Management Accounting Purpose

Added on - 21 Feb 2021

  • 22

    Pages

  • 6284

    Words

  • 18

    Views

  • 0

    Downloads

Trusted by +2 million users,
1000+ happy students everyday
Showing pages 1 to 6 of 22 pages
ManagementAccounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Management accounting systems.........................................................................................1P2 Different methods used in management accounting reporting..............................................4TASK 2............................................................................................................................................5P3 Calculations of costs using appropriate techniques to prepare income statement.................5Last in first out (LIFO)..................................................................................................................10TASK 3..........................................................................................................................................11P4 Advantage and disadvantage of different types of planning tools used for budgetary control...................................................................................................................................................11TASK 4..........................................................................................................................................15P5 Compare how organisations are adapting management accounting systems to respond tofinancial problems.....................................................................................................................15CONCLUSION..............................................................................................................................17REFERENCES..............................................................................................................................18REFERENCES..............................................................................................................................20
INTRODUCTIONManagement accounting is considered as a way of presenting accounting information tomanagers for better decision making and strategic planning.The main purpose of Managementaccounting is to give true and fair views for increasing the profits in a firm (Senftlechner andHiebl, 2015). To understand the importance of Management Accounting Equilibrium assetsmanagement firm has been taken that provides consultants services to different companies andhelp to make correct business decision. This report is assessing of their clients which is AirdriLtd. This company manufactures hand dryers and is based in UK. This report will cover differenttopics like management accounting system, reports and planning tools that can be used to controlthe budget in a company. Moreover, report will discuss about financial problem which can occurin an organization while using system.TASK 1P1. Management accounting systemsManagement accounting means to present the accounting information for formulating thepolicies which is adopted by management and it assist day to day activities. In other words, ithelps managers to perform all functions containing planning, organising, directing, staffing andcontrolling (Tucker and Lowe, 2014).According to J. Batty: “Management accounting is the wider term that is used to definethe accounting methods, systems and techniques which, with high knowledge and ability, helpmanagement in its task of profit increasing and decreasing losses(Definition of managementaccounting2019).”Origin and evolution of management accounting:It was first evolved with techniqueof cost accounting while the earlier industrial revolution. It was originated after financialaccounting that can trace its origin to its stewardship role in various trading ventures.Role of management accounting:It plays a vital role in every business enterprise suchas decision maker, profit maximization, cost accounting, job order costing and inventorymanagement. Moreover, it helps to provide right direction within organisation by usingmanagement accounting (Englund and Gerdin, 2014).Principles of management accounting:It involves different types of principles which isdefined below:1
Influence:It includes an influencing way that help to attract the customers likecommunication.Relevance:This means the information which is provided by managers or companyshould be useful, and add value to them.Value:This means that the management accounting must help managers and decisionmakers to solve their problems, and to provide benefits. It should be analysed in order to makedecision.Trust:Management accounting must provide reports which are the result of informationprocessing. Those reports must be reliable, because of them depend the future of severalstakeholders, and of the same business. It involves stewardship that builds trust (Smith, 2017).Difference between management accounting and financial accountingManagement accountingFinancial accountingIt is used for internal and external managementthat help to make decisions.It is used only for external use.It does not need to follow GAAP or any otherinternational standards.It need to follow Generally Acceptedaccounting principles and other standardsapplicable as well.It involves specialized data about the productsof the organisation.It involves standard financial statements suchas balance sheet, income statement and cashflow statement.Management accounting system:It is a set of methods, and logical procedures orprocesses used for identify business opportunities, or business risks, and make decisions aboutthe best source and use of funds within an organization. It is helpful for all company bymaintaining the proper records and transaction in entire company. Management accountingcomprehends various methods and concepts which are necessary for set up a business withcontrolling the business activities (Lindholm, Laine and Suomala, 2017). It is important tointegrate within organisation as it help to evaluate the data and interpretation in order to makeprofitable company. Moreover, it gives financial and non-financial information that help to takeright action. Such as Airdri is the hand drier manufacturer company which is using differenttypes of management accounting system for making right business decision. These systems are2
important to be integrated in an organisation as it result in effective management oforganisational functions.Presenting financial informationCharacteristics of good information system:Management accounting system shouldprocess relevant, accurate and up to date information in order to provide business reports whichcan be used to make decisions about the best source and use of funds for that business. Up todate system help to accept the challenges and provide better solution. It is needed fororganisation that system should be accurate and reliable that help to make effective businessdecision (Badolato, Donelson and Ege, 2014).Information is presented must be understandable:It is very important for allorganization that information which is provided by company must be easy to be comprehended,because it help to take correct action further. If managers cannot understand the information,then they cannot make right business decision. Moreover, it helps to increase the productivitysuch as information helps to understand the needs of organisation and make efforts to fill.The different types of management accounting system are follows by Airdri company that are:Inventory management system: This is a system which is used to keeping records ofinventory like raw material, finished goods or unfinished goods. This is mainly used inmanufacturing company to maintain the records of stock which are available in an organization.It helps in stock forecasting, automatic reordering, materials tracking inventory alerts and manymore for keeping records within organization. It is essential required in Airdri as it help to keepand maintain the records of inventory of their products. The manager of Airdri track theinventory and make further decision for placing next order. It considers various method to usethe stock like:LIFO:It means last in first out which can be used by company to sell the products firstly.FIFO:It mean use the earlier purchased goods which is used for manufacturing. first infirst out that can be used by company to sell the first ordered products.Weighted average:It means combination of price and units produced to sell the productswithinorganization.Airdri is using FIFO method that helps in production of products. This is required for allenterprise to get the correct information of products and keep safe from damages.3
Benefits:This system help to track the inventory and proper records which is used bybusiness entity. Its main functionality is Airdri can maintain systematic records of stock and canplace order accordingly. The main benefit is that this system helps the company to control itsstocks and to avoid wastes in production, losses by other reasons such as thefts. On the otherhand, the inventory system make possible for the company to purchase raw materials, and othermanufacturing resources more accurately and according with the strategic steering of thebusiness.Job costing system:It is a set of methods, and logical procedures which gather,organize, and process information about the costs of labor in order to prepare reports that will beused by decision-makers to manage the business resources. This means a specific contract,assignment or work which is needed to complete as per customer’s requirement. This is the formof particular order costing which help to ascertain the cost of individuals or jobs. It is required tomaintain the records of specific jobs or contracts. The manager of Airdri Ltd is using this systemto make estimation of individual unit cost or assignment in order to deliver hand driers. Theessential requirement of such system in Airdri is that it contains specialized rules which areapplicable to all types of jobs and helps in estimation of costs for ascertaining the jobs (Bryson,Crosby and Bloomberg, 2014).Benefits:It perform main function to reduce or increase labour units allocation todifferent tasks in the production process, and service delivery the work according to specialitythat helps Airdri to analyse the cost of different items which are manufactured.Cost accounting system:This system is used to estimate the investments, efforts inmonetary units of products and services for the valuation of stock, analysing the cost andmaintaining the profitability. It is very important for organization to maintain the cost oforganization as well as products. It is essentially required in Airdri and other organization tomanage the cost in order to increase the profitability. The manager of Airdri uses such system tois to estimate as well as record the costs like variable cost and fixed cost.Benefits:Its main function is to analysis the different cost that are related tomanufacturing activity. Moreover, it helps Airdri to track the record of direct and indirect cost ofbusiness activities.Price optimisation system:This means a system which is used by company to set theideal selling values of all manufactured products. It mainly focuses on to set the prices of4
desklib-logo
You’re reading a preview
Preview Documents

To View Complete Document

Click the button to download
Subscribe to our plans

Download This Document