Contents

Task 1..................................................................................................................................... 1
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1.1.................................................................................................................................. 1
1.2................................................................................................................................... 3
1.3................................................................................................................................... 4
P 1.4................................................................................................................................ 5
Task 2..................................................................................................................................... 5
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2.1................................................................................................................................... 5
2.2................................................................................................................................... 7
2.3................................................................................................................................... 8
2.4................................................................................................................................... 9
References........................................................................................................................... 17
Introduction

The overall aim of this report is to introduce the fundamentals of management accounting which
apply to the wider business environment and the organisations which operate within that
environment.

The exploration of how management accounting uses financial data to aid planning decisions,
and the monitoring and control of finance within organisations.
On successful completion of this unit students will be in a position to present financial
statements in a workplace context and be able to assist senior colleagues with financial business
planning. In addition, we will have the fundamental knowledge and skills to progress onto a
higher level of study.

Management accounting helps small business owners and managers monitor the company's
performance and are prepared frequently throughout accounting periods as needed. Depending
on the type of project and the time-sensitivity of the information, an owner or manager may
request reports quarterly, monthly, weekly or even daily.

P1: Explain management accounting and give the essential requirements of

different types of management accounting systems.

Management accounting

Management accounting is the process of identifying, measuring, analyzing, interpreting and

communicating information for the pursuit of an organization's goals. This branch of accounting is also
known as cost accounting. The key difference between management and financial accounting is
management accounting information is aimed at helping managers within the organization make
decisions, while financial accounting is aimed at providing information to parties outside the
organization.

The process of preparing management reports and accounts are that provide accurate and timely financial
and statistical information required by managers to make day-to-day and short-term decisions.
Essential requirements of different types of management accounting systems
are:

According to the American Accounting Association, accounting is the "process of identifying,

measuring and communicating economic information to permit informed judgments and
decisions by users of the information." There are several types of management accounting
systems among them essentially required these systems Cost accounting system, Inventory
management, job costing System, Price optimization all with different accounting elements,
objectives and functions. However, these basic elements of all accounting systems establish a
standardized framework as to the purpose for the information that is identified, measured
(analyzed) and communicated.

Cost Accounting System

A cost accounting system (also called product costing system or costing system) is a framework
used by firms to estimate the cost of their products for profitability analysis, inventory valuation
and cost control. Estimating the accurate cost of products is critical for profitable operations.

Cost accounting is a type of accounting process that aims to capture a company's costs of
production by assessing the input costs of each step of production as well as fixed costs such
as depreciation of capital equipment. Cost accounting will first measure and record these costs
individually, then compare input results to output or actual results to aid company management
in measuring financial performance.

Inventory Management
Inventory management is the practice overseeing and controlling of the ordering, storage and use
of components that a company uses in the production of the items it sells. Inventory
management is also the practice of overseeing and controlling of quantities of finished products
for sale.

Inventory management is the practice overseeing and controlling of the ordering, storage and use
of components that a company uses in the production of the items it sells. Inventory management
is also the practice of overseeing and controlling of quantities of finished products for sale. A
business's inventory is one of its major assets and represents an investment that is tied up until
the item sells.

Job Costing System

Job order costing or job costing is a system for assigning manufacturing costs to an individual
product or batches of products. Generally, the job order costing systemis used only when the
products manufactured are sufficiently different from each other.

A job costing system involves the process of accumulating information about the costs associated
with a specific production or service job. This information may be required in order to submit the
cost information to a customer under a contract where costs are reimbursed. The information is
also useful for determining the accuracy of a company's estimating system, which should be able
to quote prices that allow for a reasonable profit. The information can also be used to assign
inventorial costs to manufactured goods. A job costing system needs to accumulate the following
three types of information:

Direct materials.
Direct labor.
Overhead.

Price Optimization

Price optimization is the use of mathematical analysis by a company to determine how customers
will respond to a different price for its products and services through different channels. It is also
used to determine the prices that the company determines will best meet its objectives such as
maximizing operating profit.

Finding an alternative with the most cost effective or highest achievable performance under the
given constraints, by maximizing desired factors and minimizing undesired ones. In comparison,
maximization means trying to attain the highest or maximum result or outcome without regard to
cost or expense. Practice of optimization is restricted by the lack of full information, and the lack
of time to evaluate what information is available (see bounded reality for details). In computer
simulation (modeling) of business problems, optimization is achieved usually by using linear
programming techniques of operations research.

