logo

Various aspects of management accounting report

   

Added on  2021-02-21

27 Pages5607 Words326 Views
Management Accounting

Table of ContentsINTRODUCTION...........................................................................................................................4LO 1.................................................................................................................................................4P1 Essential requirement of management accounting system................................................4Management accounting.........................................................................................................4Management accounting system.............................................................................................5Evolution of management accounting....................................................................................5Difference between the financial and management accounting.............................................5P2 various method used for management accounting report..................................................6Characteristics of good management accounting system.......................................................7Need of the understandability of the management accounting report....................................8Various management accounting reports...............................................................................9LO 2.................................................................................................................................................9P 3 Calculation of cost and preparation of income statements...............................................9Definition of cost and cost analysis........................................................................................9Explanation of cost- Volume Profit, flexible budgeting and cost variances........................10Calculation of Absorption costing and Marginal Costing....................................................10Fixed and Variable costs, Cost allocation............................................................................14Normal and Standard Costing, activity- based costing and the role of costing in setting Price..............................................................................................................................................14LO3................................................................................................................................................15P4 Use of Planning tools used in management accounting .................................................15Application of planning tools in forecasting of budgets......................................................16Pricing...................................................................................................................................18LO 4...............................................................................................................................................19P5 Identification of financial problems................................................................................19Financial Governance...........................................................................................................21Management accounting skills.............................................................................................21Effective strategies and systems...........................................................................................22CONCLUSION..............................................................................................................................22

REFERENCES..............................................................................................................................24

INTRODUCTIONManagement accounting is the process of using the various data to generate informationfor further use of different management levels like top management, middle management andlower level management to improve the performance of the organization by taking the effectivedecisions. Interactive investor is a medium size company which operates their business viaonline. They provide platform to the retail companies to operate their business from theirwebsites and portal and get the financial information and investment option on their portal. Thereport highlights the importance of management accounting systems within the organization withdifferent management functions and evolution of management accounting. This reportdemonstrates the difference between the management accounting and financial accounting. Thereport explains the different types of management accounting systems like job costing, inventorymanagement and cost accounting. It also explains the functioning of accounting tools in theorganization and the various uses of accounting tools. Management accounting techniques helpto provide the information by using the different costing method like absorption and marginalcost to make decisions for the company and provide a suitable method to minimize the cost ofthe production. The report explains the different planning tools and their importance in the company toset the budget and calculating the variances to improve the performance of the differentdepartment by analysing their functioning. It also explains the different pricing strategies to setthe price to maximize their profit by capturing the greater market share and increasing the profitmargin like penetration pricing, skimming pricing etc. The report highlights the various financialproblem like increasing the production cost, management cost etc. and adopt various method toresolve the financial problems. They use controlling tools to evaluate the variances in theexpected and actual budget like key performance indicators, budgetary control, Benchmarkingetc. LO 1P1 Essential requirement of management accounting systemManagement accountingManagement accounting : Management accounting is the process to gather, sort,analyse and process financial information in order to prepare reports to help the organisation to4

take the effective decision about the usage of resources and funds to get the better result. It alsohelps to accomplish the organisational goal. Management accounting support the decisions of topmanagement and provide them various data and information to explore their knowledge andunderstand the financial position of the business (Otley, 2016). It is used to prepare theaccounting information to help managers for making policy, procedure and plan for achievingthe organization objective.Management accounting systemManagement accounting system: It is the process of using the internal financialinformation and prepare reports presenting the data in useful manner to take the effectivedecisions for the growth and development of the company. It provides the direction to run thecompany more efficiently by analysing the various alternatives and variances.Evolution of management accountingThe evolution of management accounting is improved due to the changes in technology,government interference and the different policies. Before 1950 the focus of the accounting isfinancial accounting and cost accounting to provide the financial data and maintain the profit ofthe organization but after 1950 the emergence of management accounting is start. The role ofmanagement accounting is increasing nowadays. People are more concern about the managementaccounting to use the data for taking decisions and also improving non-financial performance.Now the role of management accounting is to communicate the information within theorganization to connect the employees toward the common organization goal and improve theirperformance to get the goal and objective.Difference between the financial and management accountingBasisFinancial accountingManagement AccountingMeaning The aim of financial accounting is toconcentrates on the financialstatement of the organization likebalance sheet, income statement andcash flow statement.Management accounting help themanagers to take the effectivedecisions for the organization toimprove organization performance byusing these financial data. Information Financial accounting only providesthe monetary information regardingthe company. Management accounting provide themonetary and non monetaryinformation about the company. 5

Objective The objective of financialaccounting is to provide informationlike sales, revenue and profit of thecompany.The objective of managementaccounting is to provide variousinformation such as sales of thecompany, trend in growth to theemployees and manager to prepare themanagement reports.Auditing Financial report are compulsory topublished and auditing by theauditors.There is no compulsion to publish themanagement report in newspaper andboard meetings. Users The user of the financial accountingare internal and external parties.Only internal management uses themanagement accounting system.P2 various method used for management accounting reportImportance of management accounting system within the organizationThere are different types of management accounting system like job costing, inventorymanagement. Price optimization etc. which help the organization to set the price of the productand services and assign the job to the different departments.Job costing system: It is used to accumulate and assign the cost for manufacturing the productfor individual output unit. It is mainly used when the produced items are different from eachother. The system used to assign the cost for each activity and analyse the performance of eachactivity and compare by compare it with last year or previous year cost, so they can manage theircost. It helps the company to control the company cost (Why Job Costing Is Important, 2017).ImportanceJob costing system provided different scopes to control the cost of the products andservices. It is helpful for the small and medium size business to ascertain the cost of each job.Interactive investor company use the job costing method to record the profit earned on each job.It also helps to evaluate the performance of each job and take effective steps to control the cost.They compare the selling price, cost of each job with their profit. It permits the manager tocalculate each job cost and profit and understand the performance and take decisions whether thejob is desirables for the future use or not.6

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Management Accounting Assignment - ABC Limited
|19
|5249
|87

Management Accounting - Assignment Sample
|18
|3900
|97

Management Accounting Techniques and Budgetary Control
|15
|3492
|91

Report on Management Accounting System
|18
|5615
|80

Management Accounting Techniques and Budgetary Control
|16
|3470
|91

Financial Accounting Report 2022
|25
|5377
|39