Management Accounting Systems and Techniques: A Detailed Report

This report delves into the realm of management accounting, providing a detailed analysis of various systems and techniques employed by businesses. It begins with an introduction to the importance of effective management accounting in today's market, highlighting its role in monitoring and evaluating financial information for strategic decision-making. The report then explores different types of management accounting systems, such as inventory control, cost accounting, job costing, and price optimization systems, and discusses their benefits. Furthermore, it examines various management accounting reports, including budget reports, cost reports, performance reports, and accounts receivable aging reports, explaining their uses and significance. The report also covers a range of management accounting techniques, such as absorption costing and marginal costing, along with the application of material variances and reconciliation statements. Through the analysis of these elements, the report provides a comprehensive understanding of how management accounting supports organizational efficiency, financial planning, and performance evaluation. The report uses KEF LTD as a case study to illustrate the concepts discussed and how different frameworks help support the business strategy.

Management Accounting
Systems & Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Different type of management accounting system................................................................3
P2 Different type of management accounting reports.................................................................5
TASK 2............................................................................................................................................5
P3. Range of management accounting techniques......................................................................5
TASK 3............................................................................................................................................9
P4.Planning tools used in management accounting.....................................................................9
P5. Comparison of organisations adapting management accounting to respond to financial
problems....................................................................................................................................10
CONCLUSION..............................................................................................................................12

INTRODUCTION
There is a critical need for an effective professional management structure in the current market
situation that can monitor the valuable activity of the organisation to improve business
productivity (Collis and Hussey, 2017). Management accounting is define as an important
system for evaluating, monitoring, and handling valuable financial information within a system
in order to achieve a strategic choice by some company president to improve and grow profits
over a given period of time. The entire expense or management accounting process begins with
the compilation, reporting, estimation, evaluation, review and distribution of useful business
financial information that helps reach the required objectives over a predetermined amount of
time. To better explain the meaning of accounting administration, KEF LTD, a production firm,
is chosen.
This research illustrates understanding of multiple processes and reports, estimates the
cost of output per unit, budget period P&L accounts, etc. by applying useful valuation models. In
addition, the study further explores the use of multiple forecasting tools used in reporting for
management and how different frameworks help support the business strategy.
TASK 1
P1. Different type of management accounting system
The principle of MA is known to become an internally fitting method in the company
sense that facilitates the estimation or evaluation of the total output of various groups inside the
company. Typically, supervisors set criteria for performance assessment, evaluating several
methods that promote the accomplishment of established targets also help to determine real
explanations for variations from the current plan (Schaltegger, Burritt and Petersen, 2017). In
corporate words, MA typically provides the management and then all organisation personnel
with the non-financial as well as financial evidence that allows them create the most correct
decisions to maximise revenue, competitiveness and meet targets. There have been numerous
important managerial accounting systems that support KEF Ltd's management, which are listed
below:
Inventory control system: This program provides handle company stock in the
necessary quantities, transacted products and final product. There have been different methods
such as FIFO, LIFO and Average methodologies for regulating company shares which provide

the confidence of the business process. In KEF Ltd the FIFO approach is used though they are
necessary to eliminate old products using this approach and thus reduce damage due to defective
products. First of all, KEF Ltd helps KEF Ltd to produce products according to markets and
customer likes and dislikes, helping to increase profit.
Essential requirements: The manager establishes supplies and storage of commodities
through a coordinated supply chain structure with KEF Ltd. This relationship aims to effectively
and effectively reduce the costs for repair and marketing of goods.
System of cost accounting: This is used to calculate the cost of that same total
manufacturing of specific company’s products. It essentially entails multi-level gross costs which
also requires fixed costs that help decide the benefit. Useful accounting expense approaches such
as median and absorption costing, lean costing, operation as well as the regular costing approach
are applicable. ABC stock valuation technique is used in the respective firm that basically
allocates overall cost to items related to the production of goods (Humphrey, C. and Miller,
2012).
Essential requirements: This measure is helpful for the management of KEF Ltd as it
will determine products that are more costly again and determine whether they really worth a
huge amount or if they should obtain meaningful market shares.
Job Coasting system: This approach primarily records the costs associated with the
production of good management within the company. It helps to delegate production costs to
every other commodity, and the product manager and auditor have proof of each given product
category. This system also supports the calculation of the cost of different products produced by
the company over the same amount of time. In KEF Ltd, therefore this system helps to assess
and evaluate the cost of different helpful company’s products to reach the demand of the
consumers.
Essential requirements: This MA scheme is needed to monitor the expenses of works
with HEF ltd along with wrapping and delivery, through Innocent items. The organisation
employs cost-per-take methods to calculate its expenditures.
Price optimization system: This is regarded to just be the company's greatest system as
it helps to understand the consumer's response to the manufacturing sales volumes fixed by the
organization. Used by managers to set decent product prices that will make customers happy as

