Management Accounting Systems & Reporting for Tata Motors Ltd

This report provides an overview of management accounting and its application within Tata Motors. It defines management accounting as a function involving planning, organizing, and controlling company activities through the use of relevant information and reports. The report highlights the primary and secondary functions of management accounting, including providing accounting information, assisting in managerial activities, financial planning, tax determination, and strategic planning. It differentiates management accounting from financial accounting, emphasizing their distinct objectives and focuses. Furthermore, the report discusses various management accounting systems relevant to Tata Motors, such as cost accounting, inventory management, and price optimization systems, outlining their essential requirements. Finally, it explains different management accounting reporting methods, including budgeting reports, cost and revenue reports, and investment appraisal reports, along with the benefits of implementing these systems within Tata Motors, such as cost reduction, innovation, and improved operational efficiency. Desklib offers a wealth of similar resources for students.

Unit 5 - Management Accounting
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Contents
Task 1...............................................................................................................................................3
P1: Explain management accounting and give the essential requirements of different types of
management accounting systems that could be used by Tata Motors.........................................3
P2: Explain different methods used for management accounting reporting relevant to Tata
Motors..........................................................................................................................................6
References:......................................................................................................................................7
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Task 1
P1: Explain management accounting and give the essential requirements of different types
of management accounting systems that could be used by Tata Motors.
Definition of management accounting:
The definition of management accounting can be best explained with the management
accounting to be recognized as a function of management which is associated with planning,
organizing and controlling the various activities and operations of the company by utilizing the
type of information and reports available to the management through this function. The
management accounting function involves obtaining the adequate amount of information related
to various segments and departments of the company (Edmonds & Olds, 2013).
Another definition of management accounting can be explained as the decision making function
of management in which the management reports are utilized in order to analyse and evaluate the
financial as well as non financial performance of the enterprise for taking significant and
important economic decisions.
Functions of management accounting:
The primary function of management accounting includes:
 Provision of accounting information of the company – The management accounting
systems helps in extracting the relevant and timely information from the accounting system
of the company and helps in presenting that information in the value added reports that will
be useful for decision making purposes.
 Assisting in various activities of management – The managerial activities in the
management are concerned with making plans and strategies for the effective operational
activities to be conducted in the enterprise and the function of management accounting helps
in making possible these activities by providing the timely information to management for
further actions (Horngren, et. al., 2013).
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The secondary functions of management include:
 Helps in financial planning – The financial planning of the organization is concerned
with managing the financial matters of the company and maintaining the financial items at an
adequate level. The management accounting functions aids in financial planning.
 Helps in tax determination – The various types of reports generated in management
accounting helps in providing the tax obligations of the company for paying and completing
the obligations.
 Strategic function – The strategic function of the organisation is concerned with making
future plans and strategies of the company in order to improve the efficiency and
effectiveness of the operations which can be easily performed by management accounting
(Horngren, et. al., 2013).
Differences between management accounting and financial accounting:
Management accounting Financial accounting
The management accounting objective is to
assist in decision making function of the
management for strategic planning and
performing.
The financial accounting objective is to
produce financial reports in order to assist
investors and other users in decision making.
The time focus of management accounting is
on future perspective.
The time focus of the company is concerned
with historical perspectives.
The primary focus of the management
accounting function is on the segmental and
departmental reports of the company
(Edmonds & Olds, 2013).
The primary focus of the financial accounting
function is on the company wide reports
related to finances of the company.
The preparation and presentation of The preparation and presentation of the
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management reports is optional on part of the
management.
financial reports is mandatory for the
organization.
Management accounting systems relevant to Tata Motors along with their essential
requirements:
Cost accounting systems – The cost accounting system will help the managers of Tata Motors
to manage the costing activities in order to manage the complex business activities. The cost
accounting system will be concerned with recording and classifying the various cost items
(Drury, 2015).
Essentials:
 Integration must be established with the financial accounting system and reporting.
 The cost items must be classified appropriately in this system.
Inventory management system – The inventory management system is concerned with
managing the inventory of Tata Motors as the company is expanding and requires optimizing the
inventory to be maintained in the company.
Essentials:
 The economies of scale and optimum inventory level must be achieved by this system.
 The cost of carrying and maintaining the inventory must be reduced.
Price optimisation system – The price optimization system of the company Tata Motors will be
utilized in order to optimize the price levels and charging appropriate prices for the products.
Essentials:
 The demand and prices should be correctly identified by the company.
 The selling prices must be accurate in order to reach at adequate profitability for the
company (Cooper, et. al., 2017).
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P2: Explain different methods used for management accounting reporting relevant to Tata
Motors.
The different reports that can be utilized in management accounting are as under:
Budgeting reports – The type of reports concerned with budgeting system of the company helps
in preparing and presenting the budgets related to cost and expenditures of the company. The
company Tata Motors can use this report in order to implement cost reduction and cost control
activities.
Cost and revenue reports – The cost and revenue reports for Tata Motors will be concerned
with maintaining the cost and revenue reports by utilizing the day to day transactions of the
company. The type of information will help in making costing and selling decision of the
company (Drury, 2015).
Investment appraisal reports – The investment appraisal reports are concerned with long term
proposals of the company which will require heavy investment and allocation of resources. The
various techniques of NPV, IRR and payback period will be utilized in order to evaluate and
analyse each and every proposal of the company Tata Motors.
Benefits of management accounting systems in Tata Motors:
Cost reduction and control – The management accounting system will help in controlling the
cost expenses and reducing them to an acceptable level but achieving and identifying the cost
reduction strategies for the company Tata Motors.
Innovations – The various management accounting systems are concerned with obtaining and
achieving the new innovative technologies and methods of accounting in order to record and
present the data in an organized way for the management.
Better operations and management – The operational functions of the management can be
improved and the overall efficiency will be achieved in order to improve the profitability of the
company in context of the market and industry situations. The same will help the company in
maintaining sound reputation in the market (Cooper, et. al., 2017).
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References:
 Cooper, D. J., Ezzamel, M., & Qu, S. Q. (2017). Popularizing a management accounting
idea: The case of the balanced scorecard. Contemporary Accounting Research, 34(2),
991-1025.
 Drury, C. (2015) Management and Cost Accounting. 9th Ed. Cengage Learning
 Edmonds, T. and Olds, P. (2013) Fundamental Managerial Accounting Concepts. 7th Ed.
Maidenhead: McGraw-Hill.
 Horngren, C., Sunden, G., Stratton, W., Burgstalher, D. And Schatzberg, J. (2013)
Introduction to Management Accounting. Global Ed. Harlow: Pearson
 Otley, D. (2016). The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, 45-62.
 Schaltegger, S., & Burritt, R. (2017). Contemporary environmental accounting: issues,
concepts and practice. Routledge.
 Seal, W. et al (2014) Management Accounting. 5th Ed. Maidenhead: McGraw-Hill
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