Management Accounting Systems & Techniques Report - BTEC Unit 5

This report analyzes management accounting systems and techniques through the case study of Capital Joinery Limited. It explores the meaning and requirements of management accounting, detailing various systems like cost accounting, price optimization, inventory management, and job costing. The report examines different modules such as performance reports, cost reports, budget reports, and accounts receivable reports. It also calculates costs using absorption and marginal costing techniques, along with material variances and inventory valuation methods like LIFO and average cost methods. Furthermore, the report discusses the benefits of managerial accounting systems and the relevance of integrating them with managerial reports. It evaluates the advantages and disadvantages of planning tools, including budgetary techniques and activity-based budgeting, and analyzes their use in preparing budgets. Finally, the report compares different management accounting tools used to solve financial problems and evaluates the application of planning tools in this context.

Management Accounting Systems &
Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Brief explanation regarding meaning of management accounting and requirement of
different accounting system.........................................................................................................3
P2 Explanation of different modules use for management accounting system...........................4
M1 Benefits of using different kinds of managerial accounting system.....................................5
D1 Evaluation of relevance of integration of management accounting system with managerial
reports..........................................................................................................................................6
TASK 2............................................................................................................................................7
P3Calcluation of cost by using managerial accounting technique..............................................7
M2Breif description regarding production of finance report.....................................................10
D2Fiananacil report which help in applying accurate data........................................................10
TASK 3..........................................................................................................................................10
P4Explanation of advantage & disadvantage of various types of planning tools......................10
M3Aanayisis use of planning tools for prepare budget.............................................................12
TASK 4..........................................................................................................................................12
P5 Comparison of different management accounting tools how they use for solve financial
problems.....................................................................................................................................12
M4 Use of management accounting tools to solve financial problem.......................................15
D3 Evaluation how planning tools are used to solve financial problems.................................15
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is part of accounting approach which organizations use for
analysing, recording managing and controlling their accounting information in systematic way.
Which useful in take essential business decision by representing accounting information as per
the norms of accounting standard. To understand this concept Capital joinery limited has been
taken. It is medium size organization. This report has been define use of different types of
management accounting system which useful in decision making. Relevance of management
account report and technique use for determine cost as well as usefulness of planning tool for
recognize issue arising of financial problem and use of benchmarking, balance scorecard through
which they can resolve problem. All theses information has been describe in systematic manner.
TASK 1
P1 Brief explanation regarding meaning of management accounting and requirement of different
accounting system.
Management accounting: This term is combination of two essential norms of business.
The first one is management , which refer as an art of getting things and activities done by other
personal by influencing them. The other one is accounting which means process of identifying ,
analysing, recording and presenting data in effective way. Management accounting is
combination of theses word which means managing accounting record in a way which help in
influencing people and took decision by representing accounting data in systematic manner.
There are various system has been used while applying management accounting approach
following are define below
 Cost accounting system: It is consider as essential system of management accounting
approach. There are various technique has been used by organizations through which
they can able to find out value of cost as well as profit. In context with Capital joinery
limited, they used cost accounting system through which they can manage all the relevant
cost, of raw materiel, process costing and cost incurred for distributing products.
Manager of cost accounting use this system to determine cost required for manufacturing
their business products which include, furniture, door, table etc (Quattrone, 2016).

 Price optimization system: This system is used for determine price of relevant product.
Success of business entity depend on the strategy they use for select particular price.
Price skimming, penetration, premium and price formulation of particular rate all these
are strategies regarding price which manager can adopt. Capital joinery limited, use
skimping price policy which help in provides satisfaction to customers as well as help in
gain profits. Price of Capital joinery limited, set on the basis of expectation and market
demand of customers. Price optimization system beneficial for internal as well as external
stockholders as this will useful in attain business profits.
 Inventory management system: Management accounting is useful for maintain level of
stock. Stock management system is help in recognize maximum, minimum and
dangerous level of stock on the basis of that management department formulate policies t
control cost of managing and storing inventory. Capital joinery limited, apply technique
used in stock management system which includes, FIFO, LIFO, JIT, ABC analysing, all
theses are help in recording inventory in effective manner. This will useful for Capital
joinery limited, to recognize value of under stock (Guinea, 2016).
 Job costing system: This system is used to determine value of job order, this system help
in recognize the cost incurred for complete or fulfil requirement of their clients. as
different customer according to their needs take order and measured value of rational job.
Capital joinery limited, use job costing system through which they can able to find out
cost required for running business activities. Theses information are useful for finance
manager on the basis of that they formulate their trading statement.
P2 Explanation of different modules use for management accounting system
Report: The term report has been consider as document which help in defining all the
summery and information of business activities in systematic manner. It is record of all business
transactions which are essential. Following are types of report which management department of
Capital joinery limited, has been formulated
 Performance report: This report is consider as combination of all the reports as it
proved base for measuring performance of each department. This report gives
information regarding the overall performance, target achieved by departments as well as
individual performance of workforce. Capital joinery limited, formulate performance

