Assignment on Management Accounting System
25 Pages4704 Words101 Views
Added on 2020-06-04
Assignment on Management Accounting System
Added on 2020-06-04
ShareRelated Documents
MANAGEMENT ACCOUNTING
TABLE OF CONTENTSINTRODUCTION............................................................................................................................................................................................................3TASK 1..........................................................................................................................................................................................................................3P1 Management accounting and essential requirements of different management accounting systems...............................................................3P2 Identification of different methods that are used for management accounting reporting.................................................................................7P3Profitability computation by using marginal and absorption costing method.....................................................................................................8P4 Merits and demerits of varied tools in respect to budgeting............................................................................................................................11P5 Way in which firms are using management accounting systems to respond to financial problems.................................................................13CONCLUSION..............................................................................................................................................................................................................15REFERENCES...............................................................................................................................................................................................................16
INTRODUCTIONManagement accounting is commonly used by the firms to deal with related transaction and to manage same at the workplace.In the current report varied systems of management accounting are explained and there essential requirements are defined. Apart fromthis, in middle section of the report, marginal and absorption costing methods are differentiated and relevant calculations areperformed. Different planning tools are define and discussed in detail. At end of the report, way in which management accountingsystems are used to respond to financial problems are also explained in the report.TASK 1P1 Management accounting and essential requirements of different management accounting systemsFrom: Budgeting officerTo General manager of White elephant restaurantSubject: Management accounting systemManagement accounting branch of accounting which deals with costs and expenditures that are made in the business.Management accounting is used to do accounting related cost and expenses as well as it are used to keep track of expensesthat are made in the business. In this way effective control is made on expenses in firm. In discussed discipline there aremany approaches like variance analysis that can be used in the business (Sánchez-Rodríguez and Spraakman, 2012).Under variance analysis method there are some of predetermined goals and objectives and against these objectivescomparison is made in order to identify performance of the business firm which may be positive or negative. If there isgood performance on some points then there is no problem but if it is identified that on some point performance is not
good then in that case action can be taken to work on the area where performance is not good and efficiency of thebusiness firm can be improved. Apart from variance analysis, there are many other methods that can be used to analyzefirm business performance. Many firms in order to get more better overview of profitability make use of marginal andabsorption costing method. There is difference between both methods as they give overview of the firm profitability butthere is difference in same. In case of other approach merely unstable expenditures are considered but in respect to otherapproach all sort of expenditure are cosidered. Both methods compute firm profitability in different manner and it can besaid that management accounting reveal the profit if only variable expenses are taken in to account and when both sort ofexpenses are considered (Busco and Scapens, 2011). Some of MA systems are explained below.Cost accounting system: Cost accounting system have significance for the companies and it is used by White elephantrestaurant as under this cost of entire departments is done and on basis of same per unit cost is computed. It can beobserved that under this accounting system in White elephant restaurant at each department level expenses are recordedand then summed up to identify entire cost that is incurred in the business. This is the one of the common accountingsystem that is observed in case of all sort of firms whether it is small or big in nature. This is because while doing cost it isnecessary to take in to account entire cost of departments so that actual cost can be computed. Different department headsneed to collect data related to expenses that they are made in the business during entire month. These details need to besubmitted to the chief accountant of an organization.
Figure 1Cost accounting system(Source: Vosselman, 2014)It is the accountant that compiles entire records that are related to different departments and on this basis overall cost forbusiness is computed. In cost accounting systems not only different departments cost are added but same are also classifiedin to different categories like fixed, variable and semi variable expenses. It must be noted that fixed expenses are those thatremain stationary and does not altered with change in situation. On other hand, variable expenses are those that keep on
changing consistently and never remain same (Vosselman, 2014). Fixed portion cannot be controlled but variable portioncan be changed. Thus, in cost accounting system all expenses are classified in to these categories. These information helpmanager a lot in making decisions and it can be said that they easily identify that at what rate expenses are increasing inthe business and at which point they need to take steps to control expenses in company.Job order costing: This approach is given due importance by the corporates due to its unique characteristics as for eachjob costing is separately done. This is also used by White elephant restaurant as for each product or food item separatecosting is done. Usually, in the firms that produce customized products for different sort of orders costing is separatelydone. This is because different raw materials are used in costing of products and due to this reason it becomes inevitable todo costing of each batch individually. There are certain benefits of job order costing for the business firms. One of themain advantages is that manager gets costing report individually for each batch and on analysis of same identifies thatwhich sort of expenses need to be controlled in the business so that cost of each batch can be controlled to maximumpossible extent (Talha, Raja and Seetharaman, 2010). This is the one of the major factor by considering which job costingis used by the most of business firms that are operating in manufacturing department. Process costing: It is another method that is commonly used by the firms at their workplace. Process costing refers to thecosting process under which entire steps that covered under process are analyzed and cost for them is computedindividually. In specific process there may be multiple steps and all of them need to be taken in to consideration todetermine overall cost of product. Usually, in this method for individual process costing is done separately and then sameare added to determine overall cost of the product in the business. This costing approach is used by most of the businessfirms because in every sort of firm different process are performed whether it is related to production or servicedepartment. It can be said that process costing is quite popular among business firms.Throughput accounting: It is the one of the most important accounting system for the business firm and it can be said that
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Management Accounting and Reporting Methodslg...
|17
|4408
|26
Management Accounting and Reporting Methodslg...
|15
|5100
|61
Report on Varied Management Accounting Systemslg...
|15
|4329
|48
Management Accounting System Assignment (Doc)lg...
|15
|4532
|84
MANAGEMENT ACCOUNTING INTROUCTIONlg...
|16
|4991
|493
Management Accounting and Costing Systemslg...
|13
|4800
|95