Management Accounting Assignment - ABC Limited
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Added on 2021-02-19
Management Accounting Assignment - ABC Limited
Added on 2021-02-19
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Management Accounting
INTRODUCTION...........................................................................................................................3LO 1.................................................................................................................................................3P1 Explaining the meaning of management accounting and different kinds of managementaccounting systems...................................................................................................................3P2 various method used by the organization for preparation of management accountingreport.........................................................................................................................................6Integration of management accounting system and management accounting report...............7LO 2 ................................................................................................................................................8P 3 Calculation of Net Profit or Loss under Marginal Costing and Absorption Costing forABC Ltd. ..................................................................................................................................8LO 3 ..............................................................................................................................................12P 4 Advantages and Disadvantages of different types of planning tools used for budgetarycontrol.....................................................................................................................................12P5 Explaining range of management accounting systems for developing efficiency ofcompany in responding to various financial problems...........................................................14CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................18
INTRODUCTIONManagement accounting is the process recording, analysing, measuring and evaluatingthe financial data by using the various tools to get the information for making decision for theorganization. The aim of management accounting is to support the manager in decision-makingprocess and analyse the financial data. The report is about ABC Limited, which is a medium sizemanufacturing company operating in United Kingdom. The aim of report is to explain the role ofmanagement accounting and requirement of various accounting system to the organization toevaluate the performance and control the cost of the company. It also explains the differentmethod used by the company to reporting the management accounting like the balance sheet,profit and loss account and income statements. It highlights the use of marginal and absorptioncost to prepare the income statement and various advantages and disadvantages of the planningtool like zero base budgeting, increment budget etc. The report also help to focus on the MAsystem to resolve the financial problem like variances in budget, change in sales and profit etc.LO 1P1 Explaining the meaning of management accounting and different kinds of managementaccounting systemsManagerial accounting is defined as a procedure of systematically recording, evaluating andanalyzing the cost and financial information of an entity for the purpose of preparing accurateinternal financial reports, statistical information which is needed by the business managers forexercising their day to day functions. Tools and techniques of management accounting alsofacilitates the managers with the required information regarding log term decisions such asacquisition of capital assets, undertaking of a particular project etc. This is done by assessingtheir feasibility and profitability. Such decisions are taken with the help of financialmodeling,capital budgeting etc. (Mouritsen and Kreiner, 2016).Difference between financial and managerial accounting :BasisManagement accountingFinancial accountingfocusmanagerial accounting’s aim toprovide the managers with neededfinancial and cost relatedinformation that assists the in theirfinancial accounting focuses onpreparing the financial reports forall the interested parties orstakeholders of the business3
decision making process, strategyand policy formulation, etc.Statutory requirementmanagerial accounting is practisedfor the sake of assisting themanagers with meaningfulinformation to make qualifydecisions for the organization.financial accounting is required bythe law and is mandatoryDifferent types of management accounting systems are as follows:Cost accounting system:It is referred to as a procedure of systematically recording, classifying, evaluating andanalyzing the costs. This system is applied by the business organization for anticipating the costsof their products or services for the purpose of identifying the profitability, cost control, costreduction and inventory valuation. ABC Ltd applies this system of management accountingwithin its operations for a motive of determining the costs and profitability of the productsmanufactured by the company. This also helps them in exercising controlling function throughwhich cost-effectiveness is achieved.Requirement and Benefits :It is required in the business because it allows the managers in measuring and assessing thecost efficiency within the operations. It further allows the management of ABC Ltd inidentifying the profitable and non profitable operations (Machado, 2016).Price Optimization system : Price optimization refers to a system employed by business organization for identifying theretail value of the company’s products or services. In other words, it is a procedure ofdetermining the balance between profit and product’s value. The manager of businessorganization evaluate and analyse different possible prices of the goods which consumer ishappy to pay. It also analyse and assess the lowest price which the business entity requires to fixfor preventing any possibility of losses(Borker, 2016).Requirement and Benefits :Price optimization leads to better quality decisions that helps in improving the efficiency ofoverall company. It allows management to set an optimum price which helps it in attracting the4
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