Introduction to Management Accounting : Assignment

Added on - 22 Nov 2020

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MANAGEMENT ACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1A. Explaining management accounting and different type of management accounting system................................................................................................................................................1B Different management accounting reports and their importance in organisation...............3C. Benefits of management accounting system in Vectair Holdings Ltd...............................4D). The integration of management accounting system and management reporting inorganisation............................................................................................................................5TASK 2............................................................................................................................................6A.1 Absorption costing and Marginal costing........................................................................6A.2 Calculation of absorption and marginal costing..............................................................6B. Calculation with the help of break even formula...............................................................8..........................................................................................................................................................8C. Significance of generating financial reporting documents................................................8D. Interpreting data of business activities performed in above case......................................9TASK 3............................................................................................................................................9A. Advantages and Disadvantages of different types of planning tools used for budgetarycontrol.....................................................................................................................................9C. Comparison of Vectair Holdings with Nisa in adapting different management accountingsystems to respond financial problems.................................................................................10C. Representing application of planning tools for purpose of forecasting, analysing andpreparing budget...................................................................................................................12D. Analysation of management accounting techniques for sustainable success..................12E. Evaluation of planning tools that could be used to solve financial problems..................13CONCLUSION..............................................................................................................................15REFERENCES..............................................................................................................................16
INTRODUCTIONManagement accounting is referred as specialised branch of accounting as it plays veryimportant role for surviving and accomplishing growth in business entity. In the present scenario,there is huge requirement for presence of appropriate management accounting system forensuring about proper and efficient day to day non financial and financial activities. The presentreport will discuss about its significance and types on basis of Vectair Holding (SME). In thesimilar aspect, it will show various information related to management accounting reports and itssignificance to management. This report will represent advantages and limitations of accountingsystems along with their application. It will articulate about different range of managementaccounting techniques such as absorption and marginal costing. This report will also provideimportance of these techniques along with Break even and Margin of safety. Furthermore, it willdiscus about different planning tools on basis of budgetary control with their merits, demeritsand its application. For comparing various parameters for responding to financial problems,NISA has been considered with proper evaluation.TASK 1A. Explaining management accountinganddifferenttype ofmanagement accounting systemIt is a processwhich manages income and expenses of a business. Accounting is aprocess of systematic recording, measuring and communicating information about day to dayfinancial transactions of company.Financial and management accounting are two main type of accounting system:Financial accounting:this accounting systemkeeprecordof all transactionsin anorganisation. As per the guidelines,all the transactions in a company are recorded, summarizedand presented in a financial reportwhich helps in evaluating overall financial performance. .These statements are considered to be used by external people like shareholders, investors,government, auditors etc. to evaluate the financial strength of an enterprise. Examples areIncome statement and balance sheet (Otley, 2016).Management Accounting is a process which helps in identifying, measuring, analysingand communicating information to managers so that organisational goals and objectives can bedetermined.The basic difference between management and financial accounting is the users of1
the information.Managerial information provided by management accounting is used bymanagement of company, where financial information is used by both outsiders and managementof company.Management accounting helps in determining business expenses to maintaininternal fiscal report and record, which help in decision making process of management ofcompany in achieving pre-determined goals.Different types of management accounting system that are required by Vectair Holdingsare:1.Cost accounting system:This system is used by manufacturers to record the flow ofinventory through various production stages.It helps in estimating the expenses of thegoods produced for determining revenue, inventory valuation and cost- effectiveness.It isimportant for a firm to know which products are profitable and can be determined byknowing accurate cost of production (Cost Accounting system,2018). Cost accountingsystem involves actual costing, nominal costing and standard costing. It consists ofactual, normal and standard cost which are described as follows:Actual costis referred as an expense on actual aspect which are used for acquiring assetalong with supplier invoiced expense and delivering cost and appropriate setup.Normal costis used for proper valuation of products which were manufactured as itcomprises direct material, direct labour and manufacturing overhead is identified on itsparticular rate (Fullerton, Kennedy and Widener, 2014).Standard costis replicated as practice for substituting expected cost on actual aspect withreference to accounting records and periodically differences in expected and actual cost.2.Inventory management system:it is a system that uses company's inventory, orderingand storing it. Vectair Holding's input and finished goods and services are essential partof the business activity. This system is important as it lets the production department theneed to restock certain items, purchasing of raw material and at what price should bepurchased.The main objective of this system is to check the requirement of moreinventory or the extra inventory level or shortage of stock. It should consider varioustechniques such as Just in Time, FIFO, LIFO and periodic inventory in Vectair Holding.2
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