Management Accounting and Its Tool and Techniques : Report
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Added on 2020-07-23
INTRODUCTIONThis report includes the important and necessary discussion about the managementaccounting and its tool and techniques which helps the company to evaluate its overallperformance. It is a planning and measurement tools for the company. It also consider the briefstatement about various types of accounting systems and their important for business activitiesto be consolidated with management accounting reporting. Under this report, Tech (UK) Ltdproducing a special mobile phone charger and it considers management accounting improvescommunication system between the various departments about the flow of financial informationis readily available to all the departments to improve their decision making. Under this report,the organization will frame the reporting for producing the decisions in an appropriate manner.There are various accounting tools and techniques which are utilized by the company forachieving business objectives in most effective and efficient ways (Hilton and Platt, 2013).TASK 1P1. Management accounting and the necessary requirements of administration accountingframeworkManagement Accounting merely utilized to the investigation, interpretation,recognition, and analysing of accounting data and information (Management Accounting, 2017).Management accounting helps the managers and accountants in the making or formulation ofpolicies, decision-making process and in the daily business operations for the company. Useful and essential areas of management accounting are:Risk measurementPerformance evaluationUseful resources allocationPreparation of financial statementDecision making and policy framing1. Distinguish between management accounting and financial accounting:Objectives: The main aim of financial accounting is recording various operationaltransactions in an appropriate a manner and assesses the enterprise outcome and financialposition whereas the aims of management accounting is to render essential information to themanagement for the efficient performance of its functions.1
Set of rules and regulations: Financial accounting is obsessed with a different rules andregulations and prescribed standards which can be used to the organization whereas noapplication of accounting principles and conventions are imposed in the management accounting.Period: The management accounting reports and statements are prepared at regularintervals whereas the financial accounting is prepared at the end of accounting period.Sources: The financial accounting uses the financial data whereas the managementaccounting uses the financial as well as non- financial data (Lukka and Vinnari, 2014).Subject matter: In management accounting, each department of the business is treatedas a separate entity. Therefore, performance reports and statements are prepared for eachdepartment of the business separately whereas the financial accounts are prepared for thebusiness as a whole.2. The management accounting information importance as a tool of decision-making:Activity-based costing: It apportions the overhead to those units which are actuallymanufactured and use it. The activity-based costing may help to reduce the overhead costwhich is targeted by the company. It works in the complex or rigid environment, wherethere are various products and machines are used to producing. It also helps inrecognizing the activities of business and accordingly assign the indirect costs to theproducts which are produced (Bodie, 2013). This costing identifies the relationshipbetween the activities, costs, and products, and on the basis of this relationship, it makesan assigns the indirect costs to the manufactured products. This costing is helpful toanalyse the profitability, customer preferences, product costing, target costing and servicecosting also.Relevant costing analysis: This cost analysis is associated with the managementdecision and which will help in change the future outcome of that decision. This costanalysis is very useful to reduce the immaterial information from a particular decision-making process. It is a very useful tool for the short-term financial decisions in anorganization. Relevant costing is opting in competitive costing decisions, make orpurchase decisions as well as further processing decisions.The exercise of useful and important data: The management accounting informationprovides a data which is used to formulate the strategies and decisions for thedevelopment of the company. The managers use the budgets, financial statements, and2
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