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Management Accounting Systems and its applications

University: Stanford University

  • Unit No: 7
  • Level: High school
  • Pages: 13 / Words 3244
  • Paper Type: Assignment
  • Course Code: ACC8802
  • Downloads: 1146
Question :

This assessment will cover following questions:

  • Explain the planning tool which is used in the management accounting.
  • Implement the range used in management accounting techniques.
  • KEF limited company is a British company produces high-end audio products.  Understanding the accounting systems in management.
  • Compare management accounting in respect to financial problems.
Answer :
Organization Selected : KEF limited company


The field of accounting is too wide it is not limited till the recording of transaction of financial aspects. Management accounting is one of the key form of accounting which is linked to process of helping internal department of business entities by preparing internal reports (Novas, Alves and Sousa, 2017). Under this accounting all types of data are gathered and recorded in a systematic form. Main objective of this project report is to explaining role of this accounting as well as its functions for business entities. In the report KEF limited company has been chosen which is a medium sized manufacturing business entity. The report covers detailed information about different types of MA and reports. As well as various form of planning tools are also mentioned along with importance of this accounting in sorting monetary issues.


Task 1.

Mean of MA and its types.

MA- As above discussed, it is a form of accounting which is aligned with process of gathering monetary and anti monetary data from different transactions. After that using this gathered data for preparing internal managerial reports. It consists vital range of accounting systems which are mentioned below in such manner:

  • Cost accounting system- It can be defined as a type of accounting system which starts with process of making projection of future expenditures and costs. The objective of this prediction of cost is to help finance department of companies in order to do proper use of available resources and to minimise overall expenditures (Chiarin and Vagnoni, 2015). It is essential for companies because by help of this accounting system, managers can assess total number of expenditures during a particular time period. As well as can evaluate variation between actual and standard costs. In the KEF limited company, they apply this accounting system which is helping them in order to control expenses which occurs in operating different activities and operations.
  • Price optimisation system- In this accounting system, a systematic process of analysing market demand and situation is followed. Main objective of applying this process is to evaluate customers' demand for a particular product. It is essential for companies in order to set prices of products and services as per market condition. In the aspect of KEF limited company, their sales department applies this accounting system to set prices of manufactured items.
  • Stock management system- It is a type of accounting system which is linked to assess quantity of various form of material by help of techniques like last in first out method, first in first out etc. This is essential for companies in order to track various kinds of goods stored in warehouses such as raw material, finished goods etc. In the KEF limited company, they apply this accounting system for evaluating actual quantity of material on a daily basis so that accurate decisions can be taken by managers.
  • Job order costing system- This can be defined as an accounting system that computes the cost of each individual output by help of assessing cost of job (Maas,Schaltegger and Crutzen, 2016). It is being implemented in those enterprises in which portfolio of products is higher. This accounting system is essential for companies in order to minimise cost of job and activities under control. In the KEF limited company, they apply this accounting system for evaluating cost of activities separately and for minimising cost of job.

Various kinds of MA reports.

MA reports- These are types of report which are prepared by companies with an aim of making effective planning, better decision-making and for measuring actual performance. Accountant of KEF limited company produce below mentioned reports such as:

  • Budget report- It is a type of report which is prepared by help of different types of budgets. Under this information regards to estimated income and expenses is included along with the value of variation. It contributes to managers in order to track monetary performance. In the KEF limited company, their accountants prepare this report for helping managers by providing data of actual performance.
  • Accounts receivable ageing report- This is form of report which is linked to gathering key information about those parties whose amount is due. By help of it, finance manager of business entities can evaluate information regards to those customers whose payment is due. In the KEF limited company, their accountants prepare this report which help to finance department in order to manage debts.
  • Performance report- This is a kinds of report which is prepared by accountants to provide an appropriate framework to managers in order to take decision about progress and appraisal of employees (Dekker, 2016). Under it, information related to actual and estimated outcome is included in a detailed manner. In the above company, their accountant prepares this report for measurement of actual level of performance.
  • Inventory report- It can be defined as a type of report which is produced by accountants containing information regards to quantity of various form of material. Under this, information is added in accordance of making proper analysis by using techniques like LIFO, FIFO and many more. In KEF limited company, they use this reports' information in order to controlling manufacturing activities.

Benefits of MAS:

Types of MAS


Cost accounting system

This is aligned to process of estimating and tracking overall costs and expenditures. In KEF limited company, this accounting system is helping to their finance department in the context of managing expenditures.

Price optimisation system

It is related with process of setting prices of products and services at an effective level. The sales department of KEF limited company set prices of manufactured items as per the information provided under this accounting system.

