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Management Accounting - British American Tobacco plc

   

Added on  2021-02-19

16 Pages3508 Words162 Views
Finance
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ManagementAccounting
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Table of ContentsINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................1P1. Evaluate management accounting and management accounting system along with essentialrequirement of it, in the organization...........................................................................................1P2. Explain different methods which used in management accounting reporting.......................3P3. Calculate cost by using various techniques and then prepare income statement by usingmarginal or absorption costing method........................................................................................4P4. Advantage or disadvantage of planning tools which used for budgetary control..................7P5. Analyse how organization adopt management accounting system to respond financialproblems.....................................................................................................................................10CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
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INTRODUCTIONManagement accounting is a professional skills which used to prepare financial oraccounting information. It will assist by internal management in order to formulate policies,planning for the control of business operations. It is used for internal people which make itdifferent from financial accounting (Definition of Management Accounting, 2019). Mainobjective of management accounting is to use collected information and take effective decisionin order to achieve business goals & objectives. In order to understand management accountingconcepts, this report select British American Tobacco plc which is UK based multinationalmanufacture company (British American Tobacco plc (BAT), 2019). Company founded in 1902by James Buchanan Duke and they serve worldwide area. This report include various topic such as management accounting concept and essentialrequirement of accounting system. In addition, management accounting report, method ofcalculating cost, explain different tools for budgetary control and how different systems helps inresponding financial problems. MAIN BODYP1. Evaluate management accounting and management accounting system along with essentialrequirement of it, in the organizationManagement accounting: It is a process of collecting information which further help themanager to formulate strategy and used in decision making process. This accounting used forinternal purpose by using financial data. It help the managers of British American Tobacco plc todevelop financial statement which is beneficial for the stakeholder to take necessary actionsregarding their investment. Key functions of management accounting:Provide data: With help of management accounting, manager able to collect data whichis very important because all the decisions will going to take with the help of it. Analyse & interpret data: After collecting information, it is very important to interpretand analyse in the decision making process. Use as communication mode: With help of management accounting, manager able tocollect information and represent in effective manner which further used by the manager,1
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owner and investors for their future strategies. Financial information helps incommunicating their financial position and further actions will be based on it. Provide qualitative or quantitative information: Management accounting providequalitative as well as quantitative information. Net income or loss, total assets &liabilities, cash inflow these are quantitative information for the organization(Almaktoom, 2017). Growth or decline in the financial figures will helps in analysingweather business perform well in their field or not. It will be consider into qualitativeinformation. Management accounting system: There are various internal systems which is used bythe organization to measure or evaluate performance. It will further helps the stakeholders suchas creditors, investors, managers, owner etc. Some of accounting systems discussed below: Inventory management system: It is a system or software which helps the organizationto keep track their inventory level. Mostly it is used by manufacturing company tomaintain their records regarding stock. It is essentially required to analyse the availabilityof material at the time of manufacturing goods (Carlsson-Wall, Kraus and Messner,2016). In context of British American Tobacco (BAT), manager follow this system andmaintain proper records. It further helps in formulating strategy and taking decision inrespect of increasing productivity as well as profitability. There are three types ofinventory system such as LIFO, FIFO and Weighted Average but British AmericanTobacco company follow FIFO method to manage inventory level. Cost accounting system: It is also called costing system where it helps in estimating andevaluating cost of each item. Manager use this system to identify cost and develop moreeffective strategy to reduce its cost because it further helps in increasing profit margin. InBritish American Tobacco plc, it essentially required to identify tobacco's cost andfurther maintain for the whole production period. This system also include two differenttypes of costing such as product costing or activity based costing to evaluate their productcost and develop strategy accordingly. Price optimization system: It is an mathematical analysis which helps the organizationto identify customer behaviour on different price range for the product. It is also used toidentify that customers objectives will meet with organization and maximise operatingprofit. This system required by British American Tobacco plc to identify customer2
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