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Introduction to Management Accounting (doc)

   

Added on  2020-12-18

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MANAGEMENTACCOUNTING INTRODUCTION3LO1..................................................................................................................................................3P1. Explaining the concept of management accounting and the importance of its varioussystems.........................................................................................................................................3P2. Explaining several methods for reporting under management accounting...........................5M3. Evaluating the advantages and the application of the system of management accounting..6LO2..................................................................................................................................................7P3. Calculation of the net profit by using the marginal and the absorption costing technique...7LO3..................................................................................................................................................8P4&M3. Explaining the benefits and the limitations of the different planning tools ofbudgetary control.........................................................................................................................8LO4................................................................................................................................................10P5&M4. Comparing the adaptation of the different management accounting system forresolving the financial problems and which leads to sustainable success of the organization..10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12

INTRODUCTIONManagement accounting is the process that refers to the formulation of the management reportsthat facilitate accurate information regarding the financial and the statistical aspects that isneeded by the managers for making the short term or routine decisions. The present report isbased on Excite entertainment, an entertainment industry in UK, deals mainly in the activities ofpromoting the concerts and the festivals at various locations in entire UK. Furthermore, thereport includes the detailed analysis of the management accounting systems and the reportingwith the benefits of the system. Moreover, the report also evaluates the profits through marginaland absorption costing methods. The deeper insight has been thrown on the various planningtools and the system of managerial accounting that leads to solving the financial problems. LO1.P1. Explaining the concept of management accounting and the importance of its various systemsManagement AccountingFinancial AccountingManagement accounting relates with theinternal processes that are used for assessingthe transactions of the business.Management accounting provides for thedetailed report in terms of the profits from theproduct, customer, product line, and thegeographic region (Maas, SchalteggerandCrutzen, 2016).Management accounting is not compulsory anddo not have to be prepared as per anystandards.Under managerial accounting, the reports areissued more frequently.Financial accounting referred as theaccumulation of all the accounting informationentered into the financial statements.Financial accounting facilitates reporting ofresults for an entire undertaking of thebusiness.Financial accounting has to be made incompliance with the several accountingstandards.Financial accounting, the financial statementsare prepared at the end of the accountingperiod.Different system of management accounting-Cost accounting system- It refers to the system that is used by Excite entertainment in estimatingthe appropriate cost for their product so that profit can be analyzed, inventory can be valued andcould keep control over the cost. It is important for the enterprise in terms of keeping the

operations profitable (Quattrone, 2016). It helps in ascertaining the accurate cost involved inproducing the product. The two major cost accounting systems are job costing and processcosting system.Job order costing- It is the system of cost accounting that helps in assigning the manufacturingcost for each job. This process is labor intensive as he cost is accumulated for each of the job.Excite entertainment can use this approach for its unique products like the consulting projects orthe custom designed machinery etc.Process costing- It is an accounting system that accumulates or assigns the manufacturing cost toeach process. It is the most appropriate technique for the firm when its production processinvolves several divisions and the flow of cost from one division to the other. Direct costs- It includes the expenses that could be tracked directly to the particular cost centersuch as the department, product and the process. It varies with the change in the output but isconstant in context of each production unit (Messner, 2016). It is the cost that is under thecontrol and the responsibility of the managers. Standard costing- This costing method is the practice that is used for substituting the expectedor the budgeted cost with the actual cost in accounting records. The variances that occur betweenthe standard and the actual cost are analyzed by this method so that corrective measures can betaken by the managers of Excite entertainment.Inventory Management Systems- This system traces the goods by using the supply chain or bythe part of it in which Excite entertainment operates its business. It keeps the track of themovement of goods from the warehouse to delivering it to the ultimate consumers. For ensuringbetter inventory management and reducing the cost level emphasis need to be placed onemploying effectual systems namely JIT (just in time), First in first out etc. On the basis of JIT,business unit places order for inventory whenever it’s needed. This in turn helps in reducingstorage cost and thereby maximizes profitability. Further, FIFO method presents that stock whichpurchased earlier need to be sold first. This in turn reduces problem in relation to outdatedstockand thereby helps in maintaining profitability.

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