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Concept of Management Accounting – Doc

   

Added on  2021-01-01

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MANAGEMENTACCOUNTING

Table of ContentsINTRODUCTION...........................................................................................................................1P1 Explaining management accounting and essential requirements of various types ofmanagement accounting system..................................................................................................1P2. Explaining different method for managemenet accounting reports......................................3P3. Calculating costs with the help of absorption and marginal costing method.......................5P4. Evaluating different types of planning tool of budgetary controlling method.....................7P5. Comparing the ways in which organisation are adapting management accounting system tirespond their financial problems.................................................................................................9CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12Appendix........................................................................................................................................15

INTRODUCTIONManagement accounting is considered as presentation of accounting information in suchmanner which directly assist management for creating policy along with regular operation. It isrelated to application of gathering accounting data on basis of cost and financial accounting withobjective of formulating policy, planning, decision making and control through management.The present report will discuss each concept of management accounting with reference toTravelex as it is foreign exchange company headquartered in London, United Kingdom. It willbe stating management accounting system along with its essential requirements of various types.There is explanation about different methods with its benefits and disadvantages on context toTravelex. This report will be explaining about integrated management accounting system with itscritical evaluation related to business entity. Further, there will be application of different rangeof management accounting techniques income statement on basis of absorption and marginalcosting will be stated along with appropriate interpretation. In the similar aspect, budget is statedas important control tool so there will be evaluation about its merits and demerits of multipletypes of planning tools with reference to budgetary control. Hence, it will analyse application ofdifferent planning tools for preparing and forecasting its budgets. There is presence ofappropriate comparison on basis of organization for responding to financial problems on basis ofBenchmarking, Key performance indicators, balance score card, financial governance andactivity based costing.P1 Explaining management accounting and essential requirements of various types ofmanagement accounting systemManagement accounting is referred as important tool for decision making which is usedinternally through management. It helps in assisting management for attaining better control andplanning over Travelex. It is mandatory for each type of business entity as it comprises nonprofit organizations, sole proprietorship and government as well. It has presence of importantrole in business as it is widely used through management for accomplishing quality decisionmaking and better control. It analyses, understands and gathers qualitative, financial andstatistical information for helping management to undertake effective decisions on basis ofbusiness. It is highly pervasive in its scope as whole business is moved through individualdecision taken to its top management of Travelex (Azudin and Mansor, 2018). It is considered as1

big component as it lays special emphasis on forecasting the future scenario so business could becapable for facing new challenges for reaching new milestones. It synthesizes and analyses eachgathered information as it also traces return on investments. The future of Travelex has beenforecasted through management accounting as social, economic, political and technologicalchanges impact business in effective manner.The scope of financial accounting is narrow comparatively to management accounting asit facilitates for management to take effective decision on basis of shareholders. On the contrary,financial accounting represents fair and accurate view of company's financial affairs to itsgovernment, potential investors along with existing shareholders. Financial accounting isindependent where management accounting is dependent on information through financialaccounting. Only quantitative data is described in financial accounting whereas managementaccounting directly deals with both quantitative and qualitative data. In the similar aspect,financial accounting has requirement for reporting it through maintenance of certain formats asmanagement accounting shows through informal format along with structure. Financialaccounting has legally mandatory for preparing financial accounts of every company butmanagement accounting has absence of statutory requirements (Financial Accounting vsManagement Accounting, 2018).The types of management accounting system are stated below:Cost accounting system: It is an accounting method with objective of capturingproduction cost for assessing the input cost at every step of production along with fixed cost likecapital equipment's depreciation. This is referred as initial measure and tracing each cost atindividual aspect and compared input outcome to actual outcome for aiding management ofcompany management for purpose of measuring financial performance. It is differentrepresentation about financial performance and cost which consists of assets and liabilities ofTravelex. It could be replicated as very beneficial tool with perspective of management inbudgeting and to set up programs for cost control and raises net margins of business in the future.It is of two types such as process and job order costing.Job order costing: This method will be used by Travelex for assigning cost to particularproduct or specific unit. In this Forex, each job would be allotted with cost which shouldbe used.2

Process costing: There is accumulation of cost through each operations, processes anddepartments. The work performance on every unit is standardised and uniform forcontinuous mass production along with involvement of assembly operation.Inventory management system: This tracks goods from whole supply chain along withportion of its business operation. It considers each aspect from retail, warehouse to shipping andevery movement of stock along with its parts. In simple words, it is referred as method forcontrolling and overseeing the ordering, storage and use of each component with its applicationin corporation about production of goods it sells. This system will directly combine aboutapplication of barcode scanners, mobile devices, barcode printers and desktop software forstreamlining management of inventory like consumables, supplies, stock and goods. Theobjective of this system is about appropriate understanding current level of inventory and todecrease situation of overstock and under stock. The efficient tracking of quantity among thelocation of stock of Travelex, its managers will be having insight and capability for makingenough decisions about inventory. Thus, inventory of business is considered as key assets andaccounts on basis of investment which is directly tied through selling of product (Spraakman andet.al., 2018).FIFO: This is an inventory management system where oldest and first stock is used firstand inventory which is produced on recent aspect is shipped or used until all stock inwarehouse is shipped out or used.LIFO: The last in first out is used for placing accounting value to its inventory. Itoperates on basis of assumption that purchased inventory as last item is first one forselling.Thus, cost accounting system in Travelex considers normal historical costing on its basicaspect, full absorption as method for inventory valuation and in similar aspect, process costing isreplicated as cost accumulation method.P2. Explaining different method for managemenet accounting reports.It is essential for the management of Travelex to get the information about the businessactivity in order to take decisions and strategies regrading the efficient business operations. Inorder to take these decisions is it essential for the management in getting the financial as well asthe non financial data and information accurately and timely. Managerial accounting report can3

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