report for recognize those department which are not work in effective manner. They on
the basis of identifying performance, formulate policies and strategies related with reward
distribution.
 Cost report: This report has been formulated by using data collected from cost
accounting system,it is the summery of all the relevant information collected by using
technique of coat accounting. Management department of Capital joinery limited,
formulate this report to determine activities which are the reason of over cash outflow
and those transactions which are not relevant or consider as cost which are not beneficial
or relevant for organization.
 Budget report: This report has been formulate to proved base , which useful for finance
department. Manager on the basis of recognize data of budgetary report able to formulate
budget. Capital joinery limited, prepare budget report for recognize value of future
business profit as well as these activities which may become the reason of failure of
business project as well as value of opportunities arise win future (Oyewo, Ajibolade,
and Obazee, 2019).
 Account receivables report: This is consider as essential report. Account receivable
report help in record data of all the potential debtor by formulating this report
management department able to find out number of those debtors which may become non
performing asset or doubtful debtors. On the basis of data analysing from this report
manager of Capital joinery limited, formulate these polices which they can collect their
cash from debtors and reduce number of non performing assets by providing attractive
cash discount offers.
M1 Benefits of using different kinds of managerial accounting system
Accounting system Benefits
Cost accounting system Capital joinery limited, use cost accounting
system for manage their different types of cost
incurred during the time of running business
activities in effective manner. This system
useful for cost department as their manager on

the basis of information collected from this
system use to formulate policies and strategies
which help in reduce cost of product produce
by Capital joinery limited.
Price optimization system Manager of sales department use price
optimization system as on the basis of data
collected from this system they can easily find
out requirement and expectation of their
different target market people preference. On
the basis of that Capital joinery limited, take
decision regarding price at different level , they
use skimming price policy which help in attain
business profits (Dekker, 2016).
Job costing system This system play vital role as it will useful in
recognize cost of each job, cost accounting
department use information collected from job
costing system to formulate policy to control
cost for increasing and completing demand of
customer regarding particular job. This system
useful for formulate strategies and collect
information regarding internal department.
Inventory costing system By applying inventory cost system manager
can recognize or measure vale of inventory. On
the basis of that they prepare plan to control
and manage inventory. This help in increase
cash inflow and manage working capital of
Capital joinery limited.

D1 Evaluation of relevance of integration of management accounting system with managerial
reports.
Manager of Capital joinery limited use cost, job and price accounting system to measure
value of their products and determine cost require for run business activities, on the basis of
information collected from theses system they formulate report of management accounting.
Theses report are help in define all the essential information of performance of company. On the
basis of theses information manager formulate their budget and strategies to control and manage
their business activities which help in decision making process (Burritt, , Herzig, Schaltegger,
and Viere, 2019).
TASK 2
P3Calcluation of cost by using managerial accounting technique
Absorption costing:
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 labour 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
Inventor
y ledger
record
LIFO
Method
Date Description Sale/Purchases
B
a
l
a
n
c
e
Units Cost Total Units
Jun-
01
Opening
Inventory 10 £35 £350 10
Jun-
09 Purchases 15 £38 £570 25
Jun- Issued -12 £38 -£456 13

15
Jun-
20 Purchases 10 £32 £320 23
Jun-
23 Issued -10 £32 -£320 13
Jun-
27 Issued -3 £38 -£114 10
Jun-
30 Issued -2 £35 -£70 8
Average cost methods
Date Purchases Units Cost Total
Jun-
01
Opening
Inventory 10 £35 £350
Jun-
09 Purchases 15 £38 £570
Jun-
20 Purchases 10 £32 £320
Total 35 £1,240
Average cost of Inventory = Total/Units
= 1240/35
= 35.42857143
M2Breif description regarding production of finance report
Financial report useful in determine the performance and postilion of Capital joinery limited at
particular time period. By formulating statement of absorption costing manager recognize value
of profit.
D2Fiananacil report which help in applying accurate data.
Financial report by determining and providing accurate information regarding profit able
to manage statement of finance and this will help in took decision by analysing performance.

