Unit 5 Management Accounting: Systems, Tools, and Applications

This report provides a comprehensive analysis of management accounting principles and their practical application within ABC Limited. It covers various management accounting systems, including job costing, cost management, price optimization, and inventory management, highlighting their benefits and alignment with organizational goals. The report also evaluates different types of management accounting reports, such as budgetary, inventory management, performance, and accounts receivable reports, emphasizing their significance in informed decision-making. Furthermore, it examines diverse planning tools, including budgeting and forecasting techniques, along with their advantages and disadvantages in addressing financial challenges. The report concludes by assessing how organizations adapt management accounting systems to respond to financial problems, emphasizing the importance of key performance indicators and benchmarking for organizational success. Desklib offers a range of resources, including past papers and solved assignments, to support students in their academic pursuits.

MANAGEMENT ACCOUNTING

Contents
.........................................................................................................................................................3
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Brief explanation of managing accounting and differentiation between managing & financial
accounting....................................................................................................................................3
Various types of management accounting system.......................................................................4
Benefits of managing accounting system....................................................................................5
evaluation of diverse types of management accounting reporting...............................................6
TASK 2............................................................................................................................................8
Statement of marginal accounting...............................................................................................8
Statement of absorption costing...................................................................................................9
TASK 3..........................................................................................................................................10
evaluation of diverse types of planning tools with their advantage and disadvantages.............10
Uses of various forecast tools and their application for forecasting budget..............................13
TASK 4..........................................................................................................................................13
Financial problem and use of management accounting planning tools to solve the problem.. 13
Assessment of how organizations are adapting management accounting systems to respond to
financial problems......................................................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management Accounting is a systematic and effective branch of accounting. To understand
the concept of management accounting ABC limited has been taken. This report has been
formulated to define relevance of various type of Management Accounting system and its use of
alignment with budgeting is cost accounting reports. It also includes various methods used by
organisation to calculate their profit as well as relevance of planning tools and key performance
indicator and benchmarking for overcoming financial issues suffering from organisation.
TASK 1
Brief explanation of managing accounting and differentiation between managing & financial
accounting
Management accounting: The word is combination of management and accounting which
means that analysis, recording controlling and monitoring essential business record in systematic
way which useful in taken essential basis decision. This term is also popular for managing
accounting. It is modern management technique which useful in attaining business objective by
managing reduces by recording business transaction in effective way.
Principle of management accounting: There will be many principle on which the
concept of management accounting has been run . Management department of ABC Ltd, has
been apply following principle
Design and complaining: All the essential business record has been formulated to record
transaction for met future business goals. They are company with requirement of future business
outcomes. This refers that organization record management accounting data to represent it to
relevant stakeholders.
Management by exception: This principle follows the basic rule that organization
compare their budgeted and actual outcome for measuring performance. They are budgetary
control tools as well as standard costing technique management apply this concept (Messner,
2016).
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Controlling source of accounting: Recording transaction are useful to control and measure
performance of every individual employee as well as recognize performance of organization’s
each business department.
ABC Ltd, use and apply various system of accounting for running their business
organization ‘s activities in effective way.
Difference between financial and management accounting
Financial accounting Management accounting
It is related with defining essential information
regarding finance resource of organization.
This is tool of accounting which useful in
maintain position of accounting.
This include income and profit and loss
business statement.
Management accounting statement has been
formulated.
This type of accounting is use for providing
information to external holders.
Management accounting s reliable for
providing information to internal stakeholders.
Formulating financial statement is essential for
organization
It is not relevant to formulate management
accounting statements.
Various types of management accounting system
Job costing system: his system is supplied by management department for running their business
organization in effective way on the basis of job costing system organization able to record
their order per caused by recording number of orders taken by organization within a
particular time period as a less it cause a use to define cost recognize for particular time
period job costing system is useful for identifying value of each product which is unique for
customer and producer according to on the demand of customers (Wnuk-Pel,, 018).
Cost management system. This system is used by management department of ABC limited to
take organized cost required for generating revenue and earning each business activity by
using various kind of techniques of cost accounting management department can able to
understand profit they earn after in curd all the essential cost or expenses required to their
business procedures it includes standard costing marginal costing as well as absorption
costing methods which have different methods of calculating cost but overall result help in
finding out profit that organization generate for a particular time period cost management
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system useful for controlling cost by taking the effective decision regarding formulating
policies of controlling vestige business activities.