well as increase profits. In KEF Ltd, this method aims to have the best rates for imported goods
in terms of morbidity of overcharging and also to attract consumers to achieve the optimal
benefit.
Essential requirements: Management sets expectations on all the goods in a manner that
ultimately improves the profitability of the organization, and may often be a commodity with the
highest value for quality, in order to maximise customer loyalty.
Benefits of different system
Different accounting
systems
Benefits
Inventory management
system
 It allows businesses to use usable products and resources
such that targeted targets can be accomplished.
 This method encourages maintaining a detailed track of
the entire inventory and certain supplier demands in order
to maximise benefit (Holsapple, 2013).
Job Costing system  This method aims to provide good stability in evaluating
and minimising costs related to unique KEF Ltd workers.
 With the assistance of this operating system, personnel
performance logs will be maintained in order to allow any
necessary changes.
Cost accounting system  The cost method mainly helps with the cost estimation of
raw materials, direct labour and operating expenses in
order to calculate the total cost of products.
 In order to maximise benefit, the major significance of this
scheme is to provide sufficient support in the development
of business strategies and other successful approaches
Price optimization system  Efficient support is available through using this method to
provide even a clear introduction in case of goods from
KEF Ltd.

 The key advantages of the pricing system are the
availability of a mechanism which encourages the setting
of the cheapest rates for the good.
P2 Different type of management accounting reports.
Mainly four types of reports are made, which are as follows.
Budget report: Budget report helps in doing business analysis of small type of business.
According to the period it is based on prior actual expenses. It compares expenses and revenue
activities among themselves. The report includes all accounts that have revenue and expenditure
related activities. No account related to profit and loss will be included in the report. The use of
this report is determined by which expenditure is much higher than its fixed level. So that the
amount spent on expenditure can be included in the performance of the budget. The same report
is used to make transactions on the financial results of the business. And this report proves very
beneficial for the business.
Cost report: The cost report covers all the facts related to material labour and overhead.
Inventory waste, hourly labour costs, and overhead costs are also part of cost managerial
accounting reports. They provide an exact understanding of all expenses, which is essential for
better optimization of resources among all departments. Cost Reports help management
managers to compute costs of items that are produced through unprocessed data.
Performance reports: Performance reports are created to review the performance of a company
as a whole as good as for each employees at the end of a term. Departmental performance reports
are also generated in very large organizations. Managers use these performance reports to make
key strategic decisions about the future of the organization. Individuals are often awarded for
their commitment to the organization and under performers are laid off or dealt with as required.
Performance-related managerial accounting reports also offer deep insight into the working of a
company. If company think that company should be performing in a certain capacity but
somehow that is not happening, these reports can point company towards flaws in the setup. The
role of performance reports is vital for any company to keep an accurate measure of their
strategy towards their mission.
4. Account Receivable Aging Reports: Tracking Company AR aging report in a regular
cadence Weekly/monthly will help company identify concerns before they become a cash-flow

crunch to company business. This is a periodic report that categorizes a company's accounts
receivable according to the length of time an invoice has been outstanding. It is used as a gauge
to determine the financial health of a company's customers. If a particular customer is paying late
more often, company can evaluate your payment terms and conditions and bring about necessary
changes. It will also help company withhold product/service offerings until the amount is paid by
the customer on the specific due date.
The most important information which is required by the manager is to analyse the current
operation of company and the total revenues and expenses made on such operations to gain the
desired results.
Mostly this useful information is required by the internal managers who always worry to make
important plans in order to increase the company performance and make plan to increase profit
margin.
The collected information is required on regular basis mainly at the end of a working day so that
managers can make out the overall productivity and mark the areas which needed improvement
for future.
The main sources of information are the regular report prepare by the internal staff members and
the executive those are part of different external operation.
TASK 2
P3. Range of management accounting techniques.
Cost of absorption: This essentially means acquiring or absorbing something related to a
specific goal. It primarily involves all the costs involved in the production of a particular unit of
product. This system's key downside is that it offers the overall output expense but does not help
the decision-making process (Grabner and Moers, 2013).
Marginal costing: It is characterised as the increased costs imposed by firms to obtain an
additional item that helps to boost the amount of performance. Only contingent costs are used in
this inventory valuation while fixed costs are now measured against investment.
The income statement of Capital Joinery Ltd by using both the methods are shown below:
Total cost of production:
Direct materials 60
Direct labour 40