TASK 3
P4Explanation of advantage & disadvantage of various types of planning tools.
Planning tool: T hoes technique or tools which help manager to formulate plan are known
as planning tools. Difference kind of tools which Capital joinery limited, use are define below
Budgetary techniques: The term budget is define as numerical statement which is
formulated to define value of future profit and loss. There are various way through which
manager can formulate their budget all theses are define below
Activity based budgeting: This is consider as type of budget in which all the information are
collected on the basis of allocation of record, cost incurred for particular time period. Thus it is
known as activity based budget:
Advantage:
Activity based budget help in allocate resource in effective manner, and by formulating
this budget manager able to find out accurate result (Ghasemi, Mohamad, Karami, Bajuri, and
Asgharizade, 2016).
This budget is useful in providing accurate business information.
Disadvantage
Activity based budget is time consuming budget as well a it also cost incurred activity.
Formulate budget by using this method is complex procedure.
Zero based budgeting: In this type of planning tool, budget are prepared from zero or
initial level. Manager not use previous data to formulate this budget, thus it is known as zero
based budget.
Advantage:
This method of budget is useful for newly set up business entities a information are
accurate and reliable.
Zero based budget useful in cut throat redundant business activities. And help in
coordinated and communication process (Cescon, Costantini, and Grassetti, 2016).
Disadvantage
It is not useful for multinational organization as it took time for formulate budget by using
initial level information.
For formulating zero based budget cost as well as requirement of manpower is
comparatively high.

Pricing strategies: This is consider as essential tool of planning. By using pricing
strategies manager able to determine price and they formulate plan through which they can
generate business profit. There are various strategies which can apply by organization,
skimming, penetration, discounting business entity according t their needs select pricing strategy.
Advantage:
Theses strategies useful in generate business revenue.
Pricing strategy help in attain competitive business advantage by providing satisfaction to
organization's relevant customer.
Disadvantage
Future business policies are made on the basis of price element and value of price are not
constant thus it is not essential that theses strategies provide accurate business result.
Selection of price required expertise who have great knowledge regarding the market area.
Costing techniques: Theses technique are use to identify the value of cost incurred for
each business activity. By using marginal, standard as well as absorption costing method , these
methods are help in determine cost.
Advantage:
Costing technique help in reduce cost incurred on wastage businesses activities by identify
those business activities which may cause of incurring high cost.
Manager take investment decision on the basis of measuring cost of each investment.
Disadvantage
Organization need to hire person who have special degree in the field of finance or account
as well as have knowledge regarding working in corporate sector.
Other strategical tools: By using environment scanning techniques organization able to
formulate business plan. Theses consider SWOT, PESTLE, Porter's 5 model. All these are useful
in determine future opportunities (Abbasi, Khanmohammadi, Moradi, and Mahmoodiyan,
2019).
Advantage:
Strategic planning tool help in identify opportunity and market threat by using SWOT, and
PESTLE technique.

Theses technique help in attain competitive business advantage by recognize future
business policies
Disadvantage
It is not essential that information collected by using strategic planning tool are relevant as
business environment is dynamic.
M3Aanayisis use of planning tools for prepare budget.
Planning tools are useful for Capital joinery limited, thy on the basis of using activity
based budgeting formulate their budget which help in provide direction to formulate plan to
attain future goals and by using costing as well as strategic planning tool they prepared those
plan which help in reduce risk of future loss.
TASK 4
P5 Comparison of different management accounting tools how they use for solve financial
problems.
Financial problem: Organizations to run their business operations in effective manner
need to have sufficient financial resources. Situation when organization face problems due to
lack of financial resource are known as financial problems. Theses types of problem arises due to
shortage of monetary resources. Especially in case of small or medium size organizations they
are not able to supervise market due to lack of financial resources. Capital joinery limited face
financial problem, but they can resolve this issue by using tools of financial problem. Following
are relevant problem regarding issue arise financial.
Non availability of performance measurement system: Nestle is considers top brand in
food sector organization. Its market is spread in the whole world. However they are not use
measurement system which help in identify and recognize performance . Nestle not use any kind
of measurement system thus they suffers from issue and internal coherence arises within the
organization by employees (Procházka, 2017).
Unable to recognize core competences: Cadbury has been suffer from this problem as
they are not able to recognize or identify competencies of their working departments. They face
problem regarding with financial issue and thy also not recognize strategy and weakness of their
department. Thus may cause of suffers from financial problem.

