Management Accounting (Assignment)
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Added on 2020-11-23
Management Accounting (Assignment)
Added on 2020-11-23
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Management Accounting
TABLE OF CONTENTSINTRODUCTION......................................................................................................................3MAIN BODY.............................................................................................................................3P1. Explaining the essential requirement of different types of management accountingsystems.3P2. Different methods used for Management Accounting reporting.5LO2............................................................................................................................................7P3 Calculation of cost using different method of cost calculation7Net present Value.....................................................................................................................12Project Y...................................................................................................................................13LO3..........................................................................................................................................13P4 Advantages and Disadvantages of various planning tools for budgetary control13P5 Adaptation of management accounting system to solve financial problems16CONCLUSION........................................................................................................................18REFERENCES.........................................................................................................................20
INTRODUCTIONManagement accounting is defined as the mechanism of making analysis of the internalmanagement and financial accounting system which further assist in preparation ofmanagerial reports, records, and accounts. With the help of available information, statisticsand other financial as well as non-financial data, the managers and employees can makesound investment decisions. Company should always focus on formulation of effectivebusiness strategies and plans so as to achieve the business goals and objectives in a costeffective manner. The present report is based on AFC Energy PLC which is adeveloperofalkaline fuel cells & use hydrogen for production of electricity. The present report willdiscuss different types of management accounting systems available and how organizationcan seek benefits. Further the report will discuss about the concept of managementaccounting reporting and its uses in decision making. Income statement under Marginal andAbsorption Costing of AFC Energy by using appropriate technique for analysing cost factorwill be disclosed. Furthermore, the report will disclose about the budgetary concepts and howit aids in the decision making process. At last, the report will shed light on advantages anddisadvantages about different budgetary planning tools and how it assists in solving thefinancial problems of the company.MAIN BODYLO 1P1. Explaining the essential requirement of different types of management accountingsystems.Management accounting system is a practice of analysing and preparing managerialreports of the internal management systems. The management accounting system assistscompany inidentifying, analysing and recording all the statistical, financial and crucialmanagement information that can be used internally bymanagersfor planning, decision-making process. It helps company by providing accurate and timely information which helpsin maximizing the profit level as well as improving the performance of its businessoperations.Essential requirements of different types of Management Accounting System in AFCEnergy PLC are as follows:
1.Cost Accounting System – This method of management accounting system isbasically concerned with the cost aspect associated with the business operations andprocesses. With the help of cost accounting system AFC Energy can evaluate andanalysis cost value which has been incurred for carrying on all the manufacturing andproduction process of products and services (Jermias, 2017). This method aids inassessing the profitability level with minimum cost of operations by improving thequality of product and service rendered. Company should make effective businessplans and strategies so as to control the cost expenses associated with production andmanufacturing operations of the business. This method consists of following subparts:Job Order Costing Method – This method of cost accounting system helps indetermining the cost value which has been incurred by the company forproducing or manufacturing a specific product or group of products. Process Costing Method – The process costing method assist AFC Energywith facility of collecting, gathering and making assignment of cost amount.This cost amount is assigned to manufacturingprocesses or to the unitsproduced. This method is beneficial in companies where large productionprocess is carried out especially in case of identical units.2.Inventory Management System – This method of management accountingemphasizes on cost controlling function which has been incurred on producing goodsand services for meeting the customer demands (King and Clarkson, 2015). It alsoassists in managing inventory and stock level of the company. AFC Energy canassess, monitor and track the quantity of goods, inventory and stock through thesupply chain or with the help of areas in which business operations takes place. Thismethod helps company in making inventory valuation, improving the accuracy ofinventory by maintaining continuous workflow and its reorder so as to facilitatesmooth functioning of business operations. Valuation of inventory can be done withthe help of following two methods:LIFO – It stands for Last In First Out. In this method, goods which are bought orpurchased at last are available for sale at first place.FIFO – This stands for First In First Out, it emphasizes on selling first of thatstock which is purchase or bought in at first place.
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