Management Accounting Assignment: Decision Making
Added on -2020-06-06
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ManagementAccounting
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1SECTION 1......................................................................................................................................1P1. Importance of management accounting in decision making.................................................1P2. Report making with an assistance of different systems of accounting.................................2P3. Income statement with managerial and absorption costing..................................................4SECTION 2......................................................................................................................................8P4. Tools used for planning purpose...........................................................................................8P5. Management accounting systems to respond to financial problems.....................................9CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
INTRODUCTIONWith an increase in complexity of business world it has become important that effectivemanagement is maintained so that desired goals can be achieved. Management accounting is aprocess through which different reports are prepared in an organisation which helps in takingvarious decisions. These are specifically of financial nature which involves different statementsthat are used by both internal and external users. It is necessary that enough time is given to thedepartment which is involved in the process of financial reports so that decision taken on thebasis of these will be accurate and can help enterprise in achieving its goals and targets timely(Ajibolade, Arowomole and Ojikutu, 2010). In the given report, different tools and techniqueswill be discussed which are used to prepare the accounts and also their functioning and role in anorganisation will be highlighted. Different practical solutions will also be given which will helpin understanding the working of absorption and marginal costing in an accounting year. SECTION 1P1. Importance of management accounting in decision makingManagerial system and cost accounting is a continuous process which is being followedin all the organisation in order to make the financial reports. The results of these statements helpin taking long and short term financial decision (Management Accounting, 2017). Through theprocess of management accounting data is being transferred into financial terms which act as aninformation for the different stakeholders. Various events take place at the work place and inorder to estimate the results of each recording them in books of accounts is necessary which isdone through this process.Importance of Management AccountingHelps in planning – With the process of management accounting an enterprise can planits long and short term goals.Determination of objectives – Through this process vision and route to achieve the settargets can be better designed.Good services to stakeholders – Information provided by the management accountingsystem is of vital use to different stakeholders. They can take their investment decisionsaccordingly and can manage its funds in a particular firm (Albelda, 2011).1
Enables good control – Through this process companies can facilitate effectivecontrolling culture at the work place. It is because through the financial records results ofdifferent years can be compared with one another and according required correctiveactions can be taken. Each system has their own significance in the organisation. Distinct tools are used to fullfill distinct purposes. Some of the management accounting systems are discussed below in detailand also given why they are essential and required in an organisation:1.Inventory management system – In order to carry out the production process stock isrequired in an organisation. For this it is very crucial that management of same is done insuch a manner that effective use of inventory is done so that output can be maximised.For this purpose level of required quantity of stock needs to be ascertain in advance sothat situation of both excess and deficit can be avoided as both the condition will haveadverse impact on the profitability of an enterprise. Hence, the given method helps inmaintaining the appropriate level of inventory in the organisation (Ward, 2012).2.Job costing system – To give the end results various jobs are performed in anorganisation. In order to measure the performance of each job it is necessary thatevaluation of each is done separately so that accordingly results can be ascertain. Thissystem of accounting helps in realising the actual investment required to be made in eachtask and also decision regarding discontinuing of a particular job which is not required istaken with the assistance of this method (Banerjee, 2010). This way total cost also getreduced.3.Price optimisation scheme – Cost of any product plays a very significance role in thechoice selection of the customers. Therefore, it is very necessary for an organisation toset the most suitable price of the commodity which can full fill the requirement of bothconsumer and producer. Through this system of accounting it can be calculated thatwhich price can give maximum benefit to producer without having loss of potentialcustomers.4.Cost accounting system – Value of any product involves cost of various steps taken inthe course of action to compete the output. Hence through this system appropriate costingof each project can be done so that overall control can be kept.2
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