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Importance of Management Accounting in Decision Making - DOC
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Added on 2020-06-06
Importance of Management Accounting in Decision Making - DOC
Added on 2020-06-06
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Management accounting
Table of ContentsINTRODUCTION...........................................................................................................................1SECTION 1......................................................................................................................................1P1 Importance of management accounting in decision making..................................................1P2 Using systems in making of different reports........................................................................2M1...............................................................................................................................................3D1................................................................................................................................................3P3 Income statements by using marginal and absorption costing...............................................3M2...............................................................................................................................................6D2................................................................................................................................................7SECTION 2......................................................................................................................................7P4 Planning tools to be used with their merits and demerits......................................................7M3...............................................................................................................................................8D3................................................................................................................................................8P5 Response to financial problems.............................................................................................8M4...............................................................................................................................................9CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
INTRODUCTIONIn all the organisations there are various objectives which are set and shall be attained.The process which is used in this regard is known as management accounting in which differenttools are present that will help in managing the activities in appropriate manner. The strategieswill be made with the use of information that has been collected and this will be beneficial inoverall improvement of performance of the company. The scope of management accounting iswider in relation to the financial accounting as here all the aspects of the business are taken intoconsideration. All of these points will be discussed in detail in the below provided report(Macintosh and Quattrone, 2010).SECTION 1P1 Importance of management accounting in decision making.In management accounting all the data whether it is related to financial or non financialaspects will be included by which the development of business will be made. The targets will beachieved by the identification of cost which are incurred and for this various systems areavailable that can be used. By them the least cost which can be made in relation to any productwill be determined. Some of the widely used systems are provided below:Inventory management system: There are many resources which are needed and so itwill be required that all the available resources shall be maintained in the proper manner.This will be done with the help of this system in which inventory will be managed al theoptimum level. The stock to be maintained can be determined and the steps will be takenso that it can be achieved (Ward, 2012).Job costing system: The jobs which are performed in the organisation are required to becontrolled in the appropriate way and this can be done with the use of given system. Theproper checking system shall be established so that the cost to be incurred in relation tothem can be identified and all the work can be performed in the manner by which the setstandards will be maintained. As by this the expenditure will be controlled so profitabilitywill be further increased (Callahan, Stetz and Brooks, 2011).Price optimisation system: In business there are many decisions which are to be made inrespect of price of any product. For that, this system will be used by which the responseof consumers in context of price change will be identified. The relation exist between1
price and demand and that shall be the main point of focus by which the effect of them oneach other will be known and that will help in managing both of them.Cost accounting system: In order to maximise the profits, the main element which shallbe managed is cost. In this it will be needed that all the cost incurred shall be identified sothat the steps in relation to management of this can be taken. By the use of themeffective decisions will be made and they will lead to the achievement of the goals andobjectives of business (Renz, 2016).P2 Using systems in making of different reports.In the process of decision making there is the need of various information which isobtained with the use of different systems and in order to maintain it in the appropriate format, itwill have to be reported. The manner in which it will be done shall be such by which the futureuse can be ensured. It will be used by all the departments according to their needs andrequirements. Below are presented the reports that are to be prepared in business.Job costing report: The report will be made so that the information about the expenseswhich are made in production can be recorded in most appropriate manner. For this itwill be required that the knowledge shall be gained about all the relevant data. This willbe useful in determination of the tasks which are not required and then decision in respectof them will be taken by the management. They will introduce a method which will helpin avoiding them and thereby reducing total cost and increasing the profits level. All ofthis will lead to growth achievement (Fullerton, Kennedy and Widener, 2014).Performance report: In an organisation there are various activities which are performedand it is very important that the performance shall be evaluated. By this all theshortcomings by which the profitability of the business is affected will be identified. Inorder to do this, it will be required that proper targets shall be set by the attainment ofwhich the prove will be available that all the work has been undertaken in the mannerwhich is in the best interest of company. This will also be helpful in the making of plansas it will be known that what are the areas in which modification is to be made (Schäffer,2013).Inventory control report: The stock is the main input that is needed in the production ofgoods and so it shall be controlled as by that only the targets can be achieved. The stocklevel to be managed will be identified and then the decision will be taken by which it will2
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