Comprehensive Review of Management Accounting Systems & Reports

This presentation provides a comprehensive overview of management accounting, beginning with its meaning and definition as a process for preparing management reports to aid in decision-making. It delves into the structure of management accounting systems, emphasizing their integration within organizations through data input, processing via accounting methods, and output via reporting. The presentation discusses the origin, role, and key principles of management accounting, contrasting it with financial accounting in terms of user focus, data orientation, and regulatory compliance. Different types of management accounting systems are explored, including cost accounting, inventory management, price optimization, and job-costing systems, highlighting their benefits such as cost reduction, increased profitability, and improved information access. The importance of presenting relevant, reliable, and accurate financial information for effective decision-making is underscored, along with an overview of various managerial accounting reports like cost, performance, budget, operational, and project reports. In conclusion, the presentation emphasizes the role of management accounting systems in enabling businesses to conduct their activities effectively through informed decision-making and efficient information presentation.

Introduction to
Management
Accounting

 Introduction
 Meaning and definition of management accounting
 Management accounting system
 Integration within organisation
 Origin, role and principles
 Distinction between financial and management accounting
 Types of management accounting systems
 Benefits of these systems
 Presentation of financial information
 Types of managerial accounting reports
 Conclusion
 References
Table of Contents

 This presentation relates to present the
general and basic information about
management accounting.
 The aim to describe the meaning, methods
and role of management accounting to the
users to be able to grasp an overall
understanding of the concept and
framework of management accounting
Introduction

 Management accounting is the
process which is used to prepare
the management reports and
account so as to provide relevant
and timely information to the managers of an entity
of the purpose of decision making.
 Management accounting is a form of
accounting and presenting business transactions.
Meaning and definition of
Management Accounting

A system with
procedural
framework and
integration of
different methods
and processes which
aims at preparing
accounts and
reports s defined as
management
accounting system.
Management Accounting
system

An organisation integrates the management
accounting system within its business
processes by adopting the methods and
techniques of management accounting. The
integration process is as follows:
1. Input of financial data
2. Processing through management
accounting methods
3. Output through reporting
Integration within
organisation

 Origin – The
management
accounting process
evolved with the need
of effective decision
making in order to
improve the
organisational
performance.
 Role – It plays an
important role in the
accounting and
reporting process of
the organisation.
 Principles
1. Management by Exception
2. Accounting for inflation
3. Use of return on
investment
4. Forward looking approach
5. Absorption of overhead
costs
6. Utility
7. Integration
8. Controllable and
uncontrollable costs
9. Personal contacts
Origin, role and principles of
management accounting

 It prepares standard
financial statements
for the entity.
 It is for external users
 The focus is on
historical data
 These are audited and
published mandatorily
 Follow GAAP, IFRS and
other financial
regulations
 It prepares specialised
data products
 It s for internal decision-
making
 The focus is on future
trends and predictions
 These are not audited
and not required to be
published.
 No financial or
accounting legislations
apply.
Distinction between management
and financial accounting

 Cost accounting systems – Absorption costing,
marginal costing, activity based costing
 Inventory management systems – FIFO, LIO,
perpetual inventory system, weighted
average method
 Price optimising systems – Target pricing,
cost-led pricing, price skimming, penetration
pricing
 Job-costing systems –Contract costing,
process costing, batch costing
Different types of management
accounting systems

 Helps in cost reduction and cost control
 Increase in profitability of the business
 Provides easy access of information
 Ease in performing business activities and
functions
 Helps in eliminating competition through
optimum price structure
Benefits of different types of
systems

 The information which is resented to the users is used
for the financial decision-making by the users.
Therefore it s important that the information
presented is relevant, reliable, up to date and
accurate so as to avoid wrong decisions for the users
of information.
 The purpose of the presentation of information is that
it shall be received by the intended recipient and he
shall understand and react on the basis of such
information. Thus, it is important that the information
is understandable otherwise it will be f n use for the
receiver and it will not achieve the purpose of sending.
Presentation of financial
information

 Cost reports
 Performance reports
 Budget reports
 Operational reports
 Project reports
Types of managerial accounting
reports