
• Management accounting may be defined as various activities which are undertaken by the
management of the company for the purpose taking effective decisions of the business.
• Management accounting process helps the management to take appropriate decisions regarding
the internal business affairs of the business for the purpose of maximizing the earnings of the
business.
• The management accounting techniques which are applied by a business depends on the nature
of the business and also the objectives and goals of the business.

TECHNIQUES USED IN
MANAGEMENT ACCOUNTING
• There are various techniques which are used in management accounting as
previous slide show the application of the same. The most common
management accounting tool which is used in business are cost accounting
which are undertaken to keep the costs of the business under control
• There are other techniques as well but the management of Waitrose uses
absorption costing and marginal costing.

INCOME STATEMENT UNDER
ABSORPTION COSTING
Profit and Loss Statement under Absorbtion Costing
Paticulars May June
€ €
Sales 15000 25000
Less: Cost of Good sold 7200 13000.0
Gross Profit 7800 12000.0
Fixed selling 4000 4000
Fixed Administration 2000 2000
Variable sales commission 750 1250
Net Profit 1050 4750.0

INCOME STATEMENT UNDER
MARGINAL COSTING
Profit and Loss Statement under Marginal Costing
Paticulars May June
€ €
Sales 15000 25000
Less: Cost of Good Sold 4800 8000
10200 17000
Operating expenses
Fixed overhead 4000 4000
Fixed selling 4000 4000
Fixed Administration 2000 2000
Variable sales commission 750 1250
Net Profit -550 5750

INTEGRATION OF
MANAGEMENT ACCOUNTING
IN THE BUSINESS• The application of costing techniques in a business can be beneficial for the business as the
same would allow the management to have significant control over the cost structure of the
organization and thereby also provide the ability to the business to control the costs of the
company.
• The costing practices in a business allows the management to effectively forecast the total
expenditure which can be incurred by the business and on the basis of the same makes plans
for the business accordingly.

BENEFITS OF MANAGEMENT
ACCOUNTING
• Increase in Efficiency of the business: The application of appropriate management accounting
tool helps businesses to increase the efficiency of the operations of the business. The
techniques in management accounting makes it possible for businesses to achieve its objectives
and goals in a systematic manner.
• Increasing the profitability of the business: Management accounting system includes tools
like budgeting and ratio analysis which can be used for maintaining and measuring the
performance of a business.
• Simplifies the Decision-Making Process: The policies which are formulated by the
management in terms of management accounting assist them in taking vital business decisions.

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