Stock management system

Under this accounting system valuation of stock quantity is done by help of different approaches. The production department of KEF limited company, takes appropriate steps about new production and purchasing of raw material by help of this accounting system.

Job order costing system

This accounting system helps in process of computing cost of job and produced units. Same as in the above company, it is helpful for managing overall cost of job.

Integration of MAS and MA reports with business process.

In the aspect of MAS various range of accounting systems are included such as stock management system, price optimisation system etc. In the KEF limited company, their production department is integrated to inventory management system as well as sales department with price optimisation system (Bhimani, 2015). In addition, MA reports are also aligned to business process. Like in above company, their accounts department prepares strategies and policies by help of accounts receivable ageing report.

Task 2.

  1. Calculation of cost of production per unit.

(ii) Total production cost.

Absorption costing:

(iii) Total cost of sales for June.




Total amount(in £)

Direct material




Direct labour




Variable Production Overhead




COGS Per Unit




(iv) Preparation of income statements.

There are mainly two types of techniques in order to prepare income statements which are as follows:

  • Marginal costing- It is a costing technique in that costs are classified into different manner. Such as fixed cost as period cost and variable cost as per unit cost.
  • Absorption costing- Under this technique, all types of costs are assumed that it may be occurred in cost of production (Mohr, 2017). For example fixed and non fixed cost both are absorbed in order to prepare income statements.

Working Note:

Fixed overheads absorbed on 18000 units (18000*6.5) = 117000

Fixed production overheads = 130000

Under absorbed the fixed cost= -13000

(v) If production units changed till 22000 units and closing stock remain of 2000 units.

Statement of profit or loss using marginal costing for June:

(vi) Suggestion to above company.

The accountants are not bounded to apply any specific costing technique to prepare financial statements. They may use techniques as per the suitability, such as in the above company two costing techniques are used which are absorption and marginal. Apart from it, there are some other methods too such as ABC system, target costing and many more. Herein, below comparison between ABC costing and absorption costing is done in such manner:

Activity based costing system

Absorption costing

The drivers of activity cost can be applied for assessing cost objectives.

While the overheads rates are applied for ascertain cost of products.

Under it, overheads are related to activities.

On the other hand, in this overheads are regarded to different production departments.

All level of activities in the production cost hierarchy such as unit level, batch level etc.

In this only two level of activities are find out such as facility level and level.

On the basis of above discussion, this can be stated that activity based costing is much more better in compare to absorption costing technique.

Task 3

Benefits and drawbacks of planning tools of budgetary control.

Budgetary control- It can be defined as a process of determining different actual outcomes by help of budgeted figures for business entities for upcoming time period (Hosseinzadeh and Davar, 2018). Basically, this technique is being used by companies in order to controlling overall monetary performance of various kinds of aspects. It consists range of planning tools and some of them are as follows:

  • Operating budget – This is a type of budget which is prepared on an annual basis and consists information regards to estimated operational expenditures & income during a particular time frame. The main objective of this budget is to minimise operational expenditures and to gain higher operating income. In the KEF limited company, they prepare this budget for operating their operations and functions in an effective manner.

Benefits- Main benefit of this budget is that it provides direction to business in order to gain higher monetary success.

Drawback- It has some common drawbacks such as it consumes too much time and cost.

  • Capital budget- It can be defined as a type of technique which is related to process of determining efficiency of any capital expenditure. Some common example of capital expenditure are construction of building, purchasing of new machinery etc. In KEF limited company, they make futuristic investment in accordance of guidance of this budget.

Benefits- This is beneficial for companies in order to take wise decisions regards to long term strategic investments.

Drawback- This budget's prediction for long term investments can be wrong in future time period because of change in economical conditions.

  • Fixed budget- This is a budget whose projected items can not be change even change in sales volume & quantity (Hosomi, Scarbrough and Ueno, 2017). It is simple to use and understand for users because this remain same for entire time period. In the KEF limited company, they prepare this budget for long term activities.

Benefits- It does not needed to be updated and due to which managers can focus on rest of other crucial activities.

Drawback- Lack of flexibility is a key disadvantage of this budget because in some cases managers need to update items of budget.

Use of planning tools to predict and forecast of budgets.

Under the budgetary control various types of planning tools are included which plays a key role for making an accurate forecasting of budgets. In KEF limited company, their finance managers gather key information from different planning tools like capital budgeting, operational budget etc. By use of this information, it becomes easier to prepare budgets in an effective manner.

Task 4

Comparison of companies in order to sort moneta

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