Essential Requirement of Management Accounting System

Added on -2020-02-12

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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................3P1Explain management accounting and essential requirements of different managementaccounting systems......................................................................................................................3P2 Explain different methods used for management accounting reporting5P3 Calculate costs using appropriate techniques of cost analysis toprepare an income statement using marginal and absorption costs..............7P4 Explain the advantages and disadvantages of different types ofplanning tools used for budgetary control...............................................................13P5 Compare how organizations are adapting management accountingsystems to respond to financial problems................................................................14CONCLUSION.........................................................................................................................15REFERENCES..............................................................................................................................16
INTRODUCTIONManagement accounting is the one of the domain that is used to control expenses andmonitoring same in the business. It is the branch of the accounting field that help business firmsin making effective use of resources in the business. In the current report, requirements ofdifferent management accounting systems are explained. In the middle part of the report,different methods used for management accounting reporting are explained. Marginal andabsorption costing method are used to prepare income statement for the business firm. At end ofthe report, different management accounting systems are compared with each other and best oneis identified.P1Explain management accounting and essential requirements of different managementaccounting systems Management accounting is the one of the most important segment of accounting which isused to perform different sort of calculations and by considering same varied decisions are takenin the business. There are number of calculations in the management accounting that areperformed to measure firm business performance like variance analysis and breakeven point etc.All these things help managers in making varied sort of business decisions. It can be said thatthere is significant importance of the management accounting for the managers of the businessfirm. Under management accounting different sort of information are collected about labors andraw material as well as inventory (Zimmerman and Yahya-Zadeh, 2011). Different calculationsare performing that help one in understanding the extent to which labors are used effectively andefficiently in the business by the firm. Similarly, management accounting help one inunderstanding the pattern in which inventory values are increasing and decreasing in the businessand cost of same is changing. Thus, it can be said that there is a wide scope of the managementaccounting for the business firms. Variance analysis is also one of the most important tools thatis used to measure the firm performance. It is the tool that is used to measure firm performanceand identifying areas where performance is weak and strong. The area where firm performance isweak is taken in to account by the managers and steps are taken to improve performance. It canbe said that management accounting provides a lots of input to the business firm in respect toareas where improvement in the business performance is strongly needed. Different managementaccounting systems and requirements of same are given below.
Cost accounting: Cost accounting system is used by the most of the business firms and underthis all type of expenditures that are made in the business is recorded in the books of accounts.While recording expenses in the business it is ensured that all of them are classified under theappropriate headings in the accounts. Thus, cost accounting system help managers in identifyingthe extent to which variable and fixed expenses increased in the business (Macintosh andQuattrone, 2010). The main requirements of the cost accounting system are that manager prepareseparate list of all expenses and record their values separately. Thereafter, all expenses arerecorded separately under different headings. Under cost accounting systems projection aboutexpenses are also made on the basis of past data and plan that firm will followed in its businessin respect to production of goods and services in its business. Projected values are further used tomeasure the firm performance in the upcoming months. It can be said that there is significantimportance of the management accounting systems for the managers. Job order costing: Job order costing system is one under which different jobs are created andcosting of same is done. Job refers to the different orders that are received from the variedcustomers in the business. It can be said that job order costing is the one of the important methodthat is used for costing of the product. There are some important requirements of the job ordercosting. Under this it is very important to do costing of different product lines separately. Themain requirement of job order costing is that all expenses in respect to product are recordedseparately. Different costing methods like absorption and marginal costing method is used docosting of each job. It can be said that there is due importance of the job order costing methodsfor the business firms. Process costing: Process costing is another management accounting systems and under this costof different stages of production is done. There are number of stages in production of goods andservices. Different raw materials are used in production of goods and services. There are somerequirements of the process costing and under this it is important to collect data related todifferent stages of the production separately and accounting of same is also done separately(Baldvinsdottir, Mitchell and Nørreklit, 2010). The data that is recorded for each stage ofproduction is used to compute overall cost of production and per unit cost. It can be said thatprocess costing is the one of the best approach that is used for costing of the product. This isbecause in each stage of production different quantity of raw material is consumed and labors areused. Process costing system ensured that all resources will be taken in to account and costing of

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