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Management Accounting INTRODUCTION 1 P1 Essential Requirements of Management Accounting Systems

   

Added on  2020-06-04

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ManagementAccounting
Management Accounting INTRODUCTION 1 P1 Essential Requirements of Management Accounting Systems_1
Table of ContentsINTRODUCTION...........................................................................................................................1P1 Essential Requirements of Management Accounting systems..............................................1P2: Methods used for management accounting reporting...........................................................3M1...............................................................................................................................................4D1................................................................................................................................................5P3 Use of absorption and marginal costing to make income statements....................................5P4 Disadvantages and advantages of various planning tools used for budgetary control..........8M3...............................................................................................................................................9P5 Use of management accounting in solving financial problems...........................................10D3..............................................................................................................................................11M4.............................................................................................................................................12CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
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INTRODUCTIONManagement Accounting is a statement carrying the financial and statistical informationof the company necessary for the purpose of decision making (Macintosh and Quattrone, 2010).This process is an integration of accounting, finance and management to develop a betterunderstanding of the business activities. Planning for the organisation is dependent on this report.The information gathered is further utilised to perform monitoring and controlling functions bythe management. It is a process which involves analysis, interpretation and presentation of theinformation gathered in financial accounting. The activities conducted in this process are carriedout in an efficient manner and information is collected should be the best of knowledge so thatthe decisions taken works for the benefit of the company. Management accounting is differentfrom cost accounting in which reports are only prepared for the stakeholders. The report consistof information such as available cash, sales revenue, current assets and liabilities of theorganisation. The report is kept strictly confidential and can be accessed by only the internalmember of the company. The various tools and techniques used in this process are mentionedand along with a planning strategy for the coming period.P1 Essential Requirements of Management Accounting systemsManagement accounting is process which obtains, identifies, analyses and interprets theinformation for the planning, monitoring and controlling of the business activities. It is anamalgamation of accounts, finance and management for the welfare of the business. The reportwhich is formulated after this process is being sent to the top management which helps them informulating policies and deciding the future course of action. The data collected is revenue, cashflows and debts of the company (Baldvinsdottir, Mitchell and Nørreklit, 2010). The financial andnon financial information obtained is combined to get a better view of the circumstances. Thisprocess is utilized in all the organisation be it public or private limited company.Management accounting system however is a system responsible for gathering offinancial data across various business operations such as sales, revenue, inventory costs andprices of raw materials and converting into reports.The following are the types of management accounting system.Inventory Management System:This system is the most preferred accounting system used for tracking inventory levels,sales and deliveries. The most common technique used in this system is Bar code tracking. This1
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technique helps in tracking the inventories. Each inventory is provided with a bar code . The barcodes are scanned whenever the inventories move in or out of the facility or can be used formoving the inventory within the storage facility as well. The another common tool used is RFID.This tool has a feature of advanced bar coding as every item consists a device which emits signalany movement of the same can be tracked in no time. Both the tools help in maintaininginventories at a appropriate level so that the company does not have to bear extra costs forstoring the same.Job costing systemThis accounting system focuses on accumulation of manufacturing cost independently foreach job. This system is beneficial in the company producing diversified products or nichecommodities (Lukka and Modell, 2010). The costs are categorised into overhead, direct andindirect costs and lastly labour cost. The sole purpose of this system is to control themanufacturing costs for each unit and enhancing the profitability.Price Optimisation systemAs the name suggests this system focuses on optimising the cost incurred by the companyon producing a product. This system helps a company by increasing the level of profitability.The price charged from the consumers need to be maintained at a profitable level so that there isan increase in the per product margin of the company. The crucial part is the price is to bedecided keeping in mind the competition, market and the purchasing power of the consumers sothat they are able to afford the product.Cost accounting systemCost accounting system is a tool used by the business houses to estimate the cost ofpricing of products for profitability analysis and cost control. This system is used to identifywhat products are profitable for the company and which one are incurring losses. The variouselements which are involved in cost are to analysed while calculation of cost and ensuring thatproblems shall not arise due to the non performing elements. This ensures the company that thegoals will be achieved in an effortless manner. The essential requirement of Management accounting which are to be fulfilled by managers are:Traditional accounting techniques: these techniques are often used enterprises whichoperate at a small or medium scale due to the less finance. The technique takes intoaccount the cost and profit on the forecasting basis. The need of management accounting2
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