Accounting Management | Assignment

Management Accounting

INTRODUCTION
Management accounting is a profession which involves preparation of financial and
statistical reports that will help management in gathering relevant and useful information so as to
make short as well as long term decisions. Profit & Loss a/c, Balance sheet, Cash flow statement
etc. are such financial reports which reflects true and fair financial position of company during
an accounting period. It assist stakeholders (Both internal and external parties) to make decision
about further investment in company so as to get maximum amount of return. For this, company
required to appoint knowledgeable and experienced accounting manager who know how to
record all business transactions in financial statements. The present assignment is based on The
Imperial Crown Jewels Ltd. which is engaged in manufacturing of Jewellery items for the people
of UK is selected for the purpose of preparing this report. It has employed 24 employees which
support them in manufacturing and selling products to the targeted customers. The company has
generated approx. £376,000 as net revenue. The project includes different management
accounting and reporting system with brief description. In addition with this, calculation of cost
using marginal and absorption costing method is also done under this report. The project also
includes various planning tools used to control budget with their merits and demerits. Tools used
to resolve financial issues are also discussed under this report (Bedford, Malmi and Sandelin,
2016).
TASK 1
P1:
Definitions of MA:
Institute of Management Accountants (IMA): Management accounting is an activity
which are performed by some accounting professionals to reflect true and fair financial position
of company. It can be done through preparing financial reports to make an effective decisions
and suitable plans for the betterment of an organisation.
Management accounting requires skilled and knowledgeable accounting manager who
are much capable to record business transactions in financial statements so that accurate and
reliable information can be communicated to stakeholders of company.
Meaning: Management accounting assist shareholders to understand company's true and
fair financial position of company so that further goal setting, decision making and budgeting
can be carried out effectively. It can be communicated through preparing financial statements
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such as Profit & Loss a/c, Balance sheet, Cash Flow statement etc. on annual basis or can be
catered through qualitative information which can be considered while formulating decisions.
Therefore, management accounting is valuable part of an organisation which drives them
to achieve growth and success in competitive market. The accounting manager is held
responsible to perform all roles and responsibilities regarding recording, summarising and
interpreting the financial as well as non-financial data into useful information so as to make an
effective decision and suitable plans for the betterment of an organisation (Carlsson-Wall, Kraus
and Lind, 2015). Imperial Crown Jewels Ltd. is operating at small-scale due to which it is
required for them to maintain its financial performance which can be identified through
preparing financial reports on each accounting year. To support in preparing financial statements,
various accounting systems are there which are required to be implemented. Such accounting
systems are described as below along with their benefits:
Different management accounting systems:
Price Optimisation system: It is such an accounting system which is mainly focuses on
the identifying the opinion and perception of targeted people towards the amount charged by
company against their products and services. For example, Imperial Crown Jewels Ltd. is
engaged in manufacturing of Jewellery items at certain price which may influence their buying
behaviour to shift to rivals company who can charge less price than Imperial Crown Jewels Ltd.
Therefore, using such accounting system facilitate management to identify the sweet spot when it
comes to price make changes in their existing pricing policies so as to maintain the satisfaction
level of their regular clients.
Inventory management system: It is also more useful accounting system which help
company in acquiring knowledge about the inventory level at present in their warehouses so that
further decision regarding manufacturing products can be made to meet client's needs and
demands. Imperial Crown Jewels Ltd. is engaged in manufacturing of Jewellery items therefore,
it is must required for company to avail products for them on time which can be possible through
maintaining adequate amount of inventory with them. It can be done through using inventory
management system (Cuganesan, Dunford and Palmer, 2012).
Cost accounting system: Cost accounting system attempts to estimate the cost of their
products for the purpose of controlling costs and conducting a profitability analysis. Imperial
Crown Jewels Ltd. is manufacturing wide range of Jewellery products which requires huge
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amount of funds. Therefore, using such accounting system the management are able to perform
different functions at minimum cost which makes positive impact on their profitability.
Job costing system: It is such an accounting system which help in identifying and
analysing the total cost incurred in producing individual product or group of products. This will
requires management to prepare budget to produce particular products after analysing the future
response of clients towards products and also profitability so that cost has been allocated
accordingly. Imperial Crown Jewels Ltd. is manufacturing wide range of Jewellery products
therefore, identifying the products which were more in demanded in previous years and
accordingly allocate cost to produce demanded products to achieve future sales and profitability.
Benefits of management accounting systems:
Assist in achieving loyalty of targeted clients: Using price optimisation system, the
management of Imperial Crown Jewels Ltd. Are able to identify the willingness of targeted
customers to pay for the products and services offered by them. It enable them to make an
effective pricing policies which can attract customers easily as well as generate huge profits for
company (Johnson, 2013)..
Achieving profitability: Using accounting systems such as cost accounting system
facilitate company in analysing the cost invested in producing particular product or bunch of
products which makes easy for them to identify the profitability achieved after selling such
products to their clients. This will direct management to focus on minimising cost during
production process so as to increase
Effective management control: Using accounting systems assist management to make
changes in their existing decisions and plans in order to maintain their financial performance and
strong their presence among their rivals in market.
P2:
Imperial Crown Jewels Ltd. Is operating its business at small-scale which deals in
manufacturing is manufacturing wide range of Jewellery products. Due to small-in size, an
organisation tried to increase the size of company which can be done through maintaining
accounting reports and statements on regular basis so that transactions done by company on daily
basis can be easily identified. It requires management to gather relevant and useful information
which can be possible through maintaining various accounting reports such as performance
report, inventory management, account receivable report, job cost report etc. Therefore, it must
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