Meaning and Types of Management Accounting Systems


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Management accounting is the process of utilization of appropriate ideas and strategies to help the executives in building up plans for sensible financial targets. The report presents and comprises significance of the management accounting and diverse kinds of managerial accounting systems and additionally importance of management accounting reports. Cost accounting techniques subject to analyse profitability of products and services are considered subject to Jupiter Plc. Type of planning tools that re used in planning and analysing the financial issues also defined within organisational context. Use of management accounting to resolve financial issue and leading towards sustainable success also clarified in this report.


Management accounting and diverse management accounting systems

It is the procedure of collecting, recording all monetary and non-monetary data and information in books of accounting and summarising process after a time span. It is completely associated with best dimension in which executives takes valuable decisions.

1. Price optimizing system:

It is the logical examination of find out customer's mind set towards paying amount of products. If Jupiter PLC wants to set the selling price of products then it have to analyse the customer's willingness to pay for products. so custom are not easily purchase of thing but instead expense of things is too low so business would not be able to make profits. Price optimisation demonstrates the measurement of contention of customers for organisation to set the price of products..

2. Job costing system:

It is related to consolidating process of departmental cost. This system helps to relate the occupation in the way in which data are collected. With the help of cost information measure be able to summarised in effective way to demonstrate the task and activities of Jupiter Plc.

3. Inventory management system:

It is a part of managing the inventories with in organization. It helps to manage the departmental cost and analysis for better control (van der Steen, 2011). this management accounting system will be effective for Jupiter plc to manage the flow of inventory management and accounting system. Various type of inventory management systems such as LIFO, FIFO and Weighted average method.

4. Cost accounting system:

This accounting system is utilized by firms to forecast the expense of manufacturing products identified with Jupiter PLC. It is also used for analysing benefit for cost control and stock valuation. A firm should think about those products that are giving profitability for long time and furthermore it is required to analyse that which product will provide benefits. The stock that is not giving the desired profit are abolished form the production process.

Methods of management accounting reporting

Management accounting reports are utilizing for assess the execution of the Jupiter PLC. It is identified with different divisions for keep up successful accounting framework and proportion of execution by arranging and executing. These reports are as per the following-

1. Sales report

It is valuable for the executives to know the expected sales for the year. In present time sales reports are not only assisting in analysing the sales graph and competitive rivalry. In this report comprise of specific records and incomes, retail deals and discount (Merchant, 2012). It helps Jupiter plc to analyse the projected sales for upcoming years and particular time.

2. Performance Report

Mainly this report is published to senior account and managers of Jupiter PLC. It helps to monitor the execution of each office that are identified with the organization. With the assistance of this report junior accountant of Jupiter plc will be able to demonstrate strategical advancement that are applied by organization.

3. Inventory management report

This administration report plan for keep up stocks in adequate way. In these reports stock are appears by utilizing strategies for LIFO (Last in first out), FIFO (First in first out) and weighted normal cost technique. These reports be able to consolidate and combine the inventory information and reports in different forms for Jupiter plc.

4. Budgetary report

These reports aggregate cost and pay for future period. These reports mainly based upon the forecasted information of sales and purchase. It is prepared on the basis of past records and infomration. It is important to get forecasted picture of future records and information.

5. Accounts receivable report

This report indicates changes of receivables when debtors remain unable to provide required details and information for better change. It demonstrates basic instrument for providing discount to consistent debtors. After that numerous customers are set as defaulters who are not paying on time and some are pay off from awful obligations. In Jupiter PLC these reports may help to determine the expected doubtful debts and accurate payment of debts to organisation.

Benefits of management accounting systems related to Jupiter PLC

Management accounting is a critical piece of the association that helps to determine the essential elements for better control and management. For Jupiter PLC management accounting systems can helps in the following ways which a are defined as follows:

Accounting systems


Job costing system

It would be beneficial for providing explicit data identified with explicit employment in Jupiter plc.

Inventory management system

It will help to mange the level of inventories for Jupiter plc.

Price optimization system

It will help to recognise cost of every product or services by evaluating consumer's perception with in Jupiter plc.

Cost accounting system

Fluctuation with in profit and loss will be adjusted easily with in Jupiter Plc.

Critically evaluate how management accounting system and reporting is integrated with in organisational process

The management accounting and the accounting reporting is key components of management and operations. The executives revealing presents the condensed data to supervisors and Accountants of association that helps in dealing with the areas and activities of business in more huge and explicit way (DRURY, 2013). At administrative dimension the executive’s reports assumes essential jobs in framing the stages, helping basic leadership process and the executives of accounting data. Adequate accounting reporting add to predictable enhancement in a business is through the progress and mix of cost the board structures. Additionally, measure and assess the appropriateness of the prevailing piece of their authentic exercises, displaying new exercises that upgrade execution where conceivable.