Variable production cost 20
Fixed production cost 20
Full production cost 140
Income statement:
Particulars May June
Sales 25000 18750
Less: Cost of sales
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Fixed production cost 2000 1600
Opening stock 0 0
Closing stock 0 700
Under/Over absorption 0 400
Gross profit 11000 7850
Less: Expenses
Variable sales commission 500 375
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3475
Marginal costing:
Total cost of production:
Direct materials 60
Direct labor 40
Variable production cost 20
Full production cost 120

Income statement:
Particulars May June
sales 25000 18750
Less: Variable cost
Direct materials 6000 4800
Direct labour 4000 3200
Variable production cost 2000 1600
Opening stock 0 0
Closing stock 0 600
Variable sales commission 500 375
Contribution 12500 9375
Less: Fixed cost
Fixed production 2000 2000
Fixed administration 3000 3000
Fixed selling 1000 1000
Net profit 6500 3375
Reconciliation statement:
Particulars May June
Net profit under absorption costing 6500 3475
Add/Less: Closing stock 0 (100)
Net profit under marginal costing 6500 3375
Calculation of material
variances
Budgeted Actual Variances
Materials cost per unit £24 £18.67 £5.33
Inventory ledger record LIFO Method
Dat Description Sale/Purchases Balance

e
Unit
s
Cos
t Total
Unit
s
Tot
al
Jun
-01
Opening
Inventory 10 £35 £350 10
£35
0
Jun
-09 Purchases 15 £38 £570 25
£92
0
Jun
-15 Issued -12 £38 -£456 13
£46
4
Jun
-20 Purchases 10 £32 £320 23
£78
4
Jun
-23 Issued -10 £32 -£320 13
£46
4
Jun
-27 Issued -3 £38 -£114 10
£35
0
Jun
-30 Issued -2 £35 -£70 8
£28
0
Average cost methods
Dat
e Purchases
Unit
s
Cos
t Total
Jun
-01
Opening
Inventory 10 £35 £350
Jun
-09 Purchases 15 £38 £570
Jun
-20 Purchases 10 £32 £320
Total 35
£1,24
0
Average cost of Inventory =
Total/Units

= 1240/35
= 35.42857143
TASK 3
P4.Planning tools used in management accounting.
In business terms, expenditures plan are described as a continuous and valuable report that
perhaps a company typically intends to build useful forecasts within a particular time period of
total revenue and expenditures. This is a comprehensive way of planning a budget which helps
KEF Ltd in decision-making, like:
 Dependent on the essence of the market climate, the very first phase is concerned with
filtering assumptions.
 The though is to discuss the challenges that can impede progress in results and effect.
 Suitable time periods are fixed, such as yearly, weekly, etc.
 Each category of costing is calculated, such as revenues and expenses.
 For the time span, gross income is reported and real outcomes are contrasted against the
budgeted outcomes (Morden, 2016).
 The challenges and disadvantages are discussed in addition to making the review of
future spending more credible.
It is reported that the key justification for budget planning is to decrease the risk prospects for
companies which may exist due to discrepancies between real and normal budget performance.
There are different kinds of expenditures plan that are develop by KEF Ltd as a forecasting
mechanism to simplify the budget management process. Under, these would be characterised:
Flexible budgets: Because of any disaster or confusion that cannot function as per old funding
levels, this programme is useful in changing the business’ financial budgets. This budget aims to
provide fresh spending that can be created by any potential scenario in KEF Ltd but also aims to
systematically document new opportunities to increase profit in a financial year. KEF Ltd's
adjustable budget is based on modifications resulting from new in semi-variable, production
overheads. The following are the various benefits and drawbacks of this approach:
Benefits:

