Management Accounting - Tech Ltd
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Added on 2020-09-17
Management Accounting - Tech Ltd
Added on 2020-09-17
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Management Accounting
TABLE OF CONTENTSINTRODUCTION......................................................................................................................1TASK 1......................................................................................................................................1a. Explaining management accounting and essential requirements of such system..............11. Difference between management and financial accounting...............................................12. Importance of management accounting information as a decision making tool................23. Cost accounting system......................................................................................................34. Inventory management system...........................................................................................35. Job costing system..............................................................................................................4b. Presenting financial information........................................................................................41. Presenting different types of managerial accounting reports.............................................42. Stating reasons due to which it is important to present information in a understandablemanner....................................................................................................................................5TASK 2......................................................................................................................................5Preparing statements using marginal and absorption costing system....................................5TASK 3......................................................................................................................................7a. Presenting different kind of budgets and their advantages as well as disadvantages.........7b. Defining budget preparation process and determination of pricing using varied costingsystem.....................................................................................................................................9c. Significance of budget as a tool from the perspective of planning and control.................9TASK 4....................................................................................................................................10Presenting manner in which balance scorecard technique assists in responding financialproblems...............................................................................................................................10CONCLUSION........................................................................................................................10REFERENCES.........................................................................................................................12
INTRODUCTION In the recent era, business units lay more focus on undertaking managementaccounting tools and techniques with the motive to make effectual use of financial resources.Manager of the company uses management accounting tools for getting timely financial andstatistical information for taking day to day as well as short term decisions. Present report isbased on the case situation of Tech Ltd which produces special chargers for mobile phone.Further, other gadgets are also produced and offered by Tech Ltd in the UK. In this, reportwill provide in-depth insight about the different types of MA systems which can be used fordecision making. Further, report also depicts the level to which managerial reports aid indecision making aspect. Report also entails the manner in which absorption and marginalcosting system helps in assessing profit margin. It also discusses about different MA toolswhich can be used for planning purpose and coping up with the issue. TASK 1a. Explaining management accounting and essential requirements of such system1. Difference between management and financial accounting Financial accounting is highly concerned with the recording, analysis andsummarization of monetary transactions pertaining to a business. On the other side,management accounting field focuses on preparing internal business reports timely and in anaccurate manner. Tech Ltd should consider differences that take place in betweenmanagement and financial while making plan about the future operations such as:Differential basisManagement accountingFinancial accountingObjectiveMA helps in planning, settinggoals and evaluating thesame. Provides in-depth insightabout financial position andperformance at the end ofaccounting year.StakeholdersInternal stakeholder such asmanagement team usemanagerial accountingreports for decision making Financial accounting satisfiesthe need of both internal andexternal stakeholders. RequirementNot legally required, mangerprepares report as perrequirement on weekly andmonthly basis. Business unit needs toprepare and publish financialreports at the end ofaccounting period. FocusIt lays focus on present andhelps in taking decisionsabout near future. Under FA, emphasis isplaced on historicalinformationFormatIn MA, informal format isSpecific formats are followed1
followed for the purpose ofaccount preparation andreporting (Aleem, Khan andHamad, 2016)under FA for preparingreports. RulesUnlike FA, no need existspertaining to followingspecific legal requirementsand rules.In FA, GAAP and IFRS isfollowed while preparingfinancial statements. InformationFurnishes monetary andcompany goal driveninformation. This accounting systemprovides monetary andverifiable information. 2. Importance of management accounting information as a decision making tool Management accounting tools provide deeper insight about the internal operation andthereby help in devising competent plan. In the context of Tech Ltd, significance of MA indecision making can be presented in the following manner:Company can do relevant cost analysis by using the techniques of MA. It will assistTech Ltd in determining selling prices and identifying the manner in which productshould be sold to the customers.MA serves information about material, labour and overheads incurred formanufacturing products (Alfonso and et.al., 2016). Thus, using MA tools Tech Ltdcan perform make or buy analysis in the best possible way. Using MA tools manager of Tech Ltd can make assessment of departmentalperformance and thereby, becomes able to plan about incentives and other activitiessuch as training etc.3. Cost accounting system Cost accounting system is used by manufacturers for recording production activities.Tech Ltd can use cost accounting system for recording, classifying, summarizing andanalysing alternative course of action for cost control (Fullerton, Kennedy and Widener,2013). Using such system firm can determine the cost of running business and thereby wouldbecome able to do profitability analysis more effectually. Advantages 2
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