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Management Accounting in Tech (UK) Limited

   

Added on  2020-10-22

14 Pages3643 Words461 Views
MANAGEMENT ACCOUNTING

Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3a) Explanation of management accounting system.....................................................................3b) Presentation of financial information.....................................................................................5TASK 2............................................................................................................................................6Disclosure of income statement through different methods.......................................................6.....................................................................................................................................................7TASK 3............................................................................................................................................7Different kinds of budget............................................................................................................7Budget preparation process.........................................................................................................9Importance of budget for planning and controlling..................................................................10TASK 4..........................................................................................................................................11Balanced Scorecard Approach..................................................................................................11CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13

INTRODUCTIONManagement accounting (MA) is process of analysing accounting information ofbusiness and interpret it in accurate manner so that correct business decision can be made(Goddard and Simm, 2017). The main agenda of applying principles of management accountingis to measure overall performance of entity and assessing risk so that management can makeeffective strategies in order to resolve issues. Present study is based on Tech (UK) Limited thatproduces mobile chargers and other carry-on gadgets. Current assignment will comparemanagement accounting and financial accounting system. Furthermore, it will discuss varioustypes of reports that are prepared by the organization. It will calculate absorption and marginalcosting methods in order to prepare income statement for the month of September as well. Inaddition, study will explain various kinds of budgets and importance of budgetary system forplanning and controlling process.TASK 1a) Explanation of management accounting systemDifference between MA and financial accounting (FA)Management accounting is process of measuring performance of company. It assistsmanager in making sound decision so that entity can earn more profit. It helps in providing in-depth detail about policies, plans and strategies of firm so that all records can be managed in anappropriate manner (Jermias, 2017). On the other hand, financial accounting is anotherconceptual framework that pays more attention on preparing financial statements. Furthermore,another major difference in between MA and FA is that it is essential for companies to followprinciples of financial accounting whereas if entity is following standards of financial accountingthen there is no need to follow management accounting rule separately. Main objective ofmanagement accounting is to assist managers in such a manner that individuals can planactivities for the growth of business unit. Whereas, financial management aims to get allfinancial details that are required to run business in a smooth manner (Chiwamit, Modell andScapens, 2017). Time frame of preparing the reports is another major criteria that creates differencebetween both these aspects. Financial statements are being prepared by Tech (UK) limited at the end of year whereas, management reports are required to be prepared as perthe need of organization. These reports are being used for internal management of firm but3

financial reports are useful for internal and external management of business unit (Christ andBurritt, 2017). Importance of MA in decision makingBusiness decisions are the significant part of firm. Overall success of organisation highlydepends upon the decisions taken by managers. For making sound judgements, Tech (UK)limited look at the financial information of firm. Manager of Tech limited always look at thebudget and accordingly, allocate resources to each department. This allocation decision helpcompany in raising its profit and controlling the cost as well (Wei and Xima, 2017). Thesefinancial information support the manager in utilizing resources well and minimizing wastage sothat company can make sound decision for the progress of firm. Cost accounting systemCost accounting system is considered as the technique that supports in monitoring cost ofbusiness. This helps the manager in identifying various expenditures and managing costappropriately. By this, entity becomes able to generate more profit and gain competitiveadvantage. It tracks working of raw material and production phases. By this way, managersidentify the materials required to produce particular goods. By this way, estimation of cost canbe done properly ad entity can generate profit (Goddard and Simm, 2017). Inventory management system It is another important tool that is used by Tech (UK) limited that helps in keepingrecords of inventories, sales and deliveries. This is used by firm in order to create work order andbilling system. This is a beneficial tool that assists in minimizing over stock issue and managinginventory in the appropriate manner so that overall cost of company can be minimized. Tech(UK) limited has retail stores where is it essential for company to make balance between demandand supply (Jermias, 2017). It cannot hold excess products because it can enhance expendituresdue to overstock. Inventory management system is beneficial in keeping the records of inflowand outflow of inventories. Main agenda of using this software is to reduce the cost and avoidmissing out sales because of over stock situations. Job costing systemJob costing system is the process that aids in determining cost systematically. It looks atthe overhead, direct and indirect costs in order to perform a particular task. It is very importantfor Tech (UK) limited to apply this method at the workplace in order to estimate actual value.4

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