Management Accounting - Hewland Engineering Limited

Added on - 21 Feb 2021

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Management Accounting
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INTRODUCTIONIn past (around 150-200 years back), private organisations experience theneed of aninternal accounting system tosupervises and control the internal environmentof a businessorganisation in order to ensure their existence in the market.For this, a practicewhich is evolvedcommonly known asmanagerialaccounting.Suchaccounting technique provides information tothe managers so that they can be assisted in making decisions and planning for achievement oforganizational goals.For better understanding of management accounting, a famous engineering companyHewland Engineering Limitedhas been selected in this report. The company isfounded in1957 by Mike Hewland in Maidenhead, England and conducts its business in automotive sectorspecialises in racing-car gearboxes.This report covers definition and various aspects of MAS, knowledge of MA reporting,budgetary toolsas well as such system helps the company in solving various financial problemswithin its working environment and assist in answering to such issues. This report provides thevarious methods that may help in estimating and analysing future business conditions inorganizational context.ACTIVITY 1P1. Management Accounting System and itsvarious kind:Management Accounting:It may be defined as collection, documentation, abstracting,evaluating and supervising the data to assist the management (for maintain sustainability infunctioning of the entity to attain its target. Management accounting may be defined as techniquewhich is utilised by the management of an entity to be able to take effect of its internaloperations and functions. The essential task that a management accountant of an entity has toaccomplish are planning, organizing and supervising activities of the firm (Serena Chiucchi,2013).Management Accounting System:MASmay be defined as approach that includescreation ofseveraldocuments andestimations of company's future requirements for assisting themanagers. With help of MAS, Hewland Engineering limited can prepare its income statements ateach year end. An entity may utilise distinct kinds ofMASthat are as follows:
Price Optimisation System:Itis a techniquethat assist inunderstanding that how thepotential consumerwill behave onseveral quotationsfor a specific commodity. Priceoptimisation system helps in choosing best price which issatisfactory on both behalf (i.e.company and customers).Respective organization utilises such technique to fix amounts ofseveral products in marketas per several circumstancesfor itspotential consumers.Inventory Management System:Thistypeis evolved to maintain and manage the mostessential source of organizational income viz. the inventory or stock of products. It keeps recordof raw material, WIP, finished goods dispatched for delivery, sales return and goods onconsignment, etc. The management of respective enterprise may becapable in selectingappropriate methodfor inventory valuation,these are as below:LIFO:Insuchvaluation method, closing stock are valued based on price of last inventorypurchased.FIFO:In technique, inventory is valued on the basis rate of first inventory purchased.Weighted average method:In this method, company divides the total cost of goodsavailable for sale with number of quantity available.Job Costing System:Such type of MAS is used by an enterprise for a specific job incalculating the cost of such particular job by adding all the costs such as materials, labour andoverheads(Lindholm, Laine and Suomala, 2017). In other words, it may be said that Job costingsystem act as a tool in an organisation for tracing costs related to individual’s jobs and evaluatethe performance of such job to reduce the costs of all future jobs. For example, an enterprise mayproduce custom made machines as job A and It may construct custom-designed buildings as jobB.Cost Accounting System:It is atype of MASthat helps a manufacturerto find andmeasure several costs in manufacturing process. Cost accounting system helps the company inestimating the correct cost of its products because it is very essential to control the cost for betterprofitability.The management of Hewland Engineering Limited utilises such type of MAS forestimating the expenses of its products and calculate the profit of the organization.A companyby implementing such can reduce its costs related to manufacturing process that may be used forimproving its several business operations(Stechemesser and Guenther, 2012).
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