Financial governance: This policy is part of management accounting. By applying this
tool organization able to run their plan in effective as well as in ethical manner. On the basis of
that chances of internal coherence , corruption and illegal business activities has been reduce.
Financial governance useful in work in systematic manner by following norms of accounting
standard.
Management
accounting
techniques
Responding to the financial issues using
management accounting systems
Nestle Cadbury
Benchmarkin
g
Nestle face financial problem as
they are not able to measure
performance of each department,
as well as their rate of sale has been
decline. Manager of Nestle
organization need to use
benchmarking, this tool help in
setting benchmark on the basis of
that manager recognise
performance and measure their
department value. By using
benchmark Nestle measure
performance of each department.
And on the basis of that they
formulate policies to remove their
problem.
This organization face financial
problem due to not identifying
weakness and strength of organization,
by using key performance indicator
tool, management department able to
set their indicator on the basis of that
they recognize department which
provide strength to organization.
Advice for Capital Joinery
LTD to use ‘benchmarking’
technique:
Capital Joinery LTD by using benchmark overcome their
financial problem thrush set target. Individual for take incentive
and reward work to attain the benchmark target which help in
overcome the issue of financial problem. This will help in
increase sale rate and cash inflow activities.

KPI
(key
performance
indicator
Key performance indicator help in
setting target and on the basis of that
organization able to formulate policies
for providing reward. By using key
performance indicator, Nestle able to
formulate reward policy and human
resource to earn incentive work in
ethical manner which help in
overcome financial problem.
Nestle use benchmarking to identify
wherever their organization's
department able to fulfilled their
budget criteria within given time
period or not. Benchmark help in
overcome weakness of their human
resource department.
Advice for Capital Joinery
LTD to use KPI: CJL
COMPANY FOR FUTURE
PLANNING
By applying KPI Capital Joinery LTD able to formulate their
future business plan to resolve or control financial problem.
They by setting key performance indicator able to overcome
their financial Bornholm by controlling cash outflow business
activities.
Balanced
scorecard
This technique help in analysing
performance by measuring scorecard.
Nestle use this tool of manageable
accounting for recognize balance of
their financial department (Granlund,
and Lukka, 2017).
By using balance scorecard
management department of Cadbury
focus on area which not collect
their target within given time period
and on the basis of that they formate
plan for future policies.
M4 Use of management accounting tools to solve financial problem
Capital joinery limited use benchmarking and balance scorecard these tool help in
identify cause of arising financial problem. On the basis of that they formulate strategies which
useful in overcome problem.
Capital Joinery LTD

D3 Evaluation how planning tools are used to solve financial problems
Manager of Capital joinery limited use SWOT as well as PESTLE to determine future
business opportunity and threat, they on the basis of this information formulate their budget
which help in reduce risk of failure of business activities , and manager invest in these activities
which help in increase cash inflow activities which useful in overcome financial problem.
CONCLUSION
From the above analysis it has been concluded that management accounting help in
maintain position of business organization within market economy. By using system of
managerial accounting, manager take decision which is relevant for their further business
activities. Absorption costing, marginal as well as with the use of LIFO and FIFO technique
manager determine cost of business transaction and investing management cost. They use report
to formulate budget. By using different planning tools they able to identify reason of arriving
financial problem manager use benchmarking, balance scorecard through which they can
overcome theses problem.

REFERENCES
Books and journals
Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser?.
Management Accounting Research, 31. pp.118-122.
Guinea, F. A., 2016. Study regarding the creative accounting techniques in management
accounting. The Audit Financiar journal, 14(142). pp.1136-1136.
Oyewo, B., Ajibolade, S. and Obazee, A., 2019. The influence of stakeholders on management
accounting practice. Journal of Sustainable Finance & Investment, 9(4), pp.295-324.
Dekker, H. C., 2016. On the boundaries between intrafirm and interfirm management accounting
research. Management Accounting Research, 31. pp.86-99.
Burritt, R. L., Herzig, C., Schaltegger, S. and Viere, T., 2019. Diffusion of environmental
management accounting for cleaner production: Evidence from some case studies.
Journal of Cleaner Production, 224, pp.479-491.
Ghasemi, R., Mohamad, N. A., Karami, M., Bajuri, N. H. and Asgharizade, E., 2016. The
mediating effect of management accounting system on the relationship between
competition and managerial performance. International Journal of Accounting and
Information Management.
Cescon, F., Costantini, A. and Grassetti, L., 2016. Strategic Perspective in Management
Accounting: Field-Based Evidence. Il governo aziendale tra tradizione e innovazione, 4,
pp.7-31.
Abbasi, B., Khanmohammadi, M., Moradi, Z. and Mahmoodiyan, T., 2019. Capacity Building of
Green Accounting Consequences Based on the Explanation of Strategic Management
Accounting Techniques. Iranian Journal of Finance, 3(4). pp.23-59.
Procházka, D., 2017. The unintended consequences of accounting harmonization in a transition
country: A case study of management accounting of private Czech
companies. Contemporary Economics, 11(4), pp.443-458.
Granlund, M. and Lukka, K., 2017. Investigating highly established research paradigms:
Reviving contextuality in contingency theory based management accounting
research. Critical Perspectives on Accounting, 45. pp.63-80.