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Management Accounting - A Tool for Evaluating Financial Stability of Business

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Added on  2021-02-21

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LO1 1 Importance of management accounting for decision making process Importance of management accounting Management accounting is termed to as collecting of financial information and data so that company could get advice and proper guidelines in terms of development and organisation of the business functions (Simunic and Biddle, 2019). Thus, management accounting describes the real position of the firm, the mangers of the firm making the statements for the purpose of taking the decision easily related to the firm performance it helps to managing the funds and other activities.

Management Accounting - A Tool for Evaluating Financial Stability of Business

   Added on 2021-02-21

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MANAGEMENT
ACCOUNTING
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INTRODUCTION
Management accounting is the tool that is used by the manager for the purpose of
managing the internal process (Eaton, Grenier and Layman, 2019). Managers of the firm used
this tool in the business by analysing books and journals to develop annual report and evaluate
financial stability of organisation. This will be known to as evaluating the business cost or
operation for maintaining and preparing the financial accounts, reports and records as well. this
would help into manager decision making process for achieving the business objectives both
long and short term.
Thus the current report will be analysing management accounting for Nero Ltd Company
under which different type of accounting theories will be discussed with naming their merits and
demerits. Further, various type of costing, budgetary planning tool will be analysed in this report.
In addition to this report will also be explaining management accounting system which is
adopted by Nero Ltd for reducing the financial problems into company.
LO1
Importance of management accounting for decision making process
Importance of management accounting
Management accounting is termed to as collecting of financial information and data so
that company could get advice and proper guidelines in terms of development and organisation
of the business functions (Simunic and Biddle, 2019). This is very much important as will act as
bridge between the financial or other sections of business. Management accounting will also be
controlling business and its functioning the main task will be of assuring long time success of
company.
Management accounting helps to manager for conduct the relevant cost analysis in order
to reduce the cost and expenses by set the future activities in the business.
This tool helps to reduce the financial problem by controlling the expenses.
Financial statements help to determine the budget-related decisions.
Financial plan helps to target the market by making the special budget that helps to firm
for they can bring more profit from the long-term perspective.
Financial plan help to evaluate the real cost of product. Thus, this plan aids to make
proper explanation and control whether it’s additional suitable to produce items within or
purchase them from the producer.
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Explain the management accounting and different types of system.
Management accounting is the tool that manage the financial activities of the business by
analysing and preparing the budgets. Thus, accounting and cash statements aids to analyse the
income and expenses of the firm. Therefore, management accounting describes the real position
of the firm, the mangers of the firm making the statements for the purpose of taking the decision
easily related to the firm performance it helps to managing the funds and other activities.
Types of management accounting
Management accounting system is refers to identify the overall business financial
activity. Thus, it is the best process that helps to firm for identify the production and operational
coat of overall departments. Financial plan is the process every firm used in the business to
managing the overall cost of the firm. Thus. Nero Ltd used the different types of tools in the
business to determine the real cost of product and also determine that whether firm produce the
raw material internally or purchase the raw material through different suppliers, Thus, it helps to
firm for analysing the budget related decision.
Cost accounting system — This tool is aids to determine the actual cost of the raw material and
products it helps to estimate the cost of their products for profitability analysis, inventory
valuation and control (Astuty, 2019). Thus, Nero Ltd used this tool in the business to identify the
actual cost of the production by analysing the cost of raw material. Thus, by managing all
activities of costing firm need to implement this Strategy in the business for making the goods by
transferring the raw material into finished product.
Inventory management system —This is a system under which all order and stock need to be
tracked down for deliveries and sales for all manufacturing industries for creating the working
order and other production related documents as well. This is specifically termed to as including
about shaping and placing of stocked goods. It will be required at various other location for
supplying the network and planning for the production of goods and stock materials as well.
Thus inventory management systems which help into process of storing and ordering that is used
by company. There are different statements like that of LIFO and FIFO that are used by Nero Ltd
that could better understood for tracking order for goods statements which would help into
decision making process.
Job costing system — This system is helps to identify the particular departmental cost. It
includes the collection process of information which is allied with cost along with specific job of
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