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Management Accounting: Jaguar Land Rover Automotive PLC

   

Added on  2021-02-19

25 Pages6290 Words142 Views
ManagementAccounting

Table of ContentsINTRODUCTION ..........................................................................................................................3TASK 1............................................................................................................................................3P1) Various types of management accounting systems ........................................................3P2) Management accounting reporting .................................................................................6M1) Benefits and application of management accounting system ........................................8D1) Analysis of integration of management accounting system and reporting.....................9TASK 2............................................................................................................................................9P3) Calculation of cost and preparation of income statement................................................9..............................................................................................................................................15..............................................................................................................................................15M2) Management accounting techniques to produce financial report ................................15D2). Interpretation of data...................................................................................................16TASK 3 .........................................................................................................................................16P4) Different Planning tools used for budgetary control......................................................16M3) Application of planning tool for preparing and forecasting budgets............................18TASK 4..........................................................................................................................................20P5) Effectiveness of management accounting systems to respond on financial problems .20M4) Management accounting lead an organisation to sustainable success .........................22D3) Planning tools for accounting help to solve problems and support organisation withsustainable success...............................................................................................................22CONCLUSION .............................................................................................................................22REFERENCES..............................................................................................................................24

INTRODUCTION Management accounting is a process used for providing all the relevant Montereyinformation to managers and top authorities for better formulation of policies and also facilitatesaccurate decision making (Management Accounting, 2019). It includes timely recording offinancial transaction for better presentation of business activities and financial informationthrough maintaining different reports, budgets and statement which reveals the true conditionsand performance of organisation for benefit of internal management and other stakeholders.Main aim of management accounting is to provide effective control and monitoring on differentactivities of an organisation for timely achievement of goals and targets (Akkermans and VanOorschot, 2018). This assignment is based on Jaguar land rover automotive PLC which is a well knownBritish multinational automotive company. It is also a top UK engineering firms where top notchcars are get manufactured (The top UK engineering firms for fresh graduates, 2019). Jaguar landrover is having its headquarter in Whitley, Coventry, UK and is a subsidiary of Indianautomotive company Tata Motors. This assignment includes description about managementaccounting system and its types. Different methods of reporting and income statement throughabortion and marginal method is also included. Different types of planning tools along with theiradvantages and disadvantages are also included. At last, role of management accounting inresponding and solving financial problem is also discussed. TASK 1P1) Various types of management accounting systems Management accounting is mainly concerned with timely recording of day – to – daytransaction in form of numerical terms which provide effective presentation of financialtransaction and other important information for better formulation of plans and strategies (Barrosand da Costa, 2019). Proper accounting system ensures better monitoring and control overdifferent activities and task thus, also helps in keeping a check on overall performance and

conditions of an organisation. It also helps in reducing wasteful activities and achieving thetarget of cost effectiveness. Information provide through management accounting system is veryuseful for effective decision making and also provide information about future opportunities andgrowth plan. It is mainly used by stakeholders for analysing the current performance oforganisation to make decisions about future investment. Essential requirements of Different types of management accounting systemCost accounting system - It is a costing system used as a framework for calculation ofcost of a product through proper inventory valuation for analysing the profitability oforganisation. Cost accounting system is based on either traditional costing system or activitybased costing system which aim at recording production cost through calculating input costs forevery product and also includes fixed costs like capital equipment depreciation. Cost accountingis a crucial part of management accounting as it facilitates use of many analytical tools likemarginal costing, budgetary control, operating costing, etc. Jaguar land rover is making effectiveuse of cost accounting system as it helps in maintaining hard-hitting control over cost ofproduction through reducing wasteful activities and expenses also facilitates measuring offinancial performance through comparing budgeted inputs outcomes with actual results(Bollinger, 2019). Use of cost accounting system is made by jaguar land rover to control or reduce the costof its production. The essential requirements of cost accounting includes cooperation and properparticipation of executives from various department of organisation and it is also essential thatcost of installing and operating the system should justify the result and it should not sacrifice theutility of company by introducing meticulous and unnecessary tasks and details. In Jaguar landrover, cost accounting system is tailor made, practical, simple and capable of meeting all therequirements of an effective cost accounting system. The cost accounting system of Jaguar landrover is accurate thus, provide authentic knowledge for decision making. Price optimisation system –This accounting system is mainly used for fixation of mostoptimum price level for a product through evaluating respond of consumer at different price levelfor a single product. It helps in keeping a check on level of demand and also focus on howdemand varies with change in price level. Pricing is one of the most powerful driver on whichthe profitability of an organisation depends thus, price accounting system is necessary as itfacilitates a perfect balance between cost and price of a product which will provide the maximum