It helps internal management to take the right cost reduction steps because it is fundamentally
positioned for the new industry dynamics (Siverbo, 2014). This budget assists managers of KEF
Ltd in order to allow possible improvements and modifications to the overall expense and in
order to raise the profitability within different operations.
Disadvantage:
This kind of budget is complicated and dynamic in nature involving professional labour. It takes
additional effort and resources, lacks motivation for the worker of KEF Ltd which force to
implement more cost on hiring highly talented staff.
Zero-based budgeting: It is considered the most efficient budgetary control technique that
facilitates the process of creating new expenditures plan without taking related legislation into
account. ZBB's procedure creates re-evaluating each item inside the working capital but also
justifying the extra fees invested by various areas. In KEF Ltd, the whole budget helps to
estimate the whole expenses associated with producing luxury items accrued based on the
current costs of past information. There are different benefits and drawbacks that are described
below:
Benefits:
This plan enables to provide efficiency, precision and outcomes because each component of
working capital is re-evaluated. Basically, ZBB offers better and transparent communication
between different departments in order to make decisions more reliably and with accurate results
(Booth, 2018). This budget is of primary importance and helps to reduce the multiple features of
KEF Ltd in order to maximize revenue.
Disadvantage:
The big issue that needs skilled labour and much more period to predict outcomes. Such
expenditures plan also lack the skills necessary to prepare a budget. As a result company have to
arrange regular meeting for the staff to understand the working of this budget which increase the
external expenditure and impact the profit in adverse manner.
P5. Comparison of organisations adapting management accounting to respond to financial
problems.
Nowadays, each particular company faces various kinds of challenges in the corporate
environment, because of which it is crucial to decrease whole operating and commercial
activities. There are different negatives to the financial position, including the failure to produce

adequate money, raise demand, and satisfy workers, and so on. There are several money
difficulties that KEF Ltd faces that are listed below:
Lack of Managing Money: This financial issue has a larger effect on the company's corporate
activities since there will not have a competent person to handle the funds properly. There is
further investment on various advertising campaigns and the organisation is unable to raise
revenue because of professional management criteria (Lachmann, Knauer and Trapp, 2013).
Special order: Essentially, the organisation loses the production of additional special
units of products on consumer demands owing to the increase in total performance bit by bit.
If managers take the opportunity to create a special request, so the total output for the day
declines and workers are not satisfied. This lowers the client base and allows rivals an edge.
KEF Ltd utilizes multiple important MA methods to assess the various funding crisis
management insights that allow produce the best outcomes. The basic accounting method
promoting the assessment of the response to the financial issue is illustrated below:
KPI: This help monitors the average efficiency of workers within the enterprise and
makes valuable recommendations to boost profitability. Therefore the success metric helps
define the overall budget and the average return on capital made on even a given project. Key
success metrics are applied in the sense of KEF Ltd in order to recognise the financial challenges
associated with the failure of managing money. When all those company activities that are
beneficial in producing the highest possible outcomes are considered in upcoming period.
Benchmarking: This is among the most valuable management practices that allows
businesses to set standards in order to assess competition efficiency. In KEF Ltd, such method is
required to address the specific order challenge when consumer expectations are not met and
there lose their trust day after day (Kober, Subraamanniam and Watson, 2012).
Financial management: The principle of financial governance is considered as the best
managing tool that helps to create the best approach to the different problems facing the business
and to minimise efficiency. In trying to obtain the best accurate outcomes, it is a qualitative
method relevant to gathering valuable knowledge, monitoring and handling financial capital and
staff. It helps to address the issue of money abuse as it encourages KEF Ltd's attention to
improve a complete records within each financial transaction performed in the sector in order to
maximise profits. Thus it tends to decrease capital poor management and improve market

