Analysis of Management Accounting Systems and Reporting

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LO1-Demonstrate an understanding of management
accounting systems.

Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Conclusion.......................................................................................................................................6
Bibliography....................................................................................................................................7

Introduction
The enterprise Oshodi Plc is a manufacturing entity involved in the manufacture of fruit drinks
named the JOJO fruit juice. This report has been created in the context of Oshodi Plc and deals
with considering how management accounting could be used for the verification of the varying
essential requirements of differing sorts of management accounting systems together with
reporting methods.
Discussion
P1 Explain management accounting and give the essential requirements of different types
of management accounting systems.
Widely acknowledged or recognised as the managerial accounting or as accounting for
managers, there are a number of ways in which management accounting is explained. For
example, Butler and Ghosh (2015) described management accounting as the procedure or the
system via which business organisations develop the capacity of performing analysis of their
business costs along with their operations in addition to the preparation of differing financial
records, reports, and accounts for the facilitation of the managers’ decision process to attain
organisational goals. On the other hand, Brewer et al. (2015) mentioned or described
management accounting as the collection of information, followed by their analysis,
interpretation and reporting regarding finances and operations of a business organisations, all of
which are directed to the managers present in a business instead of being directed to external
entities as in case of financial accounting.
Management accounting is a diverse field and there are a wide number of systems existing in it.
They are recognised as management accounting systems and consist of a number of interrelated
and interdependent variables, each of which works together to the accomplishment of a certain
organisational goal (Klychova et al., 2015). In the below section, the four chief and fundamental
management accounting systems have been evaluated while each of their essential requirements
have been discussed -

 Cost accounting system - As per Christ and Burritt (2015), cost accounting system is
defined as a framework that is utilised within an organisational context for the estimation
of the costs that have been spent on its products while performing inventory valuation
along with profitability analysis, thereby strengthening cost control. It is one necessary
requirement within enterprises such as the Oshodi Plc, the manufacturer of JOJO fruit
drinks, for its facilitation in the enhancement of accuracy in the measurement of cost of
production, as it is necessary for ensuring profitable operations.
 Job costing system - In the words of Weetman (2019), the job costing system could be
defined as the one existent within managerial accounting, which turns out being useful
for the assignment and the accumulation of cost of manufacturing of individual output
units. It is one necessary requirement for enterprises including Oshodi Plc since it
provides the management of a business organisation with the allowance of profit
computation from individual jobs, thereby facilitating them in ascertaining whether
particular jobs in the enterprise are desirable to be pursued during the future years or not.
 Inventory management system - Patel and Harnett (2018) described inventory
management system as the interrelated and interconnected components through the
means of which an enterprise develops the capacity of conducting the maintenance and
monitoring of stocked goods, be it the assets of a company, its supplies or its raw
materials or the finished goods in it that are ready for selling. It is one necessary
requirement for enterprises including the Oshodi Plc since it is a major requirement for
warehouse management while keeping a strong control over inventories while allowing
the tracking of commodities across the supply chain.
 Price optimisation system - Ceraolo et al. (2016) explained the price optimisation system
as the one with the assistance of which business concerns develop the ability of
computing demand of its commodities at varying levels of prices while examining the
reactions that customers tend to show relative to the prices that an enterprise sets for its
products. In addition to the three systems explained above, this system is also one
necessary requirement for enterprises including the Oshodi Plc since it is needed for the
ensuring of customers’ satisfaction.

P2 Explain different methods used for management accounting reporting
A primary manner in which management accounting can be utilised within the context of an
entity is via reporting. The below is an analysis conducted over the three differing sorts of
reporting done in management accounting -
 Accounts receivable aging report - Summarisation and recording of the unpaid customer
invoices while listing of unused credit memos of an enterprise is done with a reporting
method termed as accounts receivable aging report (Nickerson and Hall, 2017). Oshodi
Plc makes use of the report for determining the payments, which are overdue while
accelerating its collections.
 Variance report - This is the method applied for reporting within which an enterprise
contrasts the planned financial results that it has relative to the financial results that were
attained in reality and summarises the information (Simmering et al., 2015). Oshodi Plc
makes use of the report for performing the evaluation of the distinctions existent within
actual performance attained from manufacturing JOJO fruit drinks relative to the
performance, which had been previously budgeted.
 Departmental report - Summarisation and recording of the departmental
accomplishments of objectives and goals for a certain period of reporting while
accounting for production outcomes, financial details, projections and proposals is done
using a method termed as department report (Powers, 2016). Oshodi Plc makes use of the
report for reporting the challenges, the failures, the successes as well as the advices for
each of its departments.
In addition to the above, management accounting helps in preparation of other reports such as the
job cost report, the budget report, the investment appraisal report and several others.
M1 Evaluate the benefits of management accounting systems and their application within
an organisational context
Merits of management accounting systems are considerable and each of them can be applied
within organisational contexts such as that of Oshodi Plc in differing ways, a discussion of which
has been made below -

 Cost accounting system is beneficial for the proper planning of costs, keeping a control
over them while spotting unprofitable and profit generating activities (Guenther et al.,
2015). It can be applied into Oshodi Plc for measuring costs of manufacturing within the
entity. Job costing system is beneficial so that the management of an entity can be computing
profit earning from individual jobs in it (Pollard, 2018). It can be applied into Oshodi Plc
for the evaluation of whether particular jobs are going to be desired and required in future
years or not. Inventory management system is beneficial so that the management of an entity is able
to lower inventory expenditure, improve activities of cost accounting, remove order
duplication and ascertain adequate material supply (Sayed et al., 2018). It can be applied
into Oshodi Plc for providing a check over the loss of materials in the entity while
enhancing stock utilisation. Price optimisation system is beneficial so that the management of an entity could be
accomplishing clients’ satisfaction (Ceraolo et al., 2016). It can be applied into Oshodi
Plc for setting optimal prices in a way such that clients are attracted and satisfied.
Conclusion
Hence, the study helped in understanding how effectual each system is in the branch of
managerial accounting along with evaluation of differing techniques or methods applied for
reporting within managerial accounting.

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