level of profits. Jaguar land rover should make use of price optimization system to increase itssales and profitability through fixing most appropriate price for its product which will yield itbetter profit without reducing demand of product. Essential requirements of Price optimisationsystem include collection of historical data through proper analysis and evaluation of productvolume, company's process and promotion polices, competitor' s prices, economic conditions,etc. all these information are necessary to set or fix most suitable and profitable price level for aproduct. Inventory management accounting - This accounting system is used for establishing abetter control over inventory or raw material (Burritt and et. al., 2019). It includes properwarehousing and storage of all stock of raw material and finished goods, thus facilitates acoordination between supply and demand of raw material and ensures timely availability ofinventory for production of finished products. Inventory mange met system provides an effectivecontrol and helps in checking and monitoring wasteful activities, thus also provides possibleways of reducing unnecessary expenses and wastage of raw material.Essential requirements for implementing an effective inventory management accountingsystem includes setting par level of inventory on the basis of proper planning and analysis ofneed. A good relationship with suppliers is also necessary to avoid conditions of misscommunication and shortage of inventory. Contingency planning, forecasting and auditing isalso essential for implementation of an effective inventory management system, There are manytypes of inventory management accounting system, Jaguar land rover can select or implementany one of these strategy for implementing effective control on its inventory: Materials Requirement planning : It is used for calculation of material and componentsrequired for manufacturing a product. It is mainly divided into three parts which includestaking inventory of material in hand, identifying further requirement of material and laststep includes, scheduling purchase of needed amount of material. Quantity of requiredmaterial is totally depend on amount of expected sales thus, helps in maintaining abalance between demand and supply of product (Clifton and et. al., 2019). Just in time management- This strategy is used to increase efficiency and decreasewastage of raw material as provide an aligns raw material orders from suppliers thusminimize the cost of storage and warehousing. This method is quite risky and require

accurate forecast of demand of product as if demand rises unexpectedly than it might bedifficult to arrange the raw material as adequate amount of stock is not maintained. Days sales of inventory –This method provides a ratio of days indicating the averagetime period that a company takes in placing a new order for stock. This represents inadvance that for how long current stock of inventory will last thus, provide sufficienttime for placing the new order for stock.Economic Order Quantity- This method facilities calculation of that level or size of stockwhich should be purchased by an organisation at one time to reduce the overall cost ofhandling, carrying and ordering (Eldenburg and et. al., 2019). Jaguar land rover is making use of Materials Requirement planning. This system ofaccounting is essential for Jaguar land rover for proper analysis and planning and provide abetter discipline and consistency and also ensures timely availability of raw material and optimaluse of production resources. P2) Management accounting reporting Management accounting reporting is a processes of maintaining and preparing timelyreports by managers to provide accurate and most authentic financial information to makeaccurate decisions. It includes recording of day – to – day transaction for keeping a control andcheck on different business activities and also provide information about current performanceand condition of business which is useful for stakeholders to take decisions about futureinvestment and growth. Jaguar land rover is making use of effective management accountingreporting to properly record its financial transaction and for that purpose it uses differentaccounting reports which are described below: Budget reports – It is an internal report mainly used by managers to compare the actualperformance with estimations made. Hence, it provides the gap between desired performance andactual performance for a definite period of time. This comparison helps in discovering the flawsthus, manager can correct the problems occurring in business activities and it also evaluaterealistic and accuracy of the predictions and forecast made. Budget report included informationabout all the expenses and income thus, facilitates easy calculation of profit for a specific periodof time. Jaguar land rover is making annual budgets to keep a check on its performance and toanalyse whether its financial targets and cost effectiveness is reached or not.

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