Management Accounting Research

Added on - 22 Jul 2020

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MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1A) Explaining MA as well as its key requirements................................................................1I. Difference among MA and financial accounting (FA).......................................................1II. Significant of MA for making business decisions.............................................................2III. Cost accounting systems...................................................................................................3IV. Inventory management systems.......................................................................................3V. Job costing systems...........................................................................................................3Price optimisation system.......................................................................................................4B) Presenting the financial information.................................................................................4I. Various reports of managerial accounting..........................................................................4II. Importance of presenting information in an understandable manner................................5M1 Evaluating benefits of MA systems.................................................................................5TASK 2............................................................................................................................................6I. Statement of P&L on the basis of absorption costing.........................................................6II. Statement of P&L on the basis of marginal costing..........................................................6M2 Reconciliation statement..................................................................................................7TASK 3............................................................................................................................................8A) Various budgets and their merits as well as demerits.......................................................8Financial budgets....................................................................................................................8Operating budgets...................................................................................................................9B) Procedure of budget preparation.....................................................................................11Determination of pricing......................................................................................................12Different costing system:......................................................................................................12C) Significant of budget.......................................................................................................12M3 Use of various planning tools and application to prepare and forecast budgets............13TASK 4..........................................................................................................................................14Ways through which BSC approach is used for responding financial shortfalls.................14Connection of KPI with Tech Ltd's financial issues............................................................16Comparing BSC used within another business organisation................................................16
M4 Ways through which MA helps to firm in sustainable success.....................................17CONCLUSION..............................................................................................................................17REFERENCES..............................................................................................................................18
INTRODUCTIONA system which is used in the firm for making financial plan, implementing, controlling,monitoring as well as taking effective actions is known as management accounting (MA). Thepresent report is based on Tech Limited company which has presence in the electronic industry.Main products offered by it are special mobile phone's charger as well as other carry-on gadgets.The study reflects about the management accounting along with its essential needs within theworkplace of Tech Ltd in order to make internal financial decisions. Apart from this, varioussystems involved in the MA like reporting etc. are explained. The current project focuses onmarginal and absorption costing which are supportive to frame income statements. In additionalto this, budgets, their benefits and limitations as well as importance within Tech Limited aredescribed. At the end of present assignment, BSC approach is explained which helps to eliminatefinancial issues incurred in Tech Limited.TASK 1A) Explaining MA as well as its key requirementsA procedure of an entity which helps to make an effective schedule of financial expenses,control and monitor them within workplace is considered as the management accounting (MA).It is highly required for taking only internal decisions because not works at the external level.When Tech Limited will consider this approach in proper and high manner then easily able tofulfil and accomplish goals of the firm. Apart from this, it consists with wide range of systemsand methods due to which it is an essential part (Klemstine and Maher, 2014). Due to lack ofavailability and proper use of MA, businesses cannot meet the objectives framed. The belowsections are giving information about different systems of MA and their basic needs.I. Difference among MA and financial accounting (FA)In the accounting branch of knowledge, basically two aspects involved which are likemanagement and financial. Both are used by the firms but in different level and criteria.Therefore, distinguish of these both the systems i.e. MA and FA is mentioned below:Management accountingFinancial accountingMA is a system used by the company in orderto make internal business only. It totallyOn the other side, in order to make highlyeffectual kind of external business decisions,1
ignored to the external information whichrelated to financial or non financial.FA approach is considered. However, it notfocuses on the internal aspect of an entity.When the firm makes reports under MA thenthere are any specific strcutures or formates arenot available. Therefore, Tech Ltd able tomake reports as per its understanding andsuitability.When looking at the FA then reports must beprepared in accordance to structure framed bylegal frameworks.It is not necessary for the firms to frame all thereports of MA. These are prepared for trackingfinancials on an internal basis.Those accounts involved under FA like P&L,B/S, cash flows, disclosures etc. are mandatoryto prepare (Groot and Selto, 2013).When looking at the users then MA is used byinternal stakeholders of Tech Ltd only whichinclude employees, managers, owner, CEO etc.Accounts prepared under FA are used byexternal stakeholders like customers,government, shareholders etc.Apart from these all, there is not anyrequirement of publishing and auditing of themanagement accounting reports.In the financial accounting, Tech Limited mustneed to go through auditing as well publishingprocedure in legal manner.II. Significant of MA for making business decisionsManagement accounting has a pivotal place in the workplace of Tech limited because it ishighly supportive for taking internal decisions. It helps to frame budgets which lead to forecastabout the future financial information. Under this, if has been estimated that revenue will declinein the next period then decisions for enhancing is taken. Apart from this, data related to the stockavailable in the working environment of Tech Limited also assessed through MA. Further, if itfinds that total inventory is higher, then corrective actions can be undertaken. In order to forecastcash flows in the enterprise also management accounting is an important aspect. As the cashflows will decline within every month under cash budget then strategies for boost up are framed(The Importance of Managerial Accounting in Decision-Making,2014). On the basis of this itcan be said that MA is significant for Tech Limited. Variance which is a tool of assessingbusiness performance is also a part of MA. It helps to known that at which aspect like material,labour, cost, profit etc. Tech Ltd not able to meet budgeted data. Therefore, an effective decision2
to grab and eliminate the issues can be taken in the firm properly. Further, it comprises withseveral systems and leads to generate reports of different financial transactions like cost,receivables, budget etc. Therefore, performance of the firm within relevant industry cam beassessed and effective decisions made accordingly.III. Cost accounting systemsExpense or cost is a very sensitive aspect for each and every business entity. Whileproducing chargers and any electronic gadgets when costing enhanced over the years thendirectly create negative impact on profit generation capacity. Further, in order to manage thissituation and boost up profitability, cost accounting system is used by the management. It istaken into consideration in order to assess actual expenditures involved within workingenvironment of Tech Ltd firm. When looking at the requirements then, used for estimating costsof production (Bryer, 2013). On the basis of total expenses, decisions for determining pricinglevel of that product are made. For instance: if cost of special chargers is high at the end of yearthen price will be charged as per the situation. In addition to this, in order to frame strategies formanaging and reducing costing this system is needed to cited entity. Along with this, profitabilityanalysis is also done by on the basis of cost accounting system in a proper direction.IV. Inventory management systemsStock is a big matter of concern for the company because when it remains in theworkplace with higher level then influence to the sales revenue. Therefore, inventory is requiredto manage and reduce in proper way within Tech Limited. Apart from managing, it helps to citedfirm in order to track orders, deliveries as well as sales of the stock in the firm. On the basis ofthis it can be easily identified that how much stock or products manufactured are sold at the endof year. It is required for the organisation for assessing as well as tracking levels, sales, ordersand deliveries of stock. In addition to this, for creating order for specific work in themanufacturing company as well as generate bill of materials also this is used (Soheilirad andSofian, 2016). Under this, valuation of stock level is also done by considering major threemethods like LIFO, FIFO and weighted average.V. Job costing systemsIn the firm when products and services manufactured are different from each other insufficient way then job costing system is considered. In order to assess level of expenses3
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