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Benefits of Management Accounting System Report

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Added on  2020-07-22

Benefits of Management Accounting System Report

   Added on 2020-07-22

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MANAGEMENTACCOUNTING
Benefits of Management Accounting System Report_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1 (A) Management accounting and essential requirements of its systems...............................1P2) (B) Financial information.....................................................................................................4M1) Benefits of management accounting system.......................................................................6TASK 2............................................................................................................................................7P3) Income statements using marginal and absorption costing methods....................................7M2) Reconciliation of profits for financial reporting.................................................................8TASK 3............................................................................................................................................9P4) Budget planning and controlling tools..................................................................................9M3) Planning tools and their usefulness for forecasting budget..............................................13TASK 4..........................................................................................................................................14P5) Management accounting reports reducing financial problems of Tech UK Ltd................14M4) Significance of management accounting for reducing financial problems of Tech Ltd...15D3) Importance of planning tools for accounting respond appropriately to solving outfinancial issues..........................................................................................................................15CONCLUSION .............................................................................................................................16REFERENCE ................................................................................................................................17
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INDEX OF TABLESTable 1: Comparison between management and financial accounting............................................2Table 2: Income statement using marginal costing..........................................................................7Table 3: Income statement using absorption costing.......................................................................8Table 4: Reconciliation of profit......................................................................................................8
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ILLUSTRATION INDEXIllustration 1: Stages for preparing budget.....................................................................................12
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INTRODUCTIONManagement accounting is a multidisciplinary approach used for managing businessoperations and increasing effectiveness of any organisation. It includes planning and decision-making tools like costing, budgeting, investment appraisal for decision making regardingbusiness operations. This report is based to understand significance of management accountingfor reducing financial issue of Tech (UK) Ltd., it manufactures It provides special charger formobile phones and other gadgets for retail outlets in the country. However, being managementaccountant of the entity, reports on financial position of organisation can be presented fordecision making and further operations. Including this, difference between financial andmanagement accounting system as well different costing systems can be described. Moreover,management accounting reports and their usefulness in decision making process for the entitywill be introduced. Along with this, advantages and drawbacks on different kinds of budgets areto understood. Similarly, management accounting systems for reducing financial problem of theorganisation is to be understood with the help of this assignment.TASK 1P1 (A) Management accounting and essential requirements of its systemsIn the case scenario, it has been identified that, there is lack of fund in Tech (UK) Ltd forits business operations. Therefore, its financial position and other business tools are identified bywhich different ideas can be generated to reduce such deficiencies and improving services(Chenhall and Moers, 2015). However, its systems' essential requirements can be described asbelow with understanding comparison between financial and management accounting system:11Management accounting vs Financial accountingFinancial accounting deals with management of fund and decisions regarding financialtransactions of Tech Ltd. While, management accounting deals with entire business operationsincluding fund, inventory, performance of employees and so on. However, under financialaccounting system, decisions are made related to expenditures and revenue on businessoperations by analysing financial statements like; profit and loss account, income statement,balance sheet, cash flow and fund flow etc (Christ and Burritt, 2013). On the other hand, undermanagement accounting system, recording and reporting of entire business activities is done bywhich appropriate decisions are made for upcoming years' so as to manage all business activities1
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in long run. Along with this, management accounting is used for internal purposes by managersand company's employees while, financial accounting is mainly done for stakeholders, bank,government etc. Some essential comparisons between management and financial accounting canunderstand as:Table 1: Comparison between management and financial accountingBasesManagement AccountingFinancial accountingPurposeFor analysing actualperformance of entity andfurther decision making onbusiness operations fordevelopments..For recording financialtransactions of the companyand identifying its economicposition.Nature of informationFinancial and non-monetarydata are recordedFinancialtransactionsregarding business operations Legal requirementsIt is not mandatory for TechLtd to record all businessactivities (De and et.al., 2014).It is essential for accountant toprepare and maintain financialstatements.Tools Costing, budgeting, varianceanalysis, ratio analysis,inventory and performancemanagement reporting are itsmain tools.Profit and loss account,balance sheet, incomestatement, cash-flow, fund-flow and other financial notesare maintained andscrutinised .11Importance of management accounting as decision making toolManagement accounting tools are significant for planning and decision making formanagement of entire business activities using costing, budgeting and other tools (Fullerton,Kennedy and Widener, 2013). However, some essential management accounting systems andtheir requirements can be understood as follows:2
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