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Management Accounting and Financial Accounting : Assignment

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Added on  2020-07-23

Management Accounting and Financial Accounting : Assignment

   Added on 2020-07-23

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Management Accounting and Financial Accounting : Assignment_1
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1a) (I) Definition of management accounting and difference between management accountingand financial accounting.............................................................................................................1a) (II) Significance of management accounting when used as decision making tool.................2TASK 2............................................................................................................................................5Computation of Absorption costing............................................................................................5Computation of marginal costing................................................................................................6TASK 3............................................................................................................................................6(a) Types of budget and its advantages and disadvantages.........................................................6(b) Process involved in preparation of budget............................................................................7(c) Pricing strategies....................................................................................................................8TASK 4............................................................................................................................................9a) Balanced Scorecard approach and its implementation in delivering performance measures.9CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
Management Accounting and Financial Accounting : Assignment_2
INTRODUCTIONManagement accounting is an important tool, used by the companies in decision makingprocess. It advises on short term and long term financial decisions of the company based on itsfinancial and non financial data. Imda Tech (UK) Ltd is a manufacturing company involved inproducing special charges for mobile telephones and other carry on gadgets that can be sold onretail outlets of UK. The report discusses difference between management accounting andfinancial accounting (Tucker and Lowe, 2014). Further it focuses on calculation of incomestatement based on two methods that is absorption costing and marginal costing for Imda TechLtd. Moreover, various types of budgets and budget process is discussed in the report. Moreover,pricing strategies are suggested to Imda Ltd that can be adopted to sell chargers and othergadgets to the customers. In the end, the report ponders on the use of balanced scorecard anddiscuss the effect of its implementation on improving the performance of the company. TASK 1a) (I) Definition of management accounting and difference between management accounting andfinancial accountingManagement accounting is a combination of accounts, finance and management wherebusiness skills are used to add value to the organisation. It is a framework to identify, analysemeasure, interpret and communicate information in order to achieve organisational goals.Management accountants are competent enough to give advice not only on financial issues butalso takeupon the big business decisions, formulate strategies and monitor risk (Boyns andEdwards, 2013). Managers use financial information to make short term decisions for day to dayoperations. They generate weekly or monthly report which shows availability of cash, salesrevenues, debt outstanding, trend chart, variance analysis etc. These informations are used tocreate a metrics and evaluate business performance. There are various differences between financial accounting and management accounting.Some differences are listed below:Financial AccountingManagement accountingPreparation of report based on past trends inorder to fulfil reporting requirements. Uses the information of revenue, cash flow,assets and debts to generate the trend reportand produce statistics which is helpful intaking business decisions.1
Management Accounting and Financial Accounting : Assignment_3
Generate the financial information so that itcan be used by various other departmentsfunctioning in the company.UseConsiders the financial information todisplay the complete picture of the businesswhich act as a success parameter whilecomparing the businesses.The financial produced are based on pastfinance trends of the company.It is based on current and future trends andtherefore, the results are not exact (Parker,2012). Various factors such as economical andlegal factors are considered while forecastingfinancial for the company. Financial accounting is produced for the sakeof external stakeholders in order to conveycompany's financial position.Management accounting is produced forinternal use. It is precise and follow the principle ofGenerally Accepted Accounting Principles(GAAPs)It is more dependent on estimates and forecastsrather than using exact numbers while takingdecisions. a) (II) Significance of management accounting when used as decision making toolManagement accounting plays vital role in decision making process. This tool is used byevery department before reaching to any conclusion. It helps to take sound decisions for thebusiness. Imda should use this important tool of decision making because:It takes care of inflow and outflow of cash and plan cash wise financing based on shortterm and long term strategies of the company. For instance, analysing the current ratiowhich is calculated by dividing current assets and current liabilities (Bodie, 2013). Itverifies that whether the business will be able to meets its short term debts with theavailable current assets. It helps to estimate income and expenses of the company at a certain point of time. Itensures that the business is going on track and as per the plan of the managers. It helps todetermine that the company have sufficient revenues and is running into profits. If not,the Imda Tech is required to take necessary steps to improve business conditions. It helps to read the generated reports and take decisions based on them. For instance, ifthe budgeted sales on the company are way more than that of actual sales, the company2
Management Accounting and Financial Accounting : Assignment_4

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