Assignment Management Accounting (Doc)
Added on 2019-12-18
22 Pages5368 Words137 Views
MANAGEMENTACCOUNTING
INTRODUCTIONAccounting is a process which is used by every kind of business entity in order tomanage, diversify, interpret, prepare, explain etc. to financial data and informations in effectualmanner. When the financial data are to be manage in appropriate way then the company is easilyable to fulfil and meet different financial goals and objectives. Further, with the help ofmanagement accounting business organisation is highly able to control over the expenses andenhance level of sales and revenue at the financial years ending. In order to explain about themanagement accounting there is a AS Diverse Limited company is chosen which is a smallbusiness and UK based. Further, it is a private limited firm and operates in the service sector i.e.dancing industry (AS Diverse limited, 2016). The study helps to analyse about different systemsof management accounting and their essential requirements at the workplace. It shows differentmethods and ways which are used by the AS Diverse Limited for reporting managementaccounts. In addition to this, the study describes calculation of net income using absorption andmarginal costing. At the end of report, it focuses on planning tools and methods which arehelpful for AS Diverse limited in budgetary control.TASK 1P1 Definingmanagement accounting and its important requirements of various kinds for itsapproaches or systemsBusiness ReportTo,General Manager,AS Diverse LimitedDate: 4th October 2017Subject: Management accounting systemsIn the business world, every company has key motive is that to maximize level of profitby controlling costs and expenses. Higher the costs lead to reduce net profit at the end of yearand hampers overall financial performance. The aspect by which AS Diverse limited highlyable to know lack of problems in the firm regarding finance department is identified as amanagement accounting. In the accounting scenario, there are very broad tools and methods are1
included. Furthermore, by applying such kinds of techniques and approaches the As DiverseLimited is able to achieve different financial targets and objectives in effectual manner. Apartfrom this, the respective aspect the firm able to determine data regarding finance and accountsfor the present and future as well (Burritt and et.al., 2011). Various systems of the managementaccounting along with their requirements for AS Diverse limited are delineated as below:Cost accounting system:Key approach of management accounting is related to costwhich is very sensitive aspect of business process. By using such kinds of system, theAS Diverse limited is able to determine different kinds of expenses such as direct,indirect, fixed, variable, overhead costs etc. After adding all such expenses, it calculatedtotal cost or production and on the basis of it determine selling prices. Hence, theessential requirement of the cost accounting is to determine cost of total production aswell as each unit. When it knows that how much cost is to incurred for producing oneunit then it able to calculate selling price and sale to customers.Inventory management system:The system by which management can know level ofstock or inventory which is available at the AS Diverse limited. When there are higherinventory remains with firm then it reduces profitability and performance of companyand hamper smooth functioning as well (Kaplan and Atkinson, 2015). Key requirementto use respective accounting system is to control over and stock and utilize it in effectiveway by which AS Diverse limited able to generate higher amount of sales. Hence, it canbecome highly financially sound and create better image across the industry where itoperates in UK. Price Optimisation: The system where product prices are analysed and fixed by themanagement of AS Diverse Limited company is known as the price optimisation. Ingeneral, each and every business entity selling its products and services after changingin the selling prices. Further, a specific price level where more customers purchasinggoods then using this method profitable price can be determined. Job costing: As per this system, cost and expenses incurred in each job of the companyare analysed and taken into account by the managers. Within workplace of AS DiverseLimited, different product range are manufactured. For assessing and deriving cost2
comes into consideration at each job level, this system is required by the firm. Transfer pricing: As per the method, the company AS Diverse limited purchasesdifferent raw materials and services from large and parent organisation which provide atlower charges compare to market rate. When the AS Diverse limited uses respectivetype of management accounting systems then easily able to reduce total cost ofproduction and selling prices as well. Essential requirement to employ transfer price isto decline level of total cost which is incurred in the production and operation process(Håkansson, Kraus and Lind, 2010). Further, when cost of every unit reduces then pricesalso by which more number of buyers attracts and helps to enhance financialperformance in the dancing industry of UK.Process costing: Another method is process costing which is used by AS Diverselimited and helps to determine cost of each process in better way. When it able to knownthat expenses incurred in particular business process such as manufacturing, production,accounting etc. By using such kind of approach of management accounting the ASDiverse limited is highly able to become financially sound in the overall industry.Reason to employ the process costing in the firm is to analyses different costs andexpenses of each process which are comes into consideration at the workplace. It can besaid that, the process costing is effective and integral part of the business entity andhelps to take decisions related to different processes.Activity based costing (ABC): Other approach of manage accounts is activity basedcosting method which shows costs of each and every activity of different processes.Here the AS Diverse limited requires to collect every financial transaction related toeach activity of a process. It is widely used method by several firms because it can knowthat which activity incurring higher expenses at to produce products and services. On thebasis of expenditures of every cost it able to know that overall production processincurred how many costs.P2 Explaining various management accounting reporting methods used by AS Diverse LimitedBusiness Report3
To,General Manager,AS Diverse LimitedDate: 4th October 2017Subject: Reporting methods of management accounting systemsIn the company, different kinds of reports are prepared by the management which helpsto analyse various aspects of the business process. When the firm prepare effective reports ofeach and every financial transaction then able to determine that in which order AS Diverselimited is generating profit. Along with this by using reporting methods it can deriveperformance in the dancing industry of UK and can make business strategies as well decisions.(Andor, Mohanty and Toth, 2015) Different method which are employed by AS Diverse limitedfor reposting different management accounts are analysed as below:Account receivables report: Moreover, method of reporting in which variousreceivables in terms of cash are recorded and analysed is known as report of accountreceivables. By this management of AS Diverse limited is highly able to know that howmuch cash is received from internal and external environment in one financial year.When the company receives amount from various debtors is to be transacted in the suchreport. Higher the debtors are not better for the firm because it reduces cash collectionefficiency within a year. Apart from this, products and services which are selling at thecredit rather than cash then credit amount is also recorded in the accounts receivablesreport. Such kind of report requires for the company in order to know that how muchamount is to be receive at the accounting year ending (Islam and Hu, 2012).Operating budget report: The approach of reporting which shows various inflows aswell as outflows of business and helps to determine future financial data is identified asbudget. In this, various kind of future information’s are to be predicted and make properstrategies according to that which is highly profitable for AS Diverse limited. Apartfrom this it helps to make comparison between actual results as well as budgeted dataestimated through budget report. By comparing this, it able to know businessperformanceat the closure of a financial year. Different kinds of financial data are4
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