P2: Explain different methods used for management accounting reporting.

Managerial, also called management or cost accounting focuses internally on information

received through financial accounting. Managerial accounting is used for planning, controlling
and decision making. Management accountants rely on normal financial statements including the
income statement, balance sheet and cash flow statement, but also use other types of accounting
reports in analyzing company information. These include product cost reports, budgets and
performance reports.

Cost Reports
Managerial accounting calculates costs of items produced. This is done by taking all raw product
costs, overhead, labor and any additional costs into consideration. The totals are divided by
amounts of products produced. All of this information is summarized in a cost report. This report
allows managers the ability to see the cost prices of goods versus selling prices. It helps
managers plan and control profit margins.

Budgets

One main element of managerial accounting is the preparation of budgets. Budgets are typically
created by using prior years budgets and adjusting to future projections. A companys budget
lists all sources of revenues and expenses. A company tries to accomplish its goals and objectives
while staying within budgeted amounts. Managers often look into new vendors to use as
suppliers of raw materials to save money. They also find ways to increase sales while decreasing
expenses.

Performance Reports

Managerial accountants use budgets to compare actual expenditures and revenues to budgeted
amounts. The differences calculated are analyzed when determining new budgets and all
information regarding these amounts is listed on a performance report. Performance reports are
calculated every year; however, some companies create them monthly or quarterly. These reports
help managers plan for future demand in production as well as cost increases.

Other Reports

Other reports are also used and prepared by managerial accountants. Order information reports
are used to compare orders placed to orders received. These reports indicate backlog information
and if the orders placed were enough needed. These reports also summarize if too many orders of
specific products were ordered, therefore forcing the company to sit on unused products not
needed at the time. Business situation or opportunity reports are also created, which help
managers make decisions regarding current and future business situations.
P3: Calculate costs using appropriate techniques of cost analysis to prepare an
income statement using marginal and absorption costs.

1. Income Statement Using Absorption Costing

General Sports Wear

For the year ended 30th Sep 2016

in "000 " in "000 "

Sales 25,600
(Less) Cost of Goods Sold:
Cost of Sales 12,500
Beginning Inventory 5,875
(as in September 2015 - 25% of 23500 closing stock)
Good Available For Sale 18,375
(Less)
Ending Inventory (as in September 2016 - 25% of 25,600 6400
closing stock)
Cost of Goods Sold 11975
Gross Margin 13625
(Less) Expenses:
Total Admin & Selling Expenses 6,600
Net Profit 7025

1. Income Statement Using Marginal Costing

General Sports Wear

For the year ended 30th Sep 2016

in "000 " in "000 "

Sales 25,600
(Less) Variable Expenses:
(a) Variable Product Cost:
Cost of Goods Manufacturing 12500
Beginning Inventory 5,875
(as in September 2015 - 25% of 23500 closing stock)
Good Available For Sale 18375
(Less)
Ending Inventory (as in September 2016 - 25% of 25,600 6400
closing stock)
Cost of Goods Sold 11975
(b) Variable Period Cost:
Administration Expenses 600
Selling Expenses 300
Total Variable Expenses 12875
Contribution Margin 12725
(Less) Fixed Cost:
Rent & Rates 1,100
Salaries 2,100
Advertisements 500
Depreciation 2,000
Total Fixed Costs 5,700
Net Profit 7025
P4: Explain the advantages and disadvantages of different types of planning
tools used for budgetary control.

What is Budgetary Control?

Budgetary control is the process by which budgets are prepared for the future period and are
compared with the actual performance for finding out variances, if any. The comparison of
budgeted figures with actual figures will help the management to find out variances and take
corrective actions without any delay.

Objectives of Budgetary Control

The main objectives of budgetary control are given below:

1. Defining the objectives of the enterprise.

2. Providing plans for achieving the objectives so defined.

3. Coordinating the activities of various departments.

4. Operating various departments and cost centers economically and efficiently.

5. Increasing the profitability by eliminating waste.

6. Centralizing the control system.

7. Correcting variances from sit standards.

8. Fixing the responsibility of various individuals in the enterprise.

Advantages of Budgetary Control

Budgetary control has become an important tool of an organization to control costs and to
maximize profits. Some of the advantages of budgetary control are:

1. It defines the goals, plans and policies of the enterprise. If there is no definite aim then the
efforts will be wasted in achieving some other aims.

