Importance of Management Accounting Essay
Added on 2020-07-23
20 Pages5688 Words137 Views
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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3P1. Management accounting and essential requirements of management accounting systems..3P2. Different types of managerial accounting reports and their importance..........................6M1...........................................................................................................................................8D1...........................................................................................................................................8TASK 2............................................................................................................................................9P3 Calculation of cost and preparation of income statement.................................................9M2.........................................................................................................................................11D2.........................................................................................................................................12TASK 3..........................................................................................................................................12P4 Different kind of budgets and their advantages and disadvantages................................12M3.........................................................................................................................................14D3.........................................................................................................................................14TASK 4..........................................................................................................................................15P5 Use of management accounting to respond financial problem.......................................15M4.........................................................................................................................................16CONCLUSION .............................................................................................................................16REFERENCES..............................................................................................................................18
INTRODUCTIONManagement accounting system includes job costing, cost accounting, inventorymanagement, etc. which helps the accountant of company to provide true information regardingtransaction.. These information are used by the management to make effective decisionsregarding various operations of company. This helps the manager of company to perform threemain functions like strategic management, performance appraisal and risk reduction. Thisprovides an opportunity to company to effectively guide their employees and achieveorganisational objectives. Tech (UK) Limited is producing special charger for mobile telephoneand other gadgets for the retail outlets in the UK (Baldvinsdottir, Mitchell and Nørreklit, 2010).In the present report, difference between management accounting and financialaccounting, importance of management accounting in decision making, different managementaccounting systems, different types of managerial reports and their importance in providingrelevant information will be discussed. Here, advantages and disadvantages of different kinds ofbudgets with their importance as a tool for planning and control purposes will also be discussed.TASK 1P1. Management accounting and essential requirements of management accounting systemsManagement AccountingManagement accounting includes the use of different accounts and reports to provideinformation regarding different activities of business. This will have huge importance regardingimprovement of decision making power of their different stakeholders. These accounts andreports and good planning and risk management tools which helps in removal of the risk andaccomplishment of their targets.Management accounting system uses various provisions of accounting to preparedifferent accounts which provide accurate information regarding different important functions of
company. This helps the manager of company to perform main three functions which are definedas below:Strategic management: This increases the role of accountant of company to effectivelyorganise the activities and operations. Performance management: These accounting system provides informational basewhich provides chances to appraise the performance of their employees with standardsand provide solution to improve their skills as well (Christ and Burritt, 2013).Risk management: Various information regarding different departments of companyhelps the manager to make effective decisions and policies. This provides opportunity toreduce the risks among different functions of company.Difference between management and financial accountingFinancial accounting is the part of management accounting which only focuses onfinance matters of company. It helps the management to know about profit and loss as well ascash flow situation of company. There are many differences between management and financialaccounting which are defined as below:Management AccountingFinancial AccountingManagement accounting focuses on past andfuture information for the purpose of planningand decision making.In financial accounting, make focus onhistorical economic data of company.Time horizon is defined by company itself.Financial accounting are done for fiscal year.This provides help in the planning, controllingand decision making.This provides an opportunity to the manager ofcompany to record financial information andtell about its financial position.This covers both financial and non-financialinformation which helps manager ofcompany’s risk management and appraise theperformance of employees as well.It only covers the financial aspects of companywhich provides help to manager in preparationof future and budgets as well as in allocation offunds to different departments of company asper their requirement.Importance of management accounting in decision making
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