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Management Accounting & Applications

   

Added on  2021-02-20

21 Pages6517 Words98 Views
ManagementAccounting

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1P1 Management accounting and its requirements.......................................................................1P2 Methods used for management accounting reporting.............................................................3M1 The advantages of management accounting and applications...............................................5D1 Management accounting system and reporting integrated with organization process...........6LO 2.................................................................................................................................................6P3 Calculations and interpretations.............................................................................................6LO 3...............................................................................................................................................13P4 Advantages and disadvantages of different planning tools used for budgetary control.......13LO 4...............................................................................................................................................15P5 Comparison of how organizations adopt the use of management accounting tool for dealingwith their financial issues and problems....................................................................................15CONCLUSION..............................................................................................................................17REFERENCES..............................................................................................................................18

INTRODUCTIONManagement accounting refers to the presentation of the accounting information andoutcomes to the management in order to frame the policies and other daily routine work in theorganization. Mentioned discipline assist the organizational management to perform themanagement function like preparing policy, streamlining varied things in sequence at workplace,control of cost and making business decisions. It encompasses facts and information in respect toproduct costing which is provided to the managers of the organization on timely basis whichhelps them in making prediction and making cost control related decision at the workplace.Current study cover UK based firm Avon Rubber Plc, which basically operate in manufacturingmedical items. Mainly firm main focus is on development of respiratory protection equipmentfor military, rubber products for personal protection and milking equipment for the farmers. In initial part of report main work is done to discuss management accounting system indetail and along with this different planning tools are also described. Further the report will alsoinclude the preparation of income statements using marginal costing and absorption costing. Inthe report at end use of varied systems discussed in the report in respect to solving financialproblems at workplace.P1 Systems used in management accounting for making business decisionsManagement accountingThe term management accounting refers to the provisions that has been used by themanagers for the taking the accounting information for the better in future for themselves whichhas been decided before it matters within the company. It also adds the performance andmanagement in control function. Management accounting is a profession which has beenincluded the partnering in the decision-making of the management, devising planing and also theperformance management method. It also provides the experts in the financial reporting & alsocontrol for assisting the management in the implementation and formulation of the company'sstrategy(Aboody, Levi and Weiss, 2018). Management accounting refers to the events which happen around the business and it hasbeen considered the needs and wants of the business. From all it has emerge all the estimate data.It also includes the preparing & providing the timely statistical and financial information anddata to the manager of the AVON company from that they can make the short term and day to1

day decisions. Maintaining and starting the professional practices of accounting which importantfor the growth and development of the business.Management accounting helps in decision-making process of the organization where ithelps in maintaining the records, financial reports, & also the accounts which has been providedthe correct & timely financial information for making the long and short-term decisions. Essential requirements of management accounting.Cost-accounting systemCost accounting system is one of the most popular system used by the business firms(Gitman, Juchau and Flanagan, 2015). It is the accounting system in which cost of product isassessed in order to make decisions in respect to inventory valuation, profitability analysis andcost control. Firm have data and on basis of this it determines amount of inventory it needed toproduce specific quantity of goods. This reflects that cost accounting play a crucial role inmanagement day to day decision making process. The main use of the cost accounting is it helps in decision-making which optimise therevenues and profitability and it is a internal reporting system for the own management for all thedecision-making. Cost accounting system helps the owners and managers for understanding thecost for the ruining business (Kaplan and Atkinson, 2015).Inventory management system.It is management system where software is used in which all information and facts arerecorded in respect to purchase of raw material transportation of units, stored final goods unitsetc. By analysing data time on which order need to be placed is determined and whether goodsoverstocked or understock is determining. Thus, it can be said that inventory managementsystem has due importance for the business firms.Inventory management system raise the sales and also tracking each and every units withthe powerful stock management, fulfil the orders & control software of the stock. Inventorymanagement system is a specifying the placement and shape of the stocked goods. It is basicallyrequired at different locations with the facility and so many locations for supplying the networksfor preceding the planned and regular courses of production & stocks of all the materials. LIFO:- It is basically a method that has been used in the inventory of the accounts. It has beenused and governed for acceptive the accounting principles. It helps the company for selling theproducts and also identify the cost of the products which has been increases the sales.2

FIFO:- The term FIFO stands for the first-in, first-out and also meaning of the oldest inventoryproducts has been recorded for selling first and it is not necessary for exacting the oldest objectsof physical and also it has been tracked & sold. AVCO:- this inventory method is basically based on the average cost of inventory during theperiod and it has been computed by taking dividing goods cost in inventory by so many numbersof products. Job-costing system Job costing system is one of the most important accounting system under which fordifferent jobs costing is done in different manner (Maas, Schaltegger and Crutzen, 2016). It canbe observed that in manufacturing firm’s wide variety of products are manufactured and eachhave different specification because of which their cost is also quite different. Thus, job costaccounting system assist firm in identifying products where cost is high, medium or low.Moreover, by evaluating facts it can also be identify that if cost is high then which component isplaying vital role in elevating cost. This make it necessary for the firm to understand to adopt jobcosting system if it is manufacturing multiple products at the workplace. Thus, it can be said thatmajor benefit of job costing system is that it assists firm in cost control through process rereengineering approaches. Scope of job costing system is wide as it can cover any number ofproducts manufactured by the firm and assist firm in making decision for each product lineindividually. Price optimizing systemIt is a mathematical model which has been calculated the varies demands at various pricelevels and then it has been combine all the data with the information on the inventory level andcost levels for recommended the price that improves the profits and revenues. Under the abovementioned system historical data is analysed by the firm to make predictions and to estimatebuyer behaviour if price increased or decreased in the market (Rikhardsson and Yigitbasioglu,2017).In this system some part of marketing research also comes where market segmentation isdone and, on that basis, varied sort of people is identified whose preference are different and areable to make purchase up to particular price. This price optimization has been implemented in somany industries such as banking, retailers, casinos, banking, car rental and also the insuranceindustry.3

P2 Reporting approach in MAManagement accounting internally concentrate on the data which has been receivedthrough all the accounting. It specifically uses the controlling, decision-making and planning ofthe business. It generally depends on the standard financial statements. There are some methodsof the management accounting reporting which are as follows;Budget reportIn order to prepare budget report budget is prepared in which income and expenses arelisted for months after doing deep research on basis of predictions or assumptions. The report ofthe budget helps the owners of the business for analysing the managers and performance of theirdepartments. Interesting fact is that prediction is made on basis of previous year budget andactual observations as well business environment that is expected in current financial year.AVON rubber Plc company has spending the list of all the sources of incomes and expenses.Company attempts to finish the target which remains in the budget amounts (Schaltegger andBurritt, 2017).Managers of the business firm make use of budget to measure the performance. Afterpreparing budget manager attempt to make expenses within the determined limit. If expensesbreach that limit it is assumed that firm make over expenses and performance is poor. On otherhand, if expenses are within limit it is assumed that performance is good.Accounts receivable reportThe accounts receivable report is one of the critical tool for maintaining the cash flowand it has extended the credit to the consumers of the company. This report of managementaccounting break down the consumers balance by they have been owned. Most of the reportidentified the problems with AVON rubber Plc company for the collection process.It is basically presented in the balance sheet as an asset. It is one of the series where thetransactions for dealing with billing of the customers and clients. Accounts receivable isbasically present the money which has been owned by the entities to the organization on the salesof the goods and services on the credit(Schaltegger and Burritt, 2017). It is typically executed theinvoice and either it is mailing and electronically delivering to its customers. The accountsreceivable is charge the receive amount on the behalf of the organization and also apply ittowards the actual pending balances. Job cost report4

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