Management Accounting - Oshodi PLC
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Added on 2021-02-21
Management Accounting - Oshodi PLC
Added on 2021-02-21
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Management Accounting
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1LO1..................................................................................................................................................1P1. Describing management accounting and the significance of its systems..............................1P2. Explaining various methods that are been used for the purpose of reporting.......................2M1. Evaluation of the MA systems through its uses and the application....................................3D1. Evaluating systems and the reporting of the management accounting with theirintegration....................................................................................................................................4LO 2.................................................................................................................................................4P 3 Preparation of income statement by marginal and absorption cost.......................................4LO3..................................................................................................................................................8P4. Evaluating benefits and the limitation of the various kinds of the planning tools that arebeen used for the budgetary control.............................................................................................8M3&D3. Analysing the uses and the application of the different budgets................................10....................................................................................................................................................10LO 4 ..............................................................................................................................................11P 5 Comparison of management accounting tools to solve the financial problems..................11CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15
INTRODUCTIONManagement accounting is the process of analysing the business performance byevaluating the cost and operation of the company. The cost and operation analysis help theorganisation to prepare the internal report to evaluate their market share and growth in compareto their competitor and provide detail information to the internal and external shareholders. MAis used to provide the critical information about the company. Oshodi PLC company is amanufacturing company which use the management accounting system to prepare the annualreport by getting information from various sources. The report highlights the requirement of MAsystem in company to get financial and non financial information. Different managementaccounting system such as cost accounting, financial accounting, inventory managementaccounting, job costing etc. help to analyse the different factors of accounting system and takeeffective and efficient decision. It explains the different methods of MA reporting like budgetreport, sales report, purchase report, account receivable aging report to record the information forthe future needs. It also demonstrates the use of marginal and absorption costing method toprepare the income statement of Oshodi PLC company. The report also highlights the advantagesand disadvantages of planning tools and the use of different MA tools to resolve the financialproblem in the organization. LO1.P1. Describing management accounting and the significance of its systems.MA refers to the process that facilitates the financial information and the resources tomanagers of Oshodi Plc in making suitable decisions (Bogsnes, 2016). It involves preparing ofthe management accounts and the reports for the purpose of providing an accurate statistical andthe financial information to the users. Management accounting is entirely different from financialaccounting as follows- Management accountingFinancial accountingIt is mainly used by the internal stakeholders that is employees, managers and the owners. This accounting is been used by both internal and the external users that includes shareholders, managers, lenders, employees etc. The main purpose of the MA is to helps Oshodi Plc in controlling, decision-making and planning. Its objective is to record for the financial performance and position of an entity for a particular period at the end of the accounting year. 1
The nature of MA is counted as financial as well as non-financial because it records for both monetary and non-monetary information. It involves mainly the information that are financial in nature. Essentials of MA systems-Job costing system- It refers to the system that accumulates and assigns the productioncost in relation to an individual output or the unit. It is the costing system that is been used at thetime when several items are been produced that are different and has significant cost (Boyabatlı,Leng and Toktay, 2015). This system plays a crucial role for Oshodi Plc in developing theinformation relating to identifying the accuracy of an estimating system of an organization,which helps in fixing the price that allows for generating larger profits. Inventory management system- This system of MA makes supervision of the non-capitalized assets and the inventory items. It is the system helps in the tracking the flow of theitems from the manufacturer to the warehouses and to the POS that is point of selling (Craig andet.al., 2018). It is been counted as the most significant system for Oshodi Plc as it helps inmaintaining the adequate record of the inventory and in controlling the handling cost attached tothe goods. Cost accounting system- This MA system referred as the method in which theproduction activities are been recoded as per the system of perpetual inventory. This system isbeen designed and essential for Oshodi Plc in tracking the cost involved in the manufacturing itsarticle. It helps the organization in assessing the present and the prospective cost that is and willbe incurred in the process of producing the product. Price optimization system- It is the mathematical tool that analyse the response of thecustomers at various price levels of product (King and Clarkson, 2015). It is the most vitalstrategy that has been used by the Oshodi Plc in order to arrive at the setting up the most suitableprice within the defined level of profitability and in developing an understanding regardingsensitivity of the existing clients in relation to the changes in the price of the product. P2. Explaining various methods that are been used for the purpose of reporting.Managerial reporting refers to the formulation of the reports that focuses on the insideinformation that is been received through the use of financial accounting. MA reports are beenformulated for regulating, decision-making, planning and in measuring the performance. Thereare large number of the reports that is been prepared by the management are as follows-2
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