Management Accounting of Business Operations
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Added on 2020-02-17
Management Accounting of Business Operations
Added on 2020-02-17
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MANAGEMENTACCOUNTING
INTRODUCTIONManagement accounting plays a crucial role in decision making and preparing strategiesfor achieving organization's effectiveness. It is one of the great tools for effective performance ofmanagement to reduce risks that occur at workplace. This project is on understandingmanagement accounting phenomenon for decision making regarding business operations ofCovent Garden Hotel.It is a small unit hotel in UK provides variety of food and accommodationto customers.Different types of its systems including methods used for making report can bedetermined. In this regard, through this study, learners will be able to learn various techniquesfor making decisions based on interpreting data of last year's financial statements. Including this,several characteristics and limitations of management planning tools for accounting informationwill be understood. However, manner in which organization handles monetary problems wouldbe expressed through this report. Along with that, there will be study on budgetary tools andplanning strategies for development and enhancing qualitative services of the firm. Moreover,vital role of management accounting for organization's development and improving efficiencieswill be determined.TASK 1P1) Management accounting and its typesGeneral ManagerCovent Garden HotelManagement accounting concept: - It is an essential planning tool includingforecasting and decision making for entity's development. It includes various kinds ofaccounting systems for business financial and non-monetary decisions. For example;economic, production and operation, risk management and so on. In this regard, severalstrategies are prepared by the management accountants through analysing last years' financialstatements and business activities (Brigham and Ehrhardt, 2013). It remains effective for furtheraccounting and enhancing efficiency of the firm. In accordance with this, entire businessplanning is obtained for financial and operational functions of Covent Garden Hotel. Forexpansion of small size firm, management accountant and manager make decisions throughcritical evaluation of monetary and non-economic structure of organization. However,management accounting is considered as one of the greatest tools for decision making strategy1
related to enlargement and qualitative services of firm effectively. Including this, variouscosting including marginal, absorption and cost-volume-profit analysis are determined throughthis accounting concept that is helpful for systematic management of small sized organization.Therefore, management accounting is the composition of all information standards to achieveeffective business performance (Clinton and England, 2016). It involves critical accountinginformation including costing and reporting for company's effectiveness. Thus, managementaccounting has significant role for rapid growth of entity. Various kinds of management accounting systems: - Management accounting systemgathers financial data from business operations including inventory, cost, sales data andinformation to analyze the accounting reports. Under this system, information is created forrecognizing cost efficiency to determine the price determination (Coad, Jack and Kholeif,2015). In this regard, decisions are made for proper balance and implementing economicaccounting system. However, various systems of management accounting and their importancecan understand as:-Managerial accounting: -In this accounting system, manager and accountant of CoventGarden critically evaluate the management of business activities. It includes production anddistribution of goods as well as costing according to expenditures incurred by organization formanufacturing and work in process. In accordance with this, as per the information, manager ofentity prepares strategy for implementation and product services including techniques to beobtained for resource and fund allocation. For instance: if management accountant of firm isgoing to implement the plans related to company's working efficiency then it is required for himto analyze last year’s business performance (Contrafatto and Burns, 2013). It is considered as akey component for him to make decisions for further activities and deciding the cost ofproducts.Inventory accounting: -It is useful for optimum utilization of resources. In thisaccounting system, manager of the organization makes plan for storing and using goods of firmfor creating balance between demand and supply of products. In addition to this, there is alsofocus on the terms related to keeping goods in different branches such as warehouses, inventorystores, etc. Therefore, management accountant of Covent Garden hotel identifies inventoriesstoring and process for adequate supplement of food and accommodation services. Moreover, it2
put a huge impact on the productivity and profitability of firm that is useful for effectivemanagement of inventories (Feeney and et.al., 2016). Thus, inventory accounting is beneficialfor keeping goods in a systematic and safe manner as well remains effective for makingdecision for production and supplement of products. It is considered as a management approachfor inventory control and adoption of technologies to be used for the expansion and betterquality products.Financial accounting system: - It is a monetary decision making tool for planning andforecasting to gain proper financial management. It includes funding for sources andinvestments for implementing business activities. Under this accounting system, decisions aremade related to creating economic structure and making strategies for funding. Including this,for financial accounting standard, manager analyses last year's records including incomestatement, cash flow and fund flow etc. It is the basis on which forecasting and decision makingis implemented to enhance qualitative services of Covent Garden hotel. Therefore, several ideasare generated for preparing budget related to sources and investments for economic efficiency.It is interrelated with the entire management of business activities for producing food andaccommodation services (Finkler and et.al., 2016).Hence, management accounting system is valuable for the systematic management oforganization in monetary and non-economic terms. However, overall development of entityincluding improving qualitative services can be effective through management accountingapproach. It is the key element for making decisions to prepare budget for developing efficiencyof firm. P2) Different methods used for management accounting reportsGeneral ManagerCovent Garden Hotel Including financial statements, managerial accountant prepares accounting reports suchas cost, budget and performance to present company's working efficiency. In this regard,systematic records of business activities is obtained to run business effectively. Therefore,information of entire organization's expenditures, revenues, budget etc are determined by3
analyzing these recorded data (Fullerton, Kennedy and Widener, 2014). However, several kindsof management accounting reports can described as follows:-Cost reports:- For preparing cost report, managerial accountant determines all costs ofitems incurred. Under this report, systematic record is maintained regarding purchasing rawmaterials, cost on manufacturing and expenses for work in process. In addition to this, cost forraw materials, overhead and labour are recorded for production and supplement of goods andservices. Moreover, reporting related to fixed and variable cost is prepared and maintainedthrough this information. Thus, by analysing this cost of items, management accountant andmanager of Covent Garden hotel determines price to set for further price determination.However, different ideas are generated for deciding hotel reports are also prepared regardingcost incurred on its operations which help managers make decisions ford cost effectiveness andfurther implementations (Guffey, 2014). Hence, by recognizing overall incurred costs, adequatereports are also created for business operations and decision making top enhance itsproductivity and profitability. Cost reports are valuable for price determination and producingcost for further year business plans.Budget:- According to current business performance, management accountant preparesbudget that considered as planning tool including forecasting and decision making for furtheryears. In this regard, decisions are made for further production and distribution of products.Along with manager of Covent Garden hotel identifies overall business activities and furtherforecasts and takes decisions for implementation and better qualitative services. Moreover,budget is also prepared for formulating and strategies to run company effectively. It includescomparison between last year and current year's business performance that is useful to increaseeffectiveness of entity at high level. For small scale organization, it is necessary to preparebudget related to expansion and enhancing efficiency for firm's sustainability. Under budgetingprocess, manager of company analysis financial statements and further takes decisions forfurther business implementation and achieving better qualitative services (Hiebl, 2014).Performance reports:- This management accounting report is useful for presentingbalance between expenditures and revenues regarding these amounts. However, performance ofworkers are evaluated weekly, monthly, quarterly and annually. Inlcuding this, by analysingtheir abilities, work is segmented according to their abilities and team building for project and4
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