Management Accounting Concepts Assignment
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Added on 2020-12-26
Management Accounting Concepts Assignment
Added on 2020-12-26
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MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1A. Explaining types of management accounting with its essential requirements.......................1B. Explaining different types of management accounting reports with their significance tomanagement................................................................................................................................3C. Benefits of management accounting systems and their application.......................................4D. Critical evaluation of the integration of management accounting systems and reporting ....5TASK 2............................................................................................................................................5A. (1) Explaining Absorption and Marginal Costing..................................................................5A. (2) & C. Preparing income statement using both absorption and marginal costingtechniques with a financial reporting document on it.................................................................6B. & D. Calculations on Cost Profit Analysis (break-even analysis) with an interpretation ofbusiness activity data..................................................................................................................8TASK 3..........................................................................................................................................10A. Explaining demerits and merits of different planning tools for budgetary control..............10B. Application of planning tools for analysing, preparing and forecasting budget .................11C. Comparing adapting management accounting systems for responding to financial problems...................................................................................................................................................12D. Analysing management accounting techniques that could lead organisation to sustainablesuccess.......................................................................................................................................14E. Evaluating planning tools for solving financial problems to attain sustainable success......14CONCLUSION..............................................................................................................................15REFERENCES..............................................................................................................................16
INTRODUCTIONManagement accounting is employed through senior management of organization forextracting critical data of business on the basis of financial position through which dailydecisions related to operations are made. Present report will discuss all concepts related tomanagement accounting with reference to Ovation System. There will be appropriateunderstanding on management accounting system with its various types. It will be applyingdifferent range of management accounting techniques such as absorption and marginal costingwith its profit and loss statement. It will reflect calculation of break-even point and margin ofsafety on its similar context. This report will also represent planning tools which are applicablein management accounting with their merits and limitations. Further, it will articulate propercomparison in between Ovation System and Compound Security System (major competitor) withapplication of management accounting to respond on its financial problems. In the same series, itwill evaluate planning tools for solving financial problems and lead to attain organizationalsuccess.TASK 1A. Explaining types of management accounting with its essential requirementsAccounting is of two types which are management and financial. Managementaccounting is referred as the process of preparation of accounts and reports which giveappropriate and timely information related to finance and statistics to its managers for takingdecision from short and long term perspective. There is a huge requirement of managers ofdepartment for forming various reports and to communicate information to team of seniormanagement. This data is not shared with lenders, other external parties and shareholders.Financial accounting is replicated as a process of summarising, reporting and recording eachtransaction of organization for giving accurate picture of its fiscal performance (Nitzl, 2018).There are various types of management accounting systems such as:Cost accounting system: It is a system of accounting which is used throughmanufacturers for tracing activities of production with application of perpetual inventory system.In simple words, accounting system is framed for manufacturers who track inventory flow oncontinuous basis at different stages of production. It tracks raw materials on this stage andconverts the same into finished goods. These materials are used in production and on immediate1
aspect, these are recorded and credited through its accounts and debited from goods in processaccount. It comprises of actual, normal and standard costing. Actual costing: It uses rate of actual and direct cost with its application for identifying thecost of specific items. The hours of manufacturing time are analysed by managers alongwith requirement of calculating actual cost of producing a particular product.Normal costing: It uses annual overhead rate which is predetermined for allocatingmanufacturing overhead to its particular products. In simple form, its rate is directlybased on the expected overhead costs for whole accounting year and its volume ofproduction. Example could be rent or mortgage and depreciation on machine used forproducing products.Standard costing: This is estimated and predetermined cost for performing operation tomanufacture any good on the basis of normal condition. It is applicable as the target costand developed through analysis of historical data from motion or time study. Its examplecould be cost of direct material, labour or manufacturing overhead (Saeidi and Othman,2017).Job Costing system: It engages the process of accumulating information related to costassociated along with proper production or service job. There is a huge requirement ofinformation for submitting information of reimbursed cost to specific customer. The applicationof information is used for identifying the accuracy for estimating system of organization. It hasgained capability for quoting price which allows for obtaining reasonable margin. This particularinformation is used for allocating the cost of inventory to its goods which were manufactured. Inthis system, it has to accumulate information related to direct material, labour and overhead. Forinstance, it is appropriate for determining constructing cost of custom machine, buildingconstruction and to design software program.Inventory management system: It tracks goods via whole supply chain or businessproportion which is operated in it. This system covers each item of production to warehouse toshipping, retail and each movement of stock and parts in it. There are various systems ofmanaging inventory such as periodic inventory, JIT, LIFO and FIFO.Periodic inventory: It is the system which updates on periodic aspect. It does not makeany effort for proper record of either cost of sales or of inventory.2
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