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Management Accounting and Financial Accounting Doc

   

Added on  2020-10-22

15 Pages4961 Words173 Views
MANAGEMENTACCOUNTING

Table of ContentsINTRODUCTION...........................................................................................................................1LO1 .................................................................................................................................................1a. Definitions of management accounting and financial accounting .....................................1b. Cost accounting systems.....................................................................................................2c. Inventory management systems..........................................................................................3d. Job Costing systems...........................................................................................................3e. Different types of management accounting reports............................................................3f. Need for sound accounting systems ...................................................................................4LO2..................................................................................................................................................4a. Number of tickets sold at break even point........................................................................5b. Number of tickets sold at profit of £30000........................................................................5c. Profit if 8000 tickets were sold...........................................................................................6LO3 AND LO4...............................................................................................................................6a. Use of budgeting as a planning and problem solving tool..................................................6b. Evaluation of financial governance and its role in preventing financial problems of EverJoy Enterprises......................................................................................................................12CONCLUSION..............................................................................................................................12REFERENCES ...............................................................................................................................1

INTRODUCTIONManagement accounting is a process of evaluation of various costs related tobusiness operations and preparing reports and then supporting in decision makingprocess for internal management. Mainly records of various costs and budgets ofbusiness operations are being analysed for growth of organization (Dražić Lutilsky andDragija, 2012). This is often called as managerial accounting. For the purpose ofstudying management accounting in an organization, Ever Joy Enterprises has beentaken which belong from leisure and entertainment industry of United kingdom. Ever JoyEnterprises is a client of EY, a audit consulting firm and was asked to prepare report formanagement accounting department.This project report covers various aspects of management accounting systemswhich consists of comparison between management and financial accounting, systemsof cost accounting, inventory management, and job costing. Relevance of accountingreports along with its types. Importance of budgeting in solving financial problems andfacilitating planning process.LO1 a. Definitions of management accounting and financial accounting Management accounting refers to the act of deriving meaning from informationprovided in management reports accurately for contributing to the organization'ssuccess. Functions of these systems are performed by managers to take short-termdecisions.Financial accounting is a method of summarizing, analysing and interpretingfinancial reports to take financial decisions. Managers after analysing budgets andcosts, prepares performance reports and does future planning of expansion (Fisher andKrumwiede, 2012). Difference between management accounting and financial accounting:Basis Management accountingFinancial accountingTime periodReports can be mademonthly or weekly dependsupon the need of managers.Annual reporting is done forsubsequent financial years.1

Format of presentationThis accounting systemhandles various aspects ofaccountingsuchasinventory, capital budgeting,raw materials, productcosting, cash management,variance analysis etc. Financialaccountingconcentrates on preparingand examination of financialstatements such as balancesheet, cash flow statement,incomestatement,statement of changes inequity.Area of coverageIt is done for use of internalstakeholders such asemployees, investors, andmanagers.Financial accounting systemprepares reports for mainlyexternalstakeholders.Auditing is done forassurance because theseare used externallyb. Cost accounting systemsAccounting system is defined as that system which is mainly used formanagement of revenue, expenditures and all types of financial transactions. Costaccounting systems is a structure used for the computation of production cost of goodsto find profit, cost controlling and inventory assessment. In cost accounting system,different costing techniques are used. These are given below: Direct costs: These costs are wholly attributed to the manufacturing cost ofgoods. Decisions are taken only on the basis of variable costs (Johnson, 2013). Directcosts helps in taking short-term decisions. Direct costs in Ever Joy Enterprises arecommissions, administration costs etc. Standard costing: In this system of costing, standard costs of production whichincludes direct material, direct labour and overheads are assigned to goods or services.These cost are analysed along with actual cost and comparison is done to find anyvariances for improvement in Ever Joy Enterprises. Examples of such costs arematerial, labour etc.2

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