Price optimization system: his system is a ply under management accounting policy
price is the most essential sector and Organization able to generate their revenue on the basis of
taking decisions regarding particular price of product and services there will be the step of
method through which organization can able to formulate or policies for the year calculation of
price by using Management Accounting systems organization able to decide the select prize
which useful for satisfied customers as a less organization able to generate revenue by using their
price Optimization system It consider prices and discounting pricing policies management
department of ABC Limited use price skimming strategy for their product and policies (Elmassri,
Harris, and Carter, 2016).
Inventory management system: This system is help in managing stock of organisations
management department need to control their wastage regarding with storage of inventory is in
the stocks as it directly impact on the cash inflow position of organisation this is by applying
effective tool of inventory management which includes LIFO ,FIFO and JIT as well as ABC
analysis techniques management department able to record East stock value number of stock
required according to their level of position which help in attaining business goals by managing
stocks.
Benefits of managing accounting system
Management accounting system useful for Unilever in the following way
Particular Management accounting system’s benefits
Job costing system By using job costing system management
department of ABC Limited able to recognise
cost required for attending a fulfilling
requirements of their potential customers it is
a useful for recognising impact of job costing
system within a particular time period on
organisations revenues
Cost management system This system is useful recognising cost
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incurred for particular time period regarding
with running business activities by applying
tools of Costing management department of
ABC Limited can able to evaluate their profit
as well as cost and those with us activities
which become the reason of high cash
outflow
Inventory management system Management department of ABC Limited use
inventory management system for implement
lifo fifo method and use of ABC analysis
technique through which they can able to
maintain their inventory report which help in
taking decision regarding managing of stock
to attend business objective in providing
material and stop to their customers then the
require
Price optimization system Management department of ABC Limited use
price skimming method through which they
can satisfy their customers by selling their
product according to the needs and social
class of customers this system useful in take
decision regarding best prices of particular
product on the basis of that organisation able
to generate revenues
evaluation of diverse types of management accounting reporting
Report are documents which are formulated to written off each and every detail regarding
with business activities there will be various type of accounting reports has been formulated
when organisation adopt Management Accounting systems these reports are useful in providing
data and help in taking future business decision following are the report has been used or
implemented by ABC Limited (Quattrone, 2016).
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Budgetary report: These reports are formulated to recognise performance as well as
finding out future business profit and loss by formulating budgetary reports organisation able to
recognise the near future business transaction it will help in providing idea regarding future
expenses and risk budget reports are determine profit as well as loss and financial performance
and management of assets for a particular time period bi formulating budget these are the data
collected by budget report organisation able to complete the task within a given time period
budgets budget report useful in providing base for formulating budget they provide essential data
as well as information which help in formulating business policies as well as attending business
results management department of ABC Limited formulate budget through which they can able
to attend their business goals.
Inventory management report: these report are formulated by the data collection from
inventory management system on the basis of information generate are collected by management
department through using ABC and other inventory system techniques management accounting
is strong enough to use this information for formulating the effective business policies regarding
managing there is on the basis of controlling inventory.
It is very essential for organisations to manage their inventory as success of the
organisation total depend on how effectively and management department is able to control and
manage their stock formulating effective business policies management department formulate
policies to inventory management report this report has been define all the level of organisation
which management can able to easily understand maximum and minimum level of inventory as a
less cost recognise for maintain stock and on the basis of the earth business organisation able to
their manage their stocks which help in attaining their business goals inventory management
report define each management departments inventory related information which help in
attending business goals (McLaren, Appleyard, and Mitchell, 2016).
Performance report: These reports are formulated for recognising performance of each
business department it is a summary of every reports which are used in by organisations
performance report has been define and measure performance of each department human
resources.
This will help in recognising and measuring performance of business departments in an
organisation sales marketing finance as well as manufacturing all these department of work
towards product and business organisation objective formulating performance report
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management department can easily recognise their performance as well as differences arising
between state and actual outcomes on the basis of that the formulate effective in his policies
through which they can able to reduce the gap between actual and budgeted outcomes the main
purpose of formality performance report is to take decisions regarding distributing of rewards
promotions and other essential recognising awards for employees on the basis of their
performance significance of combination of managing accounting system with reporting.
Account receivables report: This report has been formulated to recognise and analyse
performance of debtors collection period within a specified time this report has been formulated
to determine number of debtors who are not able to pay that celebrity organisations cash flow
directly influence when debtors are unable to pay their that amount within given time period
thus on the basis of formulating data collection report an average receive report business
organisation able to recognise number of defaulters which to be considered as non performing
Assets of organisation and on the basis of that the formulate effective business policies through
which they can able to take back their amount from debtors (Maas, Schaltegger and Crutzen,
2016).