profitability. In KEF Ltd, such method also allows managers detect industry patterns and recruit
eligible workers to generate a special request on consumer demand.
Comparison:
ABC Ltd KEF LTD
The business uses automotive production and
hence faces pricing-related financial problems.
Customers are also not happy with business
practises.
Numerous financial problems such as
shortage of money control and suggested
strategies are part of this chosen organization.
In order to create options for the specific
business' future issue manager, the price
management system is used to determine the
optimal costs of the goods in addition to
increasing profitability.
SWOT analysis is used by company to reduce or
eliminate the financial problems occurring the
system at regular basis. Thus manager make sure
that assessment directly represents a number of
project priorities. The SWOT methodology may
be used to evaluate and outsource a product or
business, trade or relationship. SWOT analysis
may also help identify a particular source, loop,
service or development specifications (van der
Steen, 2011).
An organisation, a coordination structure, an
entity or a team may be affected by the SWOT
study. The study would potentially accomplish a
range of project goals. For eg, the SWOT
method may be used for assessing and
outsourcing a service or organisation, a process
or partnership. SWOT measurement also
In order to address the dilemma of a limited
order business, the inventory control system
is used such that the production of special
orders satisfies the specifications.
This company apply Porters fiver forces to
overcome the issue in respective manner such
as Competition from the sector particularly
retail and commercial banks, is increasingly
necessary due to its low transfer costs through
one bank to the next. Closing the deposit and
starting a new account at another bank would
not cost a tonne — in most cases zero. And to
make this a competitive bargain, big banks
are extending deals to attract customers away
from their competitors. New customers will
receive up to $600 by opening a check and
saves account, if they satisfy the conditions
for eligibility.

quantifies accurate supply origins, sales periods
and material specifications or technological
approval. The SWOT analysis is focused on four
kinds of properties, flaws, expectations and
challenges in each region.
From the above all discussion, it can be suggested to Capital Journey Ltd, that a standardised
metric used to determine the general success of the organisation over a number of years. Through
using this approach, the innocent organisation uses different metrics to decide how successful
they are in fulfilling their strategies and objectives. This methodology had been used to measure
the success of the branches of the firm. In this device metric, administrators evaluate the results
including its enterprise on the basis of these steps.
CONCLUSION
Abovementioned project study revealed that management is perceived to be a valuable part
of an enterprise that promotes management-level organisational study, understanding and
judgement. In order to accomplish the tracking method, various programmes and records help an
administrator to document each business activity. In addition, and use of the costs approach to
measure the gross net benefit and to assess the output expense per unit is also inferred. In order
to find a definitive solution, planning instruments and their benefit and drawback that assist in
managing budgets are assessed in good order. The calculation of money related problems that
arise within a business and MA information system was seen in reaction to such problems. In
order to ensure full development and viability in the future time period, it will be agreed to get
through those issues.

REFERENCES
Books and journals:
Anessi-Pessina and et.al., 2016. Public sector budgeting: a European review of accounting and
public management journals. Accounting, Auditing & Accountability Journal. 29(3).
pp.491-519.
Booth, P., 2018. Management control in a voluntary organization: accounting and accountants
in organizational context. Routledge.
Collis, J. and Hussey, R., 2017. Cost and management accounting. Macmillan International
Higher Education.
Grabner, I. and Moers, F., 2013. Management control as a system or a package? Conceptual and
empirical issues. Accounting, Organizations and Society. 38(6-7). pp.407-419.
Holsapple, C. ed., 2013. Handbook on knowledge management 1: Knowledge matters (Vol. 1).
Springer Science & Business Media.
Humphrey, C. and Miller, P., 2012. Rethinking impact and redefining responsibility: The
parameters and coordinates of accounting and public management reforms. Accounting,
Auditing & Accountability Journal. 25(2). pp.295-327.
Kober, R., Subraamanniam, T. and Watson, J., 2012. The impact of total quality management
adoption on small and medium enterprises’ financial performance. Accounting &
Finance. 52(2). pp.421-438.
Lachmann, M., Knauer, T. and Trapp, R., 2013. Strategic management accounting practices in
hospitals: Empirical evidence on their dissemination under competitive market
environments. Journal of Accounting & Organizational Change. 9(3). pp.336-369.
Morden, T., 2016. Principles of strategic management. Routledge.
Schaltegger, S., Burritt, R. and Petersen, H., 2017. An introduction to corporate environmental
management: Striving for sustainability. Routledge.
Siverbo, S., 2014. The implementation and use of benchmarking in local government: a case
study of the translation of a management accounting innovation. Financial
Accountability & Management. 30(2). pp.121-149.
Takeda, H. and Boyns, T., 2014. Management, accounting and philosophy: The development of
management accounting at Kyocera, 1959-2013. Accounting, Auditing & Accountability
Journal. 27(2). pp.317-356.
Zoni, L., Dossi, A. and Morelli, M., 2012. Management accounting system (MAS) change: field
evidence. Asia-Pacific Journal of Accounting & Economics. 19(1). pp.119-138.