Cost Accounting: Impact on Profit and Balanced Scorecard Analysis
Added on 2020-01-07
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MANAGEMENT ACCOUNTING1
Table of contentsIntroduction......................................................................................................................................3Task 1...............................................................................................................................................3a) Preparation of research report based on the function of management accounting......................3b) Discussing the different types of cost accounting system and explaining the ways it can beused to improve the functionality of various departments...............................................................4Task 2...............................................................................................................................................6a) Preparing the income statements for the month of September....................................................6Task 3.............................................................................................................................................10a) Discussing different types of budgets in the research report and explaining their advantagesand disadvantages..........................................................................................................................10b) Discussing the process of preparing various budgets................................................................11c) Discussing the pricing strategies...............................................................................................11Task 4.............................................................................................................................................12a) Explaining the approach of balance score card and describing how it can be used to measurerange of performance.....................................................................................................................12Conclusion.....................................................................................................................................13Reference list.................................................................................................................................142
IntroductionManagement accounting may be defined as the process identifying and measuring the businessinformation with an aim to evaluate, interpret and communicate them with the departmentalmanagers for achieving goals and objectives. The study aims to express the managementaccounting along with its need in the context of emerging business for achieving specific targets,based on the measurement of performance of the business. It has also been aimed to understandthe various types of cost accounting both theoretically and practically to deliver the need ifbudgeting and pricing strategy. In addition to these, with the help of balance score card, it hasbeen aimed to improve financials governance and effective strategies.Task 1a) Preparation of research report based on the function of managementaccounting1) Defining and distinguishing management accounting with financial accountingCost accounting may sometimes refer to the management accounting, which is completelydifferent from financial accounting. In management accounting, both business and financialinformation are identified, measured, analyzed and interpreted with an aim to communicate themwith various management departments to achieve goal and objectives. It simply encompasses allthe relevant fields of accounting that are aimed to inform the business operation metrics to themanagement. In this approach, information related to the cost of the goods and servicespurchased and produced by the organization are considered (Fullerton et al. 2014). It can be saidthat management accounting or cost accounting are the basis of financial accounting, because,without the result of cost accounting any decision made by the department will become void andthe actual cause and effect of the cost of production will remain unknown. Therefore, it willbecome impossible to know the actual volume of sale, revenue, and profit (Fullerton et al. 2013).In cost accounting, various budgets are prepared to estimate the various requirement of thedepartment and once the actual results are disclosed, the estimated value is compared with theactual results to understand the variance.However, in financial accounting, especially the financial information are identified, measured,interpreted, summarized and recorded in a chronological order with an aim to communications3
the financial information with the stakeholders (internal and external users of financialstatements). Financial accounting is done based on certain accounting principles or policies oraccounting standards since the concept of relevancy, reliability, and objectivity gets attracted, sothat it cannot divert the mindset of the users of financial accounting (Beatty and Liao, 2014).Thus, it can be said that financial accounting is the sum or aggregation of all the financialinformation of the business.2) Describing the importance of cost accounting and how it can be considered as thedecision making tool for the various departmental managersManagement accounting helps in making short-term and long-term decisions by the managerswith the help of financial and statistical information periodically. Cost accounting helps inforecasting decision, making or buying decision, evaluating the rate of return and predicting thecash flows. In a broader concept, managerial accounting deals with the preparation of report,which includes budgeting for estimating and forecasting. Variance analysis is used for makingcomparison of actual with the standards and identifying any reason behind favorable andunfavorable variance (Christ and Burritt, 2015). In addition to these, trend analysis helps themanagers to make future estimation regarding their ability of achieving the targets by comparingwith historical records and other records of other organization. Thus, it can be said that costaccounting is the key decision making tool for various departmental managers, like productionmanager, sales manager, purchase manager, etc.b) Discussing the different types of cost accounting system and explaining theways it can be used to improve the functionality of various departments1) Describing different cost accounting system individuallyActual costingActual costing is the part of the accounting system, where the actual cost of the actual qualitiesof the product is used along with the direct cost rates in the production unit to ascertain the costof a particular good. Generally, in actual cost accounting system, the direct cost of the object istraced which can be measured in terms of labor cost and material cost, which are directly linkedwith the production unit (Greenberg and Wilner, 2015). With the help of actual costing method,managers evaluate the actual time and cost required for the production of goods and services. Inother words, it addresses the time to be taken for manufacturing the product with respect to the4
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