Management Accounting - Renishaw Plc

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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1ACTIVITY 1.................................................................................................................................1PART A.......................................................................................................................................1P1. Management accounting with its systems.............................................................................1P2. Methods for management accounting reporting....................................................................3M1. Benefits of management accounting system........................................................................4D1. Integration of management accounting systems as well as reporting with organisationalprocesses......................................................................................................................................5PART B........................................................................................................................................6P3. Calculation of costs and preparation of income statements...................................................6M2. Application of management accounting techniques...........................................................10D2. Interpretation of data...........................................................................................................11ACTIVITY 2..................................................................................................................................11Part A.........................................................................................................................................11P4. Planning tools for budgetary control...................................................................................11M3. Uses with application of tools so to forecast budgets........................................................13PART B......................................................................................................................................15P5. Comparison of ways in which management accounting systems are adopted to respondfinancial problems......................................................................................................................15M4. Analyses of ways management accounting helps in resolving financial problems...........17D3. Evaluation of the ways planning tools respond appropriately to solve financial problemsas to lead sustainable success.....................................................................................................17CONCLUSION..............................................................................................................................17REFERENCES..............................................................................................................................19
INTRODUCTIONManagement accounting is a concept which makes a proper use of financial and non-financial data to translate it into meaningful information that facilitates decision making ofmanagers of organisations (Bandy, 2014). It involves methods as well as techniques which playsnecessary aspects while planning business actions and controlling performances. It enablesadministrators to minimise losses together with maximising profits. Using statistical devices suchas graphs, charts or diagrams, management accounting presents as well as interprets financialinformation in numerical terms. To develop knowledge about management accounting,Renishaw Plc is selected which is one of the top engineering firm having headquarters atWotton-Under-Edge, UK. The entity is popular for its coordinate measuring machines additionto machine tool products.This report includes concepts such as management accounting systems, reportingmechanisms and costing techniques that are further used in producing management reports. Italso comprises planning tools with their benefits and shortcomings for budgetary control. Inaddition, financial problems are discussed that are resolved using systems and appropriateaccounting approach so that business can lead sustainable success.ACTIVITY 1PART AP1. Management accounting with its systems.Management accounting: Management accounting is aforementioned to procedures ofidentifying, measuring, gathering, preparing, explaining and spreading information to assistmanaging directors while decision making in context to fulfilling organisational goals. It iscategorised as input measurement basis, cost accumulation methods, inventory cost flows,inventory valuation techniques as well as cost flow assumption. It also benefits in planningahead, analysing and controlling business performances so to work on the path of ongoingimprovements. In relevance to Renishaw Plc, it is used to measure revenues, assets as well ascosts (Berry, Broadbent and Otley, 2016). It aids towards selecting appropriate alternative indecision making. It comprises certain accounting systems that are discussed as:Cost accounting system:While estimating product costs, preferred framework is costaccounting system. It benefits in making evaluations for inventory valuation in accordance with1
controlling costs. Accurate cost estimation is fundamental for profitable operations. In addition,this system is also essentially required at Renishaw Plc to ascertain appropriate product costs aswell as estimating material inventory during closing duration, work in progress addition toinventory of finished commodities so that financial statements can be prepared. Further, thesystem is essentially required to identify distinct costs, eliminating associated unit costs so toincrease revenues addition to building effective strategies for future related functions. Thissystem is typically classified as product and process costing in which product costing is used toascertain cost involved in a product and process costing is essential to estimate cost of a wholeprocess depending upon the manufacturing model of organisation.Inventory management system: Monitoring addition to maintaining stocked productsrequires inventory management system (Bovens, Goodin and Schillemans, 2014). It is a systemthat helps in identification of inventory items together with associated information through assettags and barcode labels. Its categories are Stock Review, LIFO, Just In Time, FIFO and ABCAnalysis. At Renishaw Plc, the system is used for carefully maintaining stock level and for thisseparate