Management Accounting and Its Importance in Company : Assignment

Added on - 21 Jul 2020

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MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1A. i. Defining management accounting and differentiate with financial accounting.............1A. ii. Significance of MA in order to make effective business decisions..............................2B. Various kinds of systems of MA and their use in departments.........................................2Cost accounting system..........................................................................................................2Inventory management system...............................................................................................3Job costing system..................................................................................................................3Price optimisation system.......................................................................................................3TASK 2............................................................................................................................................4I. Income statement using absorption costing........................................................................4II. Income statement after considering marginal costing.......................................................5TASK 3............................................................................................................................................5A) Various budgets along with their merits and demerits......................................................5B) Procedure in order to prepare budgets...............................................................................6C) Different pricing tactics.....................................................................................................7TASK 4............................................................................................................................................8A. I. Ways through which BSC used for identifying and responding financial issues..........8A. II. Use of BSC in order to enhance financial governance and frame effectual strategies.9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONThe system under which management reports as well as accounts are framed for takinginternal business decisions, considered as the management accounting (MA). The present reportfocuses on the Imda Tech company which manufactures special charger as well as someelectronic gadgets. The study describes about management accounting, its importance in thecompany along with its several systems. Further, income statements are prepared on the basis oftwo methods like marginal and absorption. Beside this, about the different budgets, process ofpreparing such statements as well as various pricing strategies are explained in the presentproject. At the end of report, Balanced Scorecard (BSC) is described along with its uses withinworkplace of the Imda Tech firm.TASK 1A. i. Defining management accounting and differentiate with financial accountingA process in which financial data planned, implemented, organised as well as controlledwithin workplace in order to make it financially sound is considered as the managementaccounting. In context to this, as the managers of Imda Tech entity considers this particularsystem within workplace then able to enhance financial performance in the relevant industry. Itdiffers from the financial accounting which stated as below:Management accountingFinancial accountingThe system which focuses on financial plans aswell as tactics for operating business inprofitable direction is known as managementaccounting (Granlund and Lukka, 2017).An approach of accounting where financialstatements are prepared for assessing businessperformance is considered as financialaccounting (FA).For the entities it is not necessary to use MA inthe firm.On the other hand, it is mandatory for ImdaTech to use FA within working environment.Users of the MA are only internal stakeholdersor management of the cited firm.The financial accounting used by both externaland internal stakeholders.Through this, upcoming financial informationdetermined with the help of budgetpreparation.While, FA provides past financial data whichsupports to analyse past business performance.Any specified formates are not used whileIn order to prepare reports under FA, specified1
framing reports under the MA.formates taken into consideration.Not required to consider auditing as well aspublishing system in the managementaccounting.Under the financial accounting, it is mandatoryto publish final accounts along with theauditing procedure.A. ii. Significance of MA in order to make effective business decisionsManagement accounting is basically considered at the internal business level in order tomake fruitful decisions. Further, its importance for Imda Tech as a tool of decision-makingwithin workplace is described below:The management accounting system supports to the firm for preparing budgets andforecast future financial information in an appropriate direction. On the basis of differentbudget statements, the manager frames strategies for making changes or modifications inthe firm (Ax and Greve, 2017). Moreover, when financial performance predeterminedthen highly fruitful as well as the profitable business decisions are made.Apart from this, MA helps to make analysis of the costs associated with each and everyactivity of business procedures. During this, if Imda Tech founds that expenses incurredin higher amount at specific stage or activity then take corrective actions for reducing theissue. Therefore, it can be said that MA is an important to make cost decisions andstrategies within working environment.Another significance of the management accounting is for utilising available resourcesand data in the firm properly. On the basis of financial projections upcoming performanceis easily assessed by which manager decides that which data needs to utilise in optimummanner (Lapsley and Rekers, 2017).B. Various kinds of systems of MA and their use in departmentsUnder the management accounting different kinds of approaches and systems areincluded which helps to various departments. Further, such systems are described below:Cost accounting systemAn approach in which various kinds of expenditures associated within workplace of acompany are analysed is known as cost accounting system. It generally used by the cost centre2
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