Requirement of alignment of report and management accounting system
Management department of ABC Limited formulated effective business report which help in
formulating and taking this is season for future policies accounting system and reports are
essential part of management accounting organisation able to formulate their business report on
the basis of Data Collection from their various accounting systems management department of
ABC Limited formulate their budget reports on the basis of collect information through cost
inventory as well as price Optimisation systems by combining information from all these
systems report are formulated and on the basis of that managers take decision to attend their
business goal.
TASK 2
Statement of marginal accounting
Marginal accounting: This is traditional business activities . This is used by organizations
in general manner. Absorption costing is includes all the essential business units which has been
used for manufacturing business units. In absorption costing every unit has been recognized and
each material is consider. This includes raw material, labor cost and overhead outcomes.
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Absorption costing is useful in recognizing expenses and on the basis of that they can able to
generate profits which useful in attaining business goals.
Marginal Costing
Statement
Budget Actual
Sales Revenue 50 8,00,000 8,00,000
- Variable cost
Direct Material 10 1,80,000 1,90,000
Direct Labour 20 360000 380000
Variable Overhead 5 90000 95000
Contribution 170000 665000
-
Fixed cost
Fixed Overhead* 5 90000 95000
Closing stock -80000 -120000
Standard Profit 160000 15500
Statement of absorption costing
Absorption accounting: This is also known as marginal costing. It considered as one of
the most useful method which adopted by organizations. Management department is used
variable costing for recognizing impact of using additional units which directly impact on profits.
It will help in identifying the impact of reduction and additional of extra business units. Variable
cost include (Thabet, and Alaeddin, 2017).All these essential items which impact on running
business activities. Although this method has been use for most f newly set organization. Which
help in managing essential business resources.
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Statement
of Profit
or Loss
for Jan
2019
Absorptio
n Costing
Per Unit Budget Actual
£ £ £ £ £ £
Sales
Revenue
50 8,00,000 8,00,000
COST OF
SALES:
Cost of
Productio
n:
Direct
Material
10 1,80,000 1,90,000
Direct
Labour
20 3,60,000 3,80,000
Variable
Overhead
5 90,000 95,000
Fixed
Overhead
*
5 90,000 95,000
40 7,20,000 7,60,000
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Statement
of Profit
or Loss
for Jan
2019
Absorptio
n Costing
+ Opening
Inventory
0 0
- Closing
Inventory
80,000 1,20,000
Standard
Cost of
Sales
40 6,40,000 6,40,000
Standard
Profit
10 1,60,000 1,60,000
Adjustmen
t for
underabso
rption
-10,000 -5,000
Profit Budgeted
Profit
1,50,000 Actual
Profit
1,55,000
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Standard costing: This is also considered as one of the useful method of costing or
management accounting. In this method organization use and evaluate various variance which
useful in recognizing business profits. Labor, overhead as well as material these variance are
used to evaluate the difference between budget as well as actual business outcomes. On the basis
of that organization formulate effective business policies through which they can able to find out
amount of difference. Material variance include all the value of cost and price which recognize
the different between actual and budget business outcomes. Business recognize by evaluating
these cost product well as effectively recognize their value of profit which help in attaining
business objectives.
Standard costing useful in taken decision and on the basis of decision taken by
organization they are able to evaluate the main reason of different are between organization and
their essential business outcome.
They are useful for optimum utilization of business resource as well as recognizing
perform of organization with given time period .This method of costing is also applicable for
organization which able to their project for short time period. Standard costing help in defining
business objectives as well as recognize effect business policies which help in generating
business result in effective manner ( Hussnain,2020).
Range of accounting techniques
Management accounting techniques directly impact on organization s performance and
on the basis of using costing business technique organization able to take decision as well as they
can also recognize the amount required for running business in effective manner. Management
department of ABC limited by applying these tools able to attain their business goals and
identifying profit in given time manner. Organization on the basis of recognize value of standard
costing can able to run business in effected manner and control cost which useful in attain final
business result.
TASK 3
evaluation of diverse types of planning tools with their advantage and disadvantages
Planning tool: These are the tools which is used by organisation to plan for future business
policies by using planning tools organisation take decisions which help in attaining their future
business goals following are the tools used by ABC Limited for their business activities.
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