warehouses are designed where centralised records associated with inventory arerecorded with other information. Essential requirements of the system at Renishaw is to trackstocks and categorising materials so to deliver inventory at production units at right time suchthat delays are eliminated in working.It provides appropriate information to mangers aboutlocation of items, specifications, totality of items held as stock and details about vendor orsupplier. In addition, with this system, documents related to work order, material bills as well asmany more are systematically recorded and provided to top authorities for taking futureinventory decisions.Price optimising system:Calculating perceptions or demand during changes in productand combining data with costs as well as inventory levels as to make changes in prices is onlydone through price optimising system. The system begins with customer segmentation and endswith setting new prices as per customer responses. It is primarily preferred by companies to tailorprices accordance with customer segments and stimulating the ways targeted audiences respondstowards altered prices(Taylor & Francis, Suomala and Lyly-Yrjänäinen, 2012). Marketers ofRenishaw Plc makes analysis of certain demand impacts in relevance to price changes of widemachines including motion control, spectroscopy and measurement products. Managers withprice optimisation system usually modifies their pricing to segment customers and analysing the2
ways in which targeted audiences will give responses to modified prices. The system isessentially required so that pricing structure is optimised for initial pricing, mark down pricingtogether with promotional pricing. In addition, the system is used to mould pricing structures indistinct scenario.Job costing system:Accumulating production costs and assigning them to individualoutput of particular job is done with job costing system. The system primarily accumulatesmanufacturing costs linked with each job in separate manner. When organisation manufactureswide range of items and all have significant differences addition to significant costs, appropriatesystem used is job costing system (Job costing system. 2016). Renishaw Plc adopts the system toproduce products as per specific client orders. Product costs are tracked with associated job andrendered services. The system is usually opted by entity so to manufacture products on specialorders. The system is essentially required to reduce risks, track costs, improving controllingmethods so that chances of profits are enhanced in appropriate manner.Thus, management of Renishaw Plc adopts all the systems as per the necessities such asinventory management system for tracking available and required inventory or stocked goods,price optimising system to optimise product prices as per customer perceptions and costaccounting system to estimate appropriate product costs.P2. Methods for management accounting reportingManagement accounting reporting:A framework to provide information in writtenmanner including facts and figures. Accounting reports are produced as per the businessrequirements such as to evaluate performance or forecasting budgets. Management Accountingreports plays important function to make decisions for existing or upcoming period. With thereports, managers of Renishaw Plc acknowledge improvement areas in order to accomplish highoutcomes. Some methods which are widely used for accounting reports are the followings:Account receivable report:It list out information about credit memos addition to unpaidcustomer invoices. It helps in determining allowances together with doubtful accounts asaccountants tabulates information about receivable accounts and to cater aspects of discount topursuant clients. As Renishaw Plc relies on extending credit so they break down balances that aredue of clients into peculiar time in order to determine defaulters. This report benefits institutionsto regular contact with clients in order to realise them that no acceptance is given to latepayments. As large entities are not able to make recognition of each credit sale, they prepare3
such report to analyse circumstances due to which company is facing issues in collectionprocedures.Budget report:To determine expenditure levels with revenues, preferences are given tobudget report as it helps in taking appropriate action to bring expenditures on track accordancewith budgeted amount. Proper management of budget reports helps an entity in planningorientation, evaluation performances, reviewing profits, allocation cash and reviewingassumptions in accurate manner. Monitoring, analysis, recording and controlling expenses ofvarious products such as healthcare addition to spectroscopy with effective techniques,management of Renishaw Plc uses budgetary report (Boyns, Edwards and Nikitin, 2013). Atsuch company, the report is designed to compare the closeness of budgeted performance withthat of actual one in accounting period. Future estimates are made through the past budget reportso that organisation can function towards profitability by forecasting circumstances and facingthem appropriately.Performance reports: It is linked with business performance and that of its employees incertain time period. It helps in strengthening knowledge about predicted performance level interms of sale together income. Management team of Renishaw Plc by using the report makesstrategic decisions that can define sustainable future. Other than this, individual performances areclosely monitored to award the commitments of high performers. It also avails deep insight aboutfunctions or operations of enterprise. Performance reports are vital as they keep correct measuresof organisational strategies, plans or policies towards mission.Inventory management report: For categorising inventories in distinct types andkeeping proper record, inventory management report is prepared so to get accurate picture ofactual stock within organisation. Analysing the report, decisions for further inventory are taken.Entities that properly manages inventory report are likely to increase information transparency,lowers costs, improves delivery performances, plans future inventory accurately and decreasesstock out chances. With this report, Administrators of Renishaw Plc analyses the level ofinventory which is used addition to the inventory that is on hold. It also alerts managers about thestock that requires purchase decision as well as quantity of materials available with company soto pursue operations.4
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