Management Accounting & Its Types
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Added on 2020-12-26
Management Accounting & Its Types
Added on 2020-12-26
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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1P1: Importance of management accounting and various types of management accountingsystem.....................................................................................................................................1P2. Different methods used for management accounting reporting.......................................2M1. Benefits of management accounting system and its applications...................................4D1: Management accounting system and its reporting are integrated within organisationalprocess....................................................................................................................................4TASK 2............................................................................................................................................5P3: Calculation of cost using an appropriate technique.........................................................5M2: Various types of accounting techniques and financial reporting documents..................7D2: Data interpretation...........................................................................................................7TASK 3............................................................................................................................................8P4: Budgetary control and different types of planning tool and their advantages anddisadvantages used in budgetary control................................................................................8M3: Uses and applications of planning tools for preparing and forecasting budgets............9TASK 4..........................................................................................................................................10P5: Responses of management accounting system to deal with financial problems ...........10M4: Management accounting can lead organisation to sustainable success in responding tofinancial problems................................................................................................................12D3: Planning tools respond appropriately to resolve financial problems.............................12CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
INTRODUCTIONManagement accounting is a method which support in various management activitiessuch as planning, organising, directing, controlling. It allows management to develop theirunderstanding regarding investments and financial decision. It helps company in identifying theirfinancial position by preparing proper income statement, balance sheet, statement of ownerequity etc. for a financial year. Thus, it is clear from the above that management accounting istotally based on financial accounting and cost accounting.Airdri is a manufacture and supplier of various luxury, highly reliable, energy efficientand beautifully designed hand dryer that suit every wash room. It was founded in Oxfordshire(UK) in 1974 by two partner Peter Philipp and Peter Allen. This report cover variousmanagement accounting system, reporting method and its benefits that help Airdri to form ahealthy pricing strategy. Management also uses cost method for evaluation of product cost.Manager Airdri applies different planning tool and budgetary control for its forecasting and takeseveral accounting system that help them to resolve financial issue for achieving target (Abiolaand Ashamu, 2012).TASK 1P1: Importance of management accounting and various types of management accounting systemManagement accounting, a part of accounting, can be refer to a procedure of analysingbusiness costs and operations used to prepare intrinsic financial records, reports and account tohelp manager's processes of decision making in attaining goals of business. The main objectiveof cost accounting in Airdri (producer of hand dryer), i.e. the process of analysing business costand operation cost in order to prepare internal financial reports, records and account which helptheir manager in decision making process for achieving sales goals. These reports helps Airdrimanagers as it shows the amount of available cash, sales revenue generated, amounts of order in-hand, state of account payable and receivable, raw material, inventories and outstanding debt.Thus, it is important for company to measure their performance by preparing financial statementthat help them to expand sales and business. This is done by proper use of several managementaccounting system like cost accounting, price optimisation, inventory management and jobcosting that are explained below:1
Cost accounting systems: This accounting system known as product costing systemused by Airdri to estimate the cost of their product for making proper profits analysis, inventorycalculation and cost controlling. Airdri is constantly developing a variety hand dryer so it isimportant for their management to make a proper use of their resources in effective way withcalculation of product cost properly. In this cost system managers first measure and records allindividual cost, then compare inputs results to output or result that help them in measuringfinancial performance. Further, cost accounting system help Airdri to calculate the closing valueof inventory, work in progress and finished goods that help their management in preparation offinancial reports.Price optimization system: This management accounting system is process ofmaximising price against the customer willingness to pay. Airdri is a manufacturer and supplierof hand dryer and wants to follow price optimisation system for creating a reasonable price insuch a manner that their customer might not get affected and will to pay the price of product.Inventory management system: This accounting system is related to the process ofkeeping an proper record/track of company's inventories. Airdri adopt this system as it help themin proper storehouse, shipping, production, retail and other inventory movement of its product.FIFO, LIFO and weighted average are an example of inventory management system. Thissystem is concerned with minimizing the total cost of inventory, while maximising the ability toprovide customer with product in a timely manner. Airdri use various inventory managementtechniques to keep right amount of goods in hand to fulfil their customer demands that help themto maximise profit such method are stock review, EOQ, Just-in-time technology (JIT) and ABCanalysis. Job costing systems: This process involve the accumulation of cost of material, labourand overhead for a specific job or a services. Airdri uses this system to keep records of any directand indirect cost that is involved in production of its product. Manufacturing firm like Airdri usejob costing to control the use of raw material, labour hours and rate of equipment by allocatingthe cost of each customer order separately. With the help of this costing system, management settheir performance which help to quote price that allows to make a reasonable profit.P2. Different methods used for management accounting reportingManagement accounting reporting refers to the formation of management reports thathelp organisation in decision making and support its internal shareholder. This report consist of2
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