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1. Explaining the management accounting, giving different types of management accounting system, different methods used in management accounting report, the benefit of management accounting system, and their applications within the organisation context:
2. Producing an adequate income statement and cash flow statement for the business:
3. Explaining the advantages and disadvantages of different type of planning tools used in budgetary control:
4. Comparing the method used by the organisation to support the financial problems by using management accounting system:

Different Methods Used in Management Accounting Reports

1. Explaining the management accounting, giving different types of management accounting system, different methods used in management accounting report, the benefit of management accounting system, and their applications within the organisation context:

Management Accounting has been considered to be a provision that is provided to the managers in order to get better information while making an adequate decision. In addition, management accounting also allows organisations effectively manage, perform, and control their functions, which help in attaining adequate growth. Without the use of Management Accounting directors and managers are not able to make sound decisions with concrete evidence that could help in improving the financial capability of an organisation (Bodie 2013).

The essential features needed for different types of Management Accountants depicted as follows.

  • Identification of  metrics in cost accounting
  • Financial accounting analysis
  • Identifying the national economic measurement for analysis

The different methods that are used for management accounting report are depicted as follows.

  • Financial planning
  • Analysis of financial statement
  • Historical cost accounting
  • Standard costing
  • Budgetary control
  • Marginal costing
  • Fund flow statement

Management Accounting systems mainly provide the following benefits which could have the organisation improve its financial condition.

Reduction in expenses:

With the help of Management Accounting system organisations able to reduce cut short the overall expenses manual accounting method. This process mainly takes fewer employees and expenses to effectively support the overall accounting system.

Improved cash flow:

Moreover, use of accounting system allows organisations to effectively improve the cash flow by addressing all the relevant expenses. In addition, the organisation with the help of Management Accounting system is able to devise an adequate plan, which would help in reducing the overall expenses and improve its cash flow (Renz 2016).

Business decisions:

Moreover, the presentation that is conducted by management and directors are drastically improved with the help of Management Accounting system, as it helps in portraying the adequate financial condition of an organisation.

Increase financial returns:

Moreover, Management Accounting system by providing adequate financial condition is able to help managers take adequate decisions which could help in increasing the financial returns and in turn raise the overall profits.

With the help of Management Accounting systems organisations are able to prepare the most accurate Management Accounting reports that could be provided to the stakeholders. Management accounting system considers all the relevant transactions and decisions, which are made by the management to attain sustainable growth. Furthermore, it helps in drafting an adequate financial report, which portrays the overall decisions that are made by the organisation within the fiscal year. Therefore, it is essential for organisations to have Management Accounting system to support, authenticate and validate their overall Management Accounting reports (Fullerton, Kennedy and Widener 2014).

Reduction in Expenses with Management Accounting Systems

2. Producing an adequate income statement and cash flow statement for the business:

Marginal Costing

Particulars

Amount

Amount

Sales

 £        1,200,000

Variable cost of goods

 £        500,000

Opening inventory

 £        240,000

Closing inventory

 £        120,000

Cost of goods sold

 £            620,000

Gross margin

 £            580,000

Administrative department

 £          40,000

Sale department

 £          75,000

Finance department

 £          65,000

Other variable cost

 £        180,000

Contribution

 £            220,000

Fixed expenses

 £              80,000

Production overhead

 £              80,000

Net Operating Income

 £              60,000

Absorption Costing

Particulars

Amount

Amount

Sales

 £   1,200,000

Variable cost of goods

 £          500,000

Opening inventory

 £          240,000

Closing inventory

 £          120,000

Cost of goods sold

 £       620,000

Gross margin

 £       580,000

Administrative department

 £            40,000

Sale department

 £            75,000

Finance department

 £            65,000

Other variable cost

 £          180,000

Fixed expenses

 £            80,000

 £       440,000

Over absorption

 £         20,000

Operating profit

 £       160,000

Cash flow Statement

Particulars

Amount

Amount

Tax paid

-£           20,000

interest paid

-£              7,000

Cash generated from operations

 £          200,000

Net cash flow generated from operating activities

 £173,000

Purchase of property

-£           60,000

Net cash flow generated Investing activities

-£60,000

Dividends paid

-£           40,000

Decreasing in long term borrowings

-£           33,000

 Net cash flow generated Financing activities

-£ 73,000

Net Change in cash

 £ 40,000

Cash and cash equivalent beginning

 £ 100,000

Cash and cash equivalent ending

 £ 140,000


3. Explaining the advantages and disadvantages of different type of planning tools used in budgetary control:

There is a relevantly different type of planning tools, which have both advantages and disadvantages that are portrayed to the budgetary control. This significance and limitations of the controls are depicted as follows.

