Management Accounting in R.L. Maynard : Report
Added on 2020-01-16
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MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1 Explanation on management accounting and give essential requirements of different typesof management accounting.........................................................................................................1P2 Explain different methods used for management accounting reporting................................4TASK 2............................................................................................................................................5P3 Calculate cost using appropriate techniques of cost analysis to prepare an incomestatement using marginal and absorption cost............................................................................5TASK 3............................................................................................................................................9P4 Explain the advantages and disadvantages of different types of planning tools used forbudgetary control........................................................................................................................9P5 Compare how organisation are adapting management accounting system to respond tofinancial problems.....................................................................................................................14CONCLUSION..............................................................................................................................16
ILLUSTRATION INDEXIllustration 1: Income statement using marginal costing method....................................................6Illustration 2: Income statement using absorption costing method.................................................7
INTRODUCTIONManagement accounting is differed from financial accounting as it is used by themanagement for the purpose of make prediction regard to future. It is used by the internalstakeholders for which they can easily make their day to day operations so, that business functionrun smoothly. The research project in the context of R.L. Maynard it runs their business with 50employees and earn annual profit that is less than the £500,000. In this project report there ismainly discussion on the management accounting and its essential that needed in themanagement accounting system (Pipan and Czarniawska, 2010). Furthermore, there is an alsostudy on the different management accounting system such as lean accounting, cost accounting,traditional cost accounting and throughput accounting that are mainly used in respondingfinancial problem. Thereafter, in the project there is a discussion on different costing method thatare used at the time of ascertained of income statement. The cost is identified with both costingtechniques are marginal and absorption costing. In ending portion there is also study on themanagement accounting reporting techniques are the job costing reporting, sales report, budgetreport and also cost accounting etc. TASK 1P1 Explanation on management accounting and give essential requirements of different types ofmanagement accountingManagement accounting include information relating to financial as well as statistical tothe business managers that assist them to take day-to-day decision for the organisation. It can besaid that it is a short-term decision regard to managerial. Therefore, it is totally differed fromfinancial accounting as it is used for internal stakeholder that are really opposed to externalaffairs stakeholder. The reports are generated periodically such as weekly, monthly for the eachdepartment managers as well as chief executive officer (Burritt, Schaltegger and Zvezdov,2011). The detail information include in it are the sale revenues, cash inflow, bills payable andreceivable and sales revenue etc. Thus, it is totally different from financial accounting in whichthe information used for the purpose of making future decisions. The R.L. Maynard usedmanagement accounting for internal used only and it gives essential requirement of various typesthat are as follows- 1
Financial accounting system: Under this management accounting system, all financialrecords of the organisation are identified such as profit and loss account, incomestatement, cash and fund flow etc. Therefore, actual economic position of R.L. Maynardis determined on which further decisions are made regarding profitability in the futuretime (Shah, Malik and Malik, 2011). Moreover, it is also helpful for optimum allocationof funds and further business operations more efficiently. Therefore, management of fundcan be done appropriately affect profit earning capability other business operations.Cost accounting system: It is one of the essential tool for cost effectiveness andincreasing sales revenue of R.L. Maynard. However, different ideas are generated forreducing expenses and enhancing selling of products. Thus, cost accounting system isbeneficial for effective price determination and adequate expenses on business operations(Zimmerman and Yahya-Zadeh, 2011).Job costing system: Under this system, expenses on menufacturing of products ismaintained affect further business operations and decision making on pricedetermination. In this regard, cost incurred on purchasing raw materials, labour andadditional overhead is set for business operations and proper management of entirebusiness activities efficiently.Batch costing system: In costing system, cost incurred on production and distribution ofgoods and services is identified for expenses on business operations. It affectsproductivity and profitability of R.L. Maynard and its market position (Elbashir, Collierand Sutton, 2011). Therefore, batch costing system remain efficient for effective pricingand monetary management of the enterprise systematically.Inventory management system: Management accountant of R.L. Maynard analysesinventories and their management position affect liquidity position of entity. Therefore,optimum utilization of resources and fund is possible by using this tool for furtherbusiness operations efficiently (Zimmerman and Yahya-Zadeh, 2011).Price optimization system: This management accounting system is beneficial at mostfor optimization of price and economic management of R.L. Maynard properly.Therefore, decisions are made regarding cost incurred on different business operationsand planning for further years effectively (Garrison and et.al., 2010).2
Traditional cost accounting- It can be define as a allocation of manufacturing expenseswhich are incur in production process. The another name of this is a conventional method thatare assigning the factory's indirect expensed to the each items manufactured based upon theproduction such as direct labour hours, number of units produced and production machine hoursetc. Thus, this method fail to assign the non-manufacturing expensed which are concern withproduction items like administration overhead. The traditional cost accounting are used for theexternal financial reports as it deliver cost of good sold value. The main advantage of theseaccounting for the R.L. Maynard is that it can easily implement which gives one product.Whereas, due to advancement of computer and machines this system in now outdated. Throughput accounting- It is just simply accounting that are based upon the principleon theory of constraints ( TOC). It is the most useful for the management for growth purpose anddecisions making process becomes simpler and its is to understandable for the people within theorganisation. It is totally different from the traditional cost accounting as the main aim is that tomaximize profit instead of minimize unit cost. The main advantage of throughput accounting isto make managerial decisions that are growth-oriented. It also allows them to make report fasterand assist individuals in operations to know the basic accounting. Transfer pricing- There is a set of rules of regulation that are formulated when anyorganisation transfer any kind of movable and immovable goods or services across anothercountries. Therefore, in the management accounting system in which there is a transaction toanother at that time transfer pricing is used to measure the cost. Thus, these prices are slightlydiffer from market price as on of the entities like losses' transaction. It can be said in anotherwords in which they either purchase for higher than prevailing MP or selling at low market pricewhich directly impact on company performance. The rules that are formulated on transfer pricingthat are ensured business entities' fairness as well as accuracy. Therefore, in the financialreporting document of an organisation which are closely monitored that useful at for the auditorsas well as regulators. Thus, it has an advantage is that it can be used by company to measureperformance of divisions. Lean accounting- It is used by company to know the information on timely,understandable and accurately etc. Therefore, it makes decisions faster that directly leads toenhance customer value and profitability etc. The lean tools assist them to minimize the wastages3
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