Management Accounting System Assignment (Doc)

Added on - 21 Jul 2020

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INTRODUCTIONManagement accounting is one of the most important domains that assist firm inmanaging cost in its business. In present research work management accounting concept isdefined clearly and requirements of varied systems are explained. In middle part of the report,profit computation is done on basis of marginal costing and absorption costing approaches andtheir suitability for business is identified. Along with this, merits and demerits of differentplanning tools is explained in respect to budgetary control. At end of the report, varied methodsthat can be used to respond to financial problems are explained. By covering all these things inproper manner research work is completed.P1 Management accounting and essential requirements of different managementaccounting systemsFrom: Budgeting officerTo General manager of White elephant restaurantSubject: Management accounting systemManagement accounting refers to the tools and methods that are used for doing costing ofproduct and identifying lots of facts and figures in respect to costing of products and services.Usually, in management accounting there are number of tools and methods like variance analysisand budgeting that can be used for cost control and analysis (Burns. and Scapens, 2000). Thereare number of advantage and disadvantage of these methods and due to this reason it is veryimportant to use all these methods in proper manner in appropriate manner so that best rules canbe obtained in the business. Management accounting systems are widely used by all sorts ofbusiness firms. It is the system in which in systematic manner and in specific way transactionsrelated to specific product are recorded. There are varied sort of management accounting systemsand essential requirement of these accounting systems are explained below.Cost accounting systems:Cost accounting system is one of the most important systemsbecause under this all sort of expenses related to all products that are produced by thefirm are recorded collectively. All these expenses are aggregated to arrive at amount ofoverall cost that is incurred in the business. White elephant restaurant can make use of hisaccounting system because it simply need to sum all relevant expenses in category of
fixed, variable and semi variable expenses. By using this accounting system managerscan prudently make decisions. Under cost accounting systems all expenses are classifiedinto fixed expenses, variable expenses and semi variable expenses (Angelakis, Theriouand Floropoulos, 2010). Fixed expense is the cost which remains stable and does not alterduring entire life of the project. It can be said that cost accounting system have dueimportance for the firms because in it one can easily get segregation of expenses indifferent categories. It can be observed that managers always required classification ofcost in all these categories because on basis of same they identify that to what extentvariable expenses increased in the business. Variable expenses are those expenses thatkeep on fluctuating consistently in the business and never remain stable at specific point.This reflects that there is huge difference between fixed and variable expenses in thebusiness. It is very important for the firm to maintain control on its expenses so thatprofitability can be enhanced in the business. Cost accounting system is currentlyemployed by all range of enterprises in their business due to its unique and easyimplementation phase. This is the reason due to which cost accounting system is gainingwide popularity among business firms. It can be said that there is huge importance of costaccounting system for the business firms.Job cost system:Job costing is one of the unique methods of costing and under this foreach job or product line separately costing is done. For example there are 5 products thenin that case for each product separately costing will be done in the business (Figge andHahn, 2013). Under this accounting system aggregately costing of products is not doneand due to this reason this accounting system is considered better than other accountingsystems. This is because in other managers does not get an overview of product linesseparately but in case of job cost system for each product individually information isobtained by the business firms. Thus, it can be said that there is huge importance of jobcost system for the business firms. This is because under this system management getsreport of costing of all products separately. On the basis of information obtained theybecome able to identify that which of product lines is more profitable and expenses arelow. In other words it can be said that managers comes to know about products whereexpenses are very high. It can be said that there is huge importance of job cost system forthe business firms. This accounting system is used in the firms that are operating
