Management Accounting: Importance, Systems, and Reports

Management accounting
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Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
Scenario 1........................................................................................................................................1
Scenario 2........................................................................................................................................5
Scenario 3........................................................................................................................................8
PART A.......................................................................................................................................8
CONCLUSION..............................................................................................................................11
REFERENCERS............................................................................................................................12
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INTRODUCTION
Management accounting is an elaborated program that starts with collecting of internal business
information, reporting them in proper reports, analysing the reports and determining the overall
performance of company during a year (Al-Qady and El-Helbawy, 2016). It is related to the
crucial role of internal manager of company as the make effective decision with the support of
management accounting. The major components of MA are different types of system, reports,
costing techniques, planning tool that help to examine the overall profitability of business and
detect financial issues that can hinder profit margin. It is also helpful in formulation of effective
ways to resolve the financial issues so that future goals can be attained. To better understand the
importance of MA excite Entertainment ltd have been selected.
In this report, variety of MA system and reports are defined, costing methods are used to
prepare income statement, use of various planning tool to control budgetary process are
discussed. Apart from this importance of MA system to find financial issues and make effective
plan to reduce these issues are discussed.
Scenario 1
Section A
(a) Comparison between MAS and Financial accounting.
Management accounting: This can be described as a category of reporting connected to the
compilation, evaluation and estimation of theoretical and practical data for internal document
computation.
Financial accounting: It is a method of reporting concerned with the procedure of evaluating the
financial data related with companies that is further used to prepare the accounts in reporting
year for better analysing of profit margin.
Basis of difference MA Financial accounting
Kind of
information used
In order to prepare authentic and
generally accepted internal reports
manager use to both qualitative and
quantitative type of data.
In context to prepare valid financial
document manager us to consider
each type of financial information
related to business dealings.
Legal requirement There is hardly any legal framework While preparing financial document
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to be followed while preparing
internal reports as manager for his
knowledge make internal documents.
for an accounting year it is
compulsory to follow the legal
accounting standard and norms.
Variety of MAS:
(b) Cost accounting system: It is described as crucial management accounting system
which is relevant with the guidelines for predicting costs of multiple activities and procedures.
The primary objective of cost system is to reduce and control total corporate budget. It is
therefore necessary to assign financial resources inside companies to the anticipated spending of
different tasks through firms. There are several kinds of cost techniques used in this accounting
system, such as direct, standard costing etc. Manager of Excite entertainment limited use this
system because this lets to track the costs of entertainment events related events.
Direct cost: These are the variable cost which are related with the actual labour and raw
material required to manufacture a particular product or a service in the specific time period. As
respective company provide number of services to their customer so they cost included in
making these services is the total direct cost.
Standard cost: It is related with the expected cost per unit of relevant good that are
manufactured by the company as per the different factors. This cost mainly help company to set
predefined targets that are further helpful in assessment of overall performance of company.
(c) Inventory management system: This is considering being effective MAS which help
manager to control and handle the quantity of inventory available within company. Stock can be
in three state, raw material, gods in transit and finished product. This system use different
process like LIFO, FIFO and ABC costing in order to maintain sufficient stock and regular
supply of good for continuous production cycle. In Excite Ltd manager with the help of this
system make sure that there are enough music system and LED available within a festive period
so that maximum customer can make purchase to fulfil their requirement.
(d) Job costing system: It is also related with internal process of company, which
support management to detect the total cost involved or spend on different jobs within an
organisation for a specific time period. In recent time companies are always focused to give
better job experience to their employees but at the lower cost as it can impact the overall
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