2. Budgetary control fixes targets. Each and every department is forced to work efficiently to
reach the target. Thus, it is an effective method of controlling the activities of various
departments of a business unit.

3. It secures better co-ordination among various departments.

4. In case the performance is below expectation, budgetary control helps the management in
finding up the responsibility.
5. It helps in reducing the cost of production by eliminating the wasteful expenditure.

6. By promoting cost consciousness among the employees, budgetary control brings in

efficiency and economy.

7. Budgetary control facilitates centralized control with decentralized activity.

8. As everything is planned and provided in advance, it helps in smooth running of business

enterprise.

9. It tells the management as to where action is required for solving problems without delay.

Disadvantages or Limitations of Budgetary Control

The following are the disadvantages of budgetary control:

1. It is really difficult to prepare the budgets accurately under inflationary conditions.

2. Budget involves a heavy expenditure which small business concerns cannot afford.
3. Budgets are prepared for the future period which is always uncertain. In future, conditions
may change which will upset the budgets. Thus, future uncertainties minimize the utility of
budgetary control system.

4. Budgetary control is only a management tool. It cannot replace management in decision-

making because it is not a substitute for management.

5. The success of budgetary control depends upon the support of the top management. If there is
lack of support from top management, then this will fail.

P5: Compare how organizations are adapting management accounting

systems to respond to financial problems.

Organizations today face the question of how to adapt their strategies, business models, and
practices to respond to social and environmental challenges while creating financial success and
value for their shareholders.

The report suggests a number of ways management accountants can guide their organizations
towards sustainable business success:
 Identify the environmental and social trends that will impact on the companys ability to
create value over time.

Link sustainable business challenges to the companys strategy, business model,

performance outlook, and license to operate.

Explain the impact of these sustainability issues in robust business terms, including how
and when they could affect the business.

Develop KPIs that support strategic and sustainable goals.

Apply management accounting tools and techniques, such as scenario planning of natural
resource availability, lifecycle costing, and carbon foot-printing, to help integrate
sustainability matters into the decision-making process.

Produce reports that include data on sustainability impacts in order to inform budgeting
and pricing decisions, investment appraisals, and strategic planning.

Develop a reporting strategy that integrates sustainability issues to ensure that relevant
financial and non-financial information is disclosed. The International Integrated
Reporting Framework created by the International Integrated Reporting Council is one
example.
Conclusion

As this management accounting assignment help us lucidly explained, most of us have already
realized by now that when it comes to accounting paper writing, professors do not tolerate any
blooper. The reason is accountancy is considered to be the backbone of every business and thus
requires accuracy. Providing comprehensible financial accounting chart and tables is the most
common problem that accounting students experience in assignment writing. This is a reason
why people need management accounting assignment help and managerial accounting
homework help.

Accounting is a comprehensive yet methodological discipline that details the financial

transactions relating to business or organizations. We who are students have to analyze thousands
of transactions that the company may have carried out throughout a certain time span. It becomes
very tough for us to accumulate that information and incorporate them.
References

http://www.investopedia.com/terms/m/managerialaccounting.asp

http://www.businessdictionary.com/definition/management-accounting.html

https://en.wikipedia.org/wiki/Management_accounting

http://smallbusiness.chron.com/3-basic-elements-accounting-system-22114.html

http://www.wisegeek.com/what-are-the-different-types-of-management-accounting-
systems.htm

http://www.investopedia.com/terms/c/cost-accounting.asp

https://www.google.com/#q=inventory+management+systems+definition

http://www.investopedia.com/terms/i/inventory-management.asp

http://www.accountingtools.com/questions-and-answers/what-is-a-job-costing-
system.html

http://www.accountingtools.com/job-costing

http://www.businessdictionary.com/definition/optimization.html

http://www.ehow.com/list_7609485_types-managerial-accounting-reports.html

http://accountlearning.com/budgetary-control-objectives-advantages-
disadvantages/

http://www.strategic-control.24xls.com/en211

http://www.fao.org/docrep/w4343e/w4343e05.htm

http://www.cgma.org/magazine/2015/jan/201511533.html