Reporting work primarily relies on the accounting framework’s essentialness and capacity. The attainability and value-based help helps in dealing with the business to conveys the objectives and vision of business in better and huge way. The procedure that predominantly helps in dealing with the areas are for the most part connected with making the plans and dealing with the segments for better improvement and change. Instead of masterminding and controlling completely at the division or utilitarian estimation, affiliations do in that limit at the action level, for example, stock buying or the charging and part receipt process. Affiliations measure the expenses of data sources and diminish or dispose of those costs that incorporate in every way that really matters zero respect.

For instance Accounting system of Tesco's Inventory the executives

There is turn around cycle circles the association regarding settling on the compelling choice and making the viable accounting structure (Agbejule, 2011). Tesco is one of the worldwide retail area association that bargains in different client items. Stock administration accounting system is the fundamental accounting framework that helps in clarifying the basic data for dealing with the areas and making the reports and detailing the management works. The requests of making designs and dealing with the areas for changing over the progressions are dissected based on stock administration reports. By and large conjugation designs help in changing over the reports in successful basic leadership process. Vital situating and announcing additionally stay incorporated with making the advertising anticipate different client items.


Marginal costing

This a cost that is considered as a period cost and helps in decision making process. Marginal costing helps to analyse profitability by analysing the total variable cost. Fixed production overheads are not absorbed in marginal costing.

Calculation of net profit by using marginal costing method



Sales revenue = ( No. of goods sold * selling price = 50 * 16000)


Marginal Cost of goods sold:


Production = ( Marginal cost per unit * Produced units= 35*18000)


Closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000)




Fixed cost


Net profit



Absorption costing

This costing mainly based upon calculating profitability by absorbing all the fixed manufacturing expense and variable expenses as cost of goods sold. This costing technique is not considered appropriate as per perspective of decision-making process.

Computation of net income by using absorption costing method



Sales = (Price of selling * no. of units sold = 50 * 16000 )


Cost of goods sold-


Production = ( Marginal cost per unit * Produced units= 35 * 18000)


Closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000)


Gross profit


Less – under absorb fixed production cost


Net profit/ operating income



(b)After changes of production unit and closing units’ changes are coming in profit and loss are as following -

Calculation of net profit by using marginal costing method



Sales revenue = ( No. of goods sold * selling price = 50 * 16000)


Marginal Cost of goods sold:


Production = ( Marginal cost per unit * Produced units= 35*19000)


Closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000)




Fixed cost


Net profit



Computation of net income by using absorption costing method



Sales = (Price of selling * no. of units sold = 16000 * 50)


Cost of goods sold-


Production = ( Marginal cost per unit * Produced units= 35*19000)


Closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000)


Gross profit


Less – Under absorb fixed production cost


Net profit/ operating income




Advantages and disadvantages of different types of planning tools used in budgetary control

Budgetary control process and budgets

Budgetary control is controlling procedure that concentrates on each division of business. Budgets indicates the differences among real and standard factors of the organisation. Budgets is a part of budgetary control process. It monitors the financial allowance to accomplish its targets and objectives. It is a financial arrangement that are get ready for future estimation based on present and past exercises of the business. Budget incorporates the procedure of expenses and costs, asset amounts, resources and liabilities, incomes and money streams in a single format.

Favourable circumstances and detriments of various kinds of planning tools utilized in budgetary control

Planning tools are serving to utilizing budgetary control in the organization for vital administration, arranging, basic leadership, estimating and controlling procedure. It is assumed significant job for budgetary control (Hoque, 2011). There is different sorts arranging toolses are utilizing in budgetary control are as follows

1. Contingency tool

This tool analyse the uncertain scenarios and situations and critically analyse the situations for better forecasting and decision making process. It is represented circumstance after assessment and explicating expected outcomes procure after changes and advancement in the organization. It will be beneficial for Jupiter plc to analyse contingent situations for better change and development.

Advantages– It is arranged in settled investigation that are control for utilizing to lead business tasks.

Disadvantages- There is no feature explicit changes are resolved for business tasks within organisation.

2. Scenario tool

It is available subjective and quantitative information to introduce making situation. It is technique that are utilizing for various sorts system identified with errands and tasks of the organization.

Advantages– It will be understanding precise situation that are making for specific undertakings and ventures of the organization.

Disadvantages– By subjective research are not giving legitimate data and difficult to see precisely circumstance of the organization.

3. Forecasting tool

With the assistance of this device expected results that are based on current, past patterns can be determined. This tools for the most part concentrating on vacillated works and circumstances in the organization and breaking down the task offices (Yalcin, 2012). It is available data in graphical route for simple to depict.

