Management Accounting Research and Practices
Added on 2020-09-17
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MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1: ASSIGNMENT 1.............................................................................................................1PART A...........................................................................................................................................1P3. Calculation of costs and preparation of income statement...............................................1PART B............................................................................................................................................2P1. Role of Management Accounting System........................................................................2P2. Principles of Management accounting System................................................................4M1. Benefits of Management accounting system..................................................................5D1. Integration of management accounting into the organisation.........................................6M2. Techniques and methods used in management accounting:...........................................8TASK 2: ASSIGNMENT 2.............................................................................................................8PART C............................................................................................................................................8P4 Comparing and contrasting three planning tools which are used under managementaccounting...............................................................................................................................8M3 Pricing strategies as well as common costing systems..................................................10PART D.........................................................................................................................................11P5 Comparing different ways through which financial shortfalls identified and resolved infirm.......................................................................................................................................11M4 Skills of an effective management accountant...............................................................13D3 Effective strategies and systems.....................................................................................14CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................16
INTRODUCTIONManagement accounting as the name suggests is basically for the use of management.Management accounting uses accounting principles, this aids them in managing the activities andperformance of control functions. This includes management accounting tools that helpsmanagement in making future economic decisions. The present report will shed some light onpractical approach of management accounting by preparing income statement using marginal andabsorption costing techniques along with the description of various types costing system.Management accounting is mostly confused with financial accounting, in this report a cleardifference between management accounting and financial accounting has been provided. Thereport also includes planning tools that are used for budgetary control with its advantages anddisadvantages. For the purpose of pricing and costing goods and services, management can alsouse various pricing in costing system explained in this report. The present report also explainsthe use of management accounting in responding to various financial problems. Managementaccounting is the combination of accounting, finance, business skills, techniques andmanagement that adds real value to the organisation. For the better understanding of the study,SME Nisa Retail store has been taken into account.TASK 1: ASSIGNMENT 1PART AP3. Calculation of costs and preparation of income statementCost is an amount that is given up for the exchange of receiving an asset. It includes allthe related amounts of an asset to make that asset ready for use. Accounting of cost aids todecision making by providing the relevant information of cost to the management. For thepurpose of calculating the cost of the products, Nisa Retail have a choice to adopt any methodfrom marginal costing and absorption costing.Cost- volume Profit: Cost volume profit analysis helps in determining the impact ofchanges in the cost and volume to the operating income of the organisation (Joshi and Li,2016).Flexible budgeting: flexible budgeting refers to the preparation of flexible budget thatadjusts the changes in the volume of the activities.1
Absorption costing: For the purpose of valuing inventory, absorption costing is used. Itabsorbs all the manufacturing cost of a product including variable as well as fixed costs.Marginal Costing: this method changes in the total production cost by increasing ordecreasing if there is a change in output by one unit. Income statement for ABC Ltd.Absorption costingAmount (£)Amount (£)sales10816000less: cost of production6916000less: closing stock-20280004888000less: fixed production overheads-975000production cost of sale3913000Gross profit6903000less; variable sales overheadsnilless; fixed cost and administration costnilNet profit6903000Marginal costingAmount (£)Amount (£)sales revenue10816000less: direct material1976000direct labour3458000variable production overheads1482000contribution3900000less: fixed production overheads975000net profit2925000Reason between the results of two is because, under absorption costing all the costs areincluded while in marginal costing only variable costs are considered.PART BP1. Role of Management Accounting SystemManagement accounting or managerial accounting are the same thing. These refers to thedecision making tool that is used by management. This helps in assisting the management inachieving control over the organisation and better planning. Management accounting provides2
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