Unit 5: Management AccountingUnit 5 Management Accounting
This assignment will look at the critical analysis of management accounting throughout an
organisation and the methods that are used to plan and measure the gro
...
Unit 5: Management AccountingUnit 5 Management Accounting
This assignment will look at the critical analysis of management accounting throughout an
organisation and the methods that are used to plan and measure the growth within the operation by
using different management accounting systems. The assignment will look what goes on in the
planning systems that create the budgeting control that is needed to measure the performance of the
business. These systems can sometimes be overlooked but are fundamental to ensuring the running of
the company and its activities.
This assignment looks at creating an understanding of how the management accounting system works
and how different planning tools in preparing and forecasting budgets functions within a business. A
comparison will be made through the organisation Econet Wireless Ltd; this business is one of the
largest telecommunications companies in Africa is also engaged in the fibre optic production, to show
how some organisations can use management accounting can take action to their financial problems.
This comparison will provide a clear understanding regarding the business strategies and their
planning which is used to develop the management accounting method for prospering the organisation
to achieve their goals set out.
LO1. Demonstrate an understanding of management accounting systems.
P1. Explain management accounting and give the essential requirements for different types of
management accounting systems.
Management accounting is the process in which it allows an organisation to identify, measure,
analysis, and eventually, communicate they financial data through the uses of their economic and cost
accounting system. The process of management accounting uses the following method:
• Identification
• Measurement
• Accumulation
• Analysis
• Preparation and interpretation
• Communication
The purpose of management accounting allows management to be able to plan, estimate and provide
strategies for the business to ensure that a level of control is governed over each department so that the
appropriate use of resources is accountability throughout the industry. Every company can follow
different management accounting techniques; this enables them to develop the results that are obtained
to optimise them in the best beneficial way. Management accounting is used for the following:
• Plan
• Evaluate
• Control
• Establish accountability
• Short-term business decisions
Kalpan & Atkinson, 2015, quoted that management accounting ensures to help management with the
preparation of policies, decision-making process and in the day-to-day operations of the organisation.
The below Graph shows an example of the top ten most used management accounting tools which are
used by various organisations across the board and the percentage of their usage.Graph 1. Top ten management accounting tool
Applications of management accounting:
Measurement of
performance
Assessment of risk Allocation of
resources
Financial statement
presentation
To ensure the
organisation is able
to measure the
performances and
efficiency of their
employee. This
process will include a
comparison of
production which
are not standardised
but which sets out
the differences for
the necessary steps
that have to be taken
and implemented.
To identify and assess
the risk factors within
the organisation and
how this can be
minimised through the
effectiveness of
management.
To ensure that the
organisations can
become more efficient
and effective by
utilising their
resources by
allocating their
resources to the right
division/department
within the business.
This will foresee that
there is a certain level
of success within the
business, as the
objectives will be
fulfilled, and effects
will be made for the
long-term
sustainability of the
organisation.
The management
accounting system
ensures to provide a
suitable demonstration
of the financial
position of the
organisation. There
will be various cost
and economic data
which will make it
straightforward for the
business to present
their financial reports
to ensure that critical
decisions are made.
Table 1. The applications of management tools
As organisations grow and develop, their look towards products and service that will enable them to
operate efficiently. One of these services are in the management accounting systems; the below will
look at how this role is integrated into the organisational processes related to Econet Wireless Ltd:Job costing system: This system is assigned to look at the costing of manufacturing of the product and
how the expenses are and will be monitored. Econet Wireless Ltd can use this system regarding
products that they have on the market that is identical, and that can be easily trackable via their orders.
The procedures involved in the bob costing accounting system is:
• Receiving – customers who are concerned with the quality of the products that are sold to
them. Pricing on the materials that are used to produce these products and the time frame to
complete these products/orders.
• Job costing – The accountant oversees the costing of jobs, they ensure to keep in mind the
preferences and taste of the customers.
• Ordering – Ordering is only placed when price assurances are received from the customer.
• Production – The production process ensures the start of production.
• Cost recording – To record the production process cost.
• Job completion – The accounting department produces a completion report for the end costing
of any project undertaken.
The optimising pricing system: The optimising pricing system is exercised so that is can take control
of the costing of all resources/products. The optimising pricing system can also be used to multiply the
prices on products at a particular time; it will help management to be able to determine how customer
demand for products will influence different prices.
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