Management Accounting Assignment - Airdri company

Added on - Nov 2020

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INTRODUCTIONMA is practices of assembling useful content affiliated to business activity & recordingof that data in accounting report that help manager to make effective decision (Managementaccounting, 2018). Management of organization gather, reminder, measure, control and examinethe collected information that aid them to make policies and strategies to succeed goal. It is asystem which is followed by the management to solve different financial issues that occurs incorporation. To realize value of direction accounting Airdri is chosen, it is hand dryermanufacture of UK.In this project report detailed information about management accounting their system andimportance of report is shown. Project focus on different costing method, various planning toolwhich are useful in maintaining budgets andimportant of management accounting approaches toresolve different financial problem faces by companies.TASK1P1. Importance of various management accounting system.Accounting is a method of recording, maintaining, auditing and analysing importantfinancial information to the management and advise them on taxation matter. It is useful inrevealing the profit and loss for an accounting year and provides the values and nature oforganisation owner equity, assets and liabilities.Accounting is further divided in two categoriesthat are financial accounting and management accounting.MA is defines as the process of distinguishing, analysing, recording & presenting usefulfinancial data which is used by manager for making decision, improving performance, planningfor future and controlling operation with an organisation. This helps them to predict variousfuture events based on past experiences & develop effective policies (Amidu, Effah and Abor,2011).Financial accounting refers to the tracking of firm's money transaction using centralisedstandard to measure the economic performance for an accounting year. It is summarising andpresenting of transaction in financial report, cash flow, income statements etc. In Airdri managerused three important accounting system to evaluate and analyse information like cost,performance and inventory. These are explained below:1
Cost accounting system:This system is help small and large company to examine andimprove its real profitability by estimating actual cost of its product. Cost accounting systemhelps manager to measure the total cost that is incurred during the production of a particularproduct. Airdri produces expensive hand dryer thus it require huge cost in the production so thissystem is useful in this company. They use to record all the production related operation and helpthem to get information cost includes in production process. Basically 3 type of costing system(Carlsson-Wall, Kraus and Lind, 2015). For example in Airdri manager uses to measure the costof total hour utilised in manufacturing a product. Standard costing is the analyses of differencebetween actual and budgeted cost like manager of Airdri prepare a budgets of cost that is goingto be involved in production process and then they compare it with actual cost involved. Normalcosting is used to derive cost of product. As an instance in Airdri manager uses normal costingto derive the cost of hand dryer.Inventory management system:This system is used by production organisation toascertain the actual information of stock lying with them. Stock lies within organisation in 3basic form which is raw material, goods in progress & finished product. Company uses thissystem to record the total stock list present in there production division. There are variousmethod of stock management system to maintain report of their stock such as perpetual &periodic stock, FIFO, LIFO and JIT. Management of Airdri use FIFO techniques in which earlierreceived stock will be used first for production of product (Dražić Lutilsky and Dragija, 2012).Job costing system:This system is mainly associated with evaluating and analysing costof individual job that is involved in different operation performed within the company. Forexample in Airdri manager uses this method to analyse direct & indirect cost which involved inthe production. So they can further cut down the cost if needed & improve efficiency of businessto increase the profitability of Airdri.Price optimisation system:This is a mathematical analysis done by Airdri organisationto determine response of different consumers when change in price of the product provided idmade. This method will help business organisation in determining the price that needs to becharged by Airdri so that objective of profit maximisation can be achieved in long run. This isderived from pricing strategy that is used to achieve various objectives such as increasing marketshare, enhancing profits of the business and to compete effectively with the competitors in the2
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