Advantages– It will be knowing future estimation and changes and advantageous for assembling and retail associations.

Disadvantages– After assessment results are not appropriately right and not portray questionable conditions and circumstances.

Various planning tools and their application

Budgeting plans gives an anticipated data with respect to future occasions and undertakings. The way toward making designs and dealing with the accounting data are merged with the budgetary control process. A very much recognized and solidified shape helps in characterizing plans for making exact budgeting plans and evaluating the financial plans. Sort of arranging instruments can be executed in associations as pursues;

1. Utilization of Scenario tool:

For better planning designs it is required to clear up the situations at beginning stage (SEAL and et al, 2014). This device can be executed by investigating the specific situation and making the specific undertaking and systems for making designs and dealing with the device for better utilize and usage process. Association can apply this standard at introductory stage by containing the explicit situation and changes within association. Exercises for better change and advancement for the most part relies on appropriate execution process.

2. Use of Forecasting tool:

Organization can use business figure instruments to help predict bargains, budgeting designs, and anything is possible from that point. Having an exact picture of your business' potential using data and market examples can empower you to set and meet goals. Evaluating allows a business to look at past examples aside from their current position and envision a future. Here are a segment of the key assessing gadgets and methods to empower you to plan and key suitably.

3. Utilization of contingency tool:

This instrument can be actualized by breaking down the specific possibility with making the settled situation and the executives of different devices and the board (Wouters and Kirchberger, 2015). This can be help association by making designs and activities a for better condemning and helping system. This can be imply during contingent situations and business cases.


Management accounting system to respond to financial problems

In each association have internal issues that are making money related issues and for explaining this utilizing KPIS and benchmarking. Type of financial issues can be determined as per following tools

Key performance indicator (KPI)

It is a specialized tool used for gathering financial data form identified sources in both the forms as finance and non-financial form (Zainun Tuanmat and Smith, 2011). this tools implemented by categorising the elements of financial and non financial factors. It will help to determine the non financial and financial issues of the organization and provide adequate aid to achieve targets and objectives of business.

1. Benchmarking

It is the way toward assessing execution of the organization with other organization to enhance productivity. Benchmarking can be implemented by setting the benchmarks of best results and try to attain that levels in near future. It is used as a measurement tool for organisation identified with management approaches, procedures, projects and systems. This analyse the differences between the actual performance with the set benchmarks and find out the relevant issues with best options.

2. Financial governance

Financial governance can be utilised by gathering the data that remain connected with fund for operations and execution purpose. It is a combination of financial rules and procedure of controlling the financial resources flow in effective manner (Yeshmin, and Hossan, 2011). At the point when in the organization' finance related issues grow up than it is required to utilize this tool for keep up various types budgetary data. KPI and benchmarking for the procedure in then and financial governance provide steps to control the financial issues with in organisation.

Differences between Jupiter Plc and KCM limited

Jupiter PLC

KCM limited

Jupiter plc is occurring a financial loss due to increment of carrying cost of inventories. This cost can be determined by implementing Key performance indicator tools.

It is a manufacturing organization that deals in daily consumer products. Organisation is getting challenges regarding setting the price of different customer products. Due to this financial problem organisation is getting challenges to mark up profit.

For solving this financial problems relating to controlling carrying cost, ROQ inventory control technique under inventory management accounting system is utilised.

Price optimisation management accounting system is implemented to analyse the fluctuation of price as per customer and setting the price accordingly.

Importance of management accounting system in sustainable development

Supportable advancement is a fundamental necessity of business associations. The executives accounting system are actualized to work and looking out different money related and non-budgetary issues of association. The board accounting enhances the arranging strategies and anticipating process for better improvement and changes in different structures (Management accounting, 2018). An efficient accounting framework not just help supervisors and Accountants to recognize the money related issues yet additionally give help to survive and react these budgetary issues in successful arrangement. Vital position and the board aptitudes get enhanced by looking at and breaking down the fundamental system for advancement and change.

Use of planning tools to lead organization towards sustainable success

The previously mentioned planning devices are primarily connected with making designs and determining budgeting plans for up and coming years. All the arranging decreases the indeterminate components and perspectives from association and use the procedure in more huge and viable way. Exact suppositions and desires help in deciding the budgetary issues and making designs in like manner.


The above detailed report describes the meaning of management accounting with different type of management accounting systems. This report summarises the relationship of management accounting system and management accounting reporting for better decision-making plans. This report accurately analyses the with detailed learning an understanding of accounting techniques for better control and management. Use of various planning tools for analysing the financial issues are also considered in this report for better analysis. Various type of financial issues are sorted out with application of management accounting system that helps in making effective decision making plans.

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