Qualification - Pearson BTEC HND in Business (RQF)

Level 4

Unit 5 Management Accounting

Assignment Context and Business Scenario

Select a company of your own choice and assume you have been appointed the Assistant Management Accountant of that company which has been operating in the industry for a number of years, which has undergone a number of changes over some time, and has expanded into new markets through acquisitions.

The Finance Director considers that the existing management accounting system needs to be revamped to make it more relevant to the changes that have occurred.

You are required to review the existing system, and conduct a research on developments in management accounting, with the view to recommending comprehensive changes to the company's management accounting system, and preparing a report of same to the Finance Director for review and onward submission to the Board of Directors.

Your report must consider a number of themes in management accounting. Specifically it must recommend changes that cover the following:

1. Management accounting and management accounting systems,
2. Management accounting techniques for determining costs,
3. Management accounting planning tools, and
4. Response to financial problems using management accounting.

Your report must also provide examples of income statements prepared on the basis of absorption costing and marginal costing. In order to do this, you may use the data attached to this assignment brief, or you may collect your own data for that purpose. These may be presented as appendices appropriately referenced in the body of your report.

Your report must be appropriately structured. The following is suggested as a guide of how a good report should be:

• An introductory section with brief a description of your selected company and what the report is about.
• The main section (body) of the report, which may be subdivided on the basis of the four themes listed above corresponding to the tasks on the next page.
• A concluding section that briefly summarises your work.
• All calculations must be disclosed in the appendix

What you must do

The following issues are required to be carried out:

LO1: Demonstrate an understanding of management accounting systems

Provide a brief description of your chosen organization and then explain management accounting and the essential requirements of different types of management accounting. You should also explain different methods used for management accounting reporting.

Having explained management accounting and different methods used in management accounting reporting, you are required to evaluate the benefits of management accounting systems and their application in your chosen organisation.

As demonstration of your ability to apply the management accounting systems, use your chosen organization to critically evaluate how management accounting systems and management reporting is integrated in your organisation.

LO2: Apply a range of management accounting techniques.

Using examples from your chosen organisation, calculate costs using appropriate techniques of costs analysis to prepare an income statement using marginal and absorption costs. In addition to calculating costs, you should accurately apply a range of management accounting techniques and produce appropriate financial reporting documents. You must attach all financial data you use as an Appendix.

Based on your understanding of management accounting techniques, you should produce financial reports that accurately apply and interpret data for a range of business activities.

LO3: Explain the use of planning tools used in management accounting

The budget is an important control tool. Explain the advantages and disadvantages of different types of planning tools used in budgetary control (Please note the calculation of these tools is not necessary). You are also required to analyse the use of different planning tools and their application for preparing and forecasting budgets.

LO4: Compare ways in which organisations could use management accounting to respond to financial problems.

Using your chosen organisation and another organisation, compare how organisations are adapting the following management accounting systems to respond to financial problems:

  • Benchmarking
  • Key performance indicators
  • Balance score card
  • Activity based costing (ABC)
  • Financial governance

You should analyse how, in responding to financial problems, management accounting can lead organisations to sustainable success. Use examples from your chosen organisation.

Based on your knowledge of planning tools, you are required to critically evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organisations to sustainable success. Use examples from your chosen organisation.







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Unit 05 Management Accounting Assignment Solution

Table of Contents

  • Introduction 3
  • L01 4
  • Explanation of management accounting and different types of management accounting systems (p1) 4
  • Different methods used for management accounting reporting (p2) 6
  • L02 8
  • Calculating costs using cost analysis to prepare an income statement using marginal and absorption costs (p3) 8
  • L03 9
  • Advantages and disadvantages of different types of planning tools used for budgetary control (p4) 9
  • L04 13
  • Comparing how organisations are adapting management accounting systems to respond to financial problems (p5) 13
  • Conclusion 16
  • References 17
  • Appendix 19


The following report contains discussion about various planning tools organisation used to control budget for small business. The reports enable an organisation to understand how, using different planning tool it can control its budget. An income statement also showed using the marginal and absorption costing and working note also included for better understanding. The report consists of critical discussion on management accounting and management accounting systems and the role they play in small businesses to improve the actions of the business. In the report, it is showed how an organisation can use management accounting to solve financial problems by producing different reports.

Checkout.com is a payment technology organisation and its headquartered is in London, UK. Checkout.com was founded by Guillaume Pousaz in 2012. Checkout.com serves customers all over Europe and besides in North America and in the Asia Pacific. Checkout.com started as a local organisation but in the last few years, the organisation turned into an international organisation and process billions of payments every year (Bek, 2019). This ensured checkout.com business revenue and profit to grow continuously. Checkout.com employee's base is growing in the UK day by day. Checkout.com changes its management technique in time to ensure the organisation's better performance and to expand its business outside of Europe.

Explication of management accounting and management accounting system

Management accounting is the process of collecting financial and monetary information as well relevant non-financial information on customer satisfaction as non-monetary and preparing several types of financial and accounting reports which are helpful for the managers to take a fruitful business decision. The organization, which can be a small and medium enterprise design a particular system to support the functions of managerial accounting. This system is known as a management accounting system. The main objective of this system is to support the decision-making process of the organization by supplying accurate financial data and other relevant information such as that on regulatory compliance, customer satisfaction, employee well-being, and so on.(Moilanen, 2016).

The significant requirement of several types of management accounting systems

SME organization uses various types of systems to maintain management accounting operations. Those are cost accounting system which mainly focuses on calculations of the total costs of producing goods, inventory management system which concentrates on the valuation and maintenance of stocks of goods of the company, price optimization system which focuses on setting the products' price according to the customers' price preferences, job costing system which coordinates all the cost information to identify production costs. To operate those all systems efficiently, the important requirements are given below:

  • All the accounting systems should be flexible to any change of business environment and economical for the small and medium organization.
  • Management accounting systems should be equivalent to the organizational structure which can be the flat, matrix or functional and management styles such as autocratic or democratic.
  • The organization should ensure the accuracy, factuality, relevancy, and objectivity of the collected financial and monetary information.
  • For presenting accurate accounting data such as data about production costs or stocks of finished goods in an organized way, coordination and communication within all functional departments should be necessary.
  • Important information should be distributed among the employees or managers of the company whose activities are influenced by that information.

The functions and utilities of management accounting systems

The key functions of management accounting are discussed below:

Planning and forecasting: The business organization prepares budgets to forecast the possible costs, expenses, income, etc. to manage and run the operational activities of the company(Taleshi, 2018).

Collecting and organizing information: The accountant of the company keeps records of all monetary information about all the financial transactions and operational activities of the company to prepare several types of financial and accounting reports.

Controlling: The Company should ensure the accuracy and objectivity of the financial information. The accountant maintains control systems to avoid fraud and misrepresentation of false information.

Decision making: Information presented in the several reports is used by the managers to make several decisions like investment decisions, funding decisions, dividend-payout decisions, etc.

The advantages of management accounting systems in the operations of the small and medium enterprise are given below:

  • It helps the company to identify its real-time financial condition, performance, and growth opportunities and provide useful information to the decision makers(Hoozée and Mitchell, 2017).
  • It ensures the flow of needed funds within the organization smoothly due to the accurate prediction in the cash flow budgets, maximizing interest earned on cash retained with the corporation.
  • It helps the company to quantify its production costs accurately and so to charge the perfect price to gain standard the highest profit margins.
  • It ensures the proper mobilization and valuation of inventory management which supports timely product delivery to the customers.
  • By providing accurate essential information it helps the managers to enhance operational efficiency, resource distribution, and overall the decision-making process of the company.

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