Static planning:

This type of planning is conducted to identify normal outcomes and monetary positions of the organisation for the following year. The main advantage of this planning is to control or constraint genuine outcomes that might be portrayed within the organisation. However, the main disadvantage of the Planning is that it only in circles normal outcomes and measures, which could affect overall budgetary control of an organisation. In addition, it does not include any kind of abnormal activities that might under the budgetary control and reduce the effectiveness of the budget (Otley and Emmanuel 2013).

Zero-base planning:

This type of planning is mainly conducted by building up relevant assumptions, which might portray different results. This planning meaning helps your organisation to use bundles of outcomes or results, which could happen with the financial plan. This allows the organisation to set a particular outcome which might be incurred for the whole business. However, the major setback for the overall planning is that it uses a bundle of outcomes, which can not exactly portray the overall outcomes from a particular decision made in the financial plan.

Flexible planning:

The flexible planning mainly allows the organisation to alter the overall cost levels particular financial plan, according to the changing attribute of the overall external environment.  the main advantage flexible planning is that it allows organisations to control the overall excessive cost and support their activities by providing relevant cash flow. This planning is an efficient way to support changing course attributes and improving the world financial plan to suit objectives of the business. However, the constraint mainly reduces the effectiveness of the flexible planning, as organisations could change the cost frequently to reduce the overall variance in the budget.  This frequent change in budget good mainly loses the friction that it has in controlling activities of an organisation (Chenhall and Moers 2015).

Incremental planning:

An incremental planning method is mainly a normal approach, where the previous spending conducted by an organisation is mainly moving forward and increased to support its future endeavours. There is no specific planning, which is conducted to draft the overall budget. The main advantage of this type of planning is that it could help the company support all the activities that were conducted in the previous fiscal year.

Improved Cash Flow with Management Accounting Systems

The overall advantage and disadvantages could be evaluated by the organisation to effectively improve their budgetary contrary control and reduce wastage of essential resources. Fullerton, Kennedy and Widener (2013) mentioned that without adequate measures and evaluation budget could not be prepared, which might help in improving the profitability of the company.

4. Comparing the method used by the organisation to support the financial problems by using management accounting system:

Management accounting systems mainly allow organisations to effectively respond to the financial problems that might affect its overall financial capability. In addition, financial capability an organisation is drastically improved by using an accounting system which could help in portraying the trends that have been followed in the market. Moreover, use of Management Accounting system allows the organisation to gauge into the future prospects, which might help in increasing overall profitability of an organisation (Otley 2016). The management accounting systems mainly help in identifying the following measures.

Timeline of information:

With the help of Management Accounting system, a timeline of information is monitored, which allows organisations to effectively comprehend the seasonal demand portrayed by the customers. In addition, the timeline mainly helps the organisation to reduce the problems related to management of resources.

Availability of resources:

Furthermore, the management accounting system also allows organisations to identify the available resources, which help in reducing the excess blockage of inventory. In addition, the management accounting system helps in reducing the blockage of capital by adding more and more resources for the production operation. Therefore managerial accounting allows managers to take essential decisions in light of all the available resources presented at the disposal (Wagenhofer 2016).

The quality of information:

Management Accounting many provide high-quality information to the managers and directors which make the adequate decisions regarding the future growth of an organisation. The management accounting system directly provides the raw data, which could be utilised by management to effectively devise the relative budgets and plans that could improve their financial feasibility.

The overall use of above measures mainly allows organisations to effectively reduce the financial problems that might arise from the operation. The collective measures provided by the manual accounting system could you went really help organisations to forecast its financial need which could be used in supporting its growth. Tucker and Parker (2014) mentioned that use of Management Accounting system allows organisations to collect all the relevant data and use adequate tools and techniques to draft a plan, which could help in improving its operations. On the other hand, Dekker (2016) argued that Management Accounting system only value is the past performance and is not able to accurately depict the future performance or future financial needs of an organisation. Therefore it could be assumed that the use of managerial accounting system has allowed organisations to comprehend and reduce the financial problems that occurred previously.

Reference:

Bodie, Z., 2013. Investments. McGraw-Hill.

Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management accounting and its integration into management control. Accounting, Organizations and Society, 47, pp.1-13.

Dekker, H.C., 2016. On the boundaries between intrafirm and interfirm management accounting research. Management Accounting Research, 31, pp.86-99.

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control practices in a lean manufacturing environment. Accounting, Organizations and Society, 38(1), pp.50-71.

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7), pp.414-428.

Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control. Springer.

Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, pp.45-62.

Renz, D.O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.

Tucker, B. and Parker, L., 2014. In our ivory towers? The research-practice gap in management accounting. Accounting and Business Research, 44(2), pp.104-143.

Wagenhofer, A., 2016. Exploiting regulatory changes for research in management accounting. Management Accounting Research, 31, pp.112-117.

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