production plant and producing multiple sorts of products in the business (Lavia Lópezand Hiebl, 2014). On the basis of reporting system they get an entire detail about singleproduct specifically and decide that on which product they need to pay due attention. Itcan be said that there is huge importance of job cost system for the business firms.Process accounting system:Process costing system is one of the important system andunder this for entire process costing is done separately. It can be seen that for eachproduct there is specific process that is followed for production of goods at workplace. Inthis process there are different stages that are performed by the business firms in order toproduce specific product. For each product production stage separately costing is done.This is one of the important costing systems that are followed by the business firm. Thisis because under this more accurately overview of costing of product is obtained (van derSteen, 2011). In the stage of production where cost is much high can be analyzed byperforming process reengineering stage and activities that are producing high amount ofwastage can be simplified so that cost can be reduced in the business. It can be said thatprocess costing system is one of the most important system that is used by the businessfirm’s at large scale in the workplace. In current time period there are large numbers offirms that are operating process costing system at workplace because it has number ofadvantage for the firm. Hence, it is the attractive features of the process accountingsystem that make it more popular among business firms.Throughput accounting system:It is one of the common accounting systems that comein modern category. It is the accounting system which is newly prepared by the Israelibusiness man so that wastage can be detected in the business and same can be removed. Itcan be said that there is huge importance of throughput accounting system for the firmsbecause it lead to reduction in cost in the business along with decline in wastage in thebusiness.P2 Different methods use for management accounting reportingFrom: Budgeting officerTo General manager of White elephant restaurantSubject: Management accounting reportingReporting is the one of the major task that is performed in every business. This is because inreports lots of facts and figures are presented that are used by the managers for making businessdecisions. These facts may be related to sales and revenue that are earned in the business. On the
basis of these facts managers comes to know about area where they need to work in order toimprove performance of the business firm (Kotas, 2014). Different sort of reporting are used bythe firms in their business and same are explained below.Job cost report:Job cost report is one under for each product separately report isgenerated in the business. White elephant restaurant can use this sort of report so as to getbetter overview of costing of all products separately. In the job cost report there aredifferent product lines that are operated by the business or different orders of customizedproducts that are received from customers are also treated as job. It can be said that thereis huge importance of job cost report for the business firms. From this report managersget information about different sort of variable expenses that are made in the business.Job cost report is prepared by most of business firms because it help them in makingrelevant business decisions. In large size firms usually there are job cost system and dueto this reason job cost report is prepared in the business. Time to time on monthly basis orwithin every 15 days job cost report is prepared. This is done because by doing somanagers keep close track of variable expenses in the business (DRURY, 2013). On otherhand, by preparing cost control strategy on initial stage expenses are control in thebusiness. This lead to strict control on expenses in the business. Overall due to reductionin expenses in the business product cost decline and due to this reason firm earn goodamount of margin in its business on per unit sold. It can be said that this sort of reportinggreatly help managers in managing efficiency in the business. Hence, it can be said thatthere are multiple reasons due to which it is assumed that there is wide level of benefits ofusing job cost report in the business.Budget report:Budget report is also one of the important tools of reporting because inthis report standards are clearly communicated and actual facts are recorded in alignmentto it. On this basis it is identified whether firm perform good or bad in its business. Firmperformance is considered good when it successfully beat standard and considered worstwhen it failed to beat standards. It can be said that it is one of the important tool ofreporting for the firms. On basis of variance analysis that is done in budget report it isidentified that which are areas where work need to be done in the business. For exampleif variable expenses variance is negative then it can be said that variable expense is thearea where work need to be done in proper manner so that cost can be controlled in thebusiness. It can be said that budget report help Company in tracking its performance timeto time. There are different sort of budgets that are prepared by the firms like zero basedbudgeting and incremental budgeting (Li and et.al., 2012). Both budgeting approachesare totally different from each other. Budgeting methods does not affect budget report ofthe business firms. It can be said that budget report help firms to measure theirperformance in systematic way and due to this reason there is huge importance of budgetreport for the firms.Sales and profit report:Sales report can be prepared by White elephant restaurant onquarter basis and yearly basis. On basis of quarter results managers determine strategy onwhich they need to work for next quarter. By doing so an attempt is made to improveperformance of business. It can be said that sales report not only help firm in measuringits performance but it also help it in formulating business strategy so that performancecan be improved more for next time period. However, it is not necessary that firmsprepare sales report on quarter basis (Cuganesan, Dunford and Palmer, 2012). Mentionedsort of report can be prepared on monthly basis or in every 15 days. It can be said that
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