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Defining Management Accounting

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Added on  2020-12-09

Defining Management Accounting

   Added on 2020-12-09

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Management Accounting
Defining Management Accounting_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3a....................................................................................................................................................31. Defining management accounting and differentiating it from financial.................................32. Presenting the importance of management accounting information as a decision making tool.....................................................................................................................................................43. Cost accounting system...........................................................................................................54. Inventory management system................................................................................................65. Job costing system...................................................................................................................6B...................................................................................................................................................71. Presenting the manner in which managerial reporting aid in decision making.......................72. Stating reasons behind the inclusion of understand-ability characteristics in managerialreports..........................................................................................................................................8TASK 2............................................................................................................................................8Preparation of profitability statement as per marginal and absorption costing method..............8Presenting different kinds of budgets and their advantages and disadvantages........................10Describing budget preparation process and costing system that can be used for taking pricingdecisions....................................................................................................................................12Stating the importance of budget as a decision making tool.....................................................13TASK 4..........................................................................................................................................13Comparing the manner in which organisations use adapt management accounting forresponding financial problems...................................................................................................13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................16
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INTRODUCTION Management accounting tools are widely used by the business organization around theglobe. In the recent times, both profit and non-profit making organizations, undertake managerialaccounting tools for making effectual use of financial resources. Moreover, it rendersinformation about day to day activities as well as operations and thereby aid in decision makingaspects. The present report is based on the case scenario of Tech ltd which provides customerswith special chargers for the mobile phone. Business entity of Tech Ltd owns & operates retailoutlets in UK and now concerned about making improvement in the decision making aspect aswell as overall performance. In this, report will describe different type of managementaccounting systems along with the essential requirements. Further, report will present the mannerin which different types of accounting system aid in managerial decision making. TASK 1a.1. Defining management accounting and differentiating it from financial Management accounting lays emphasis on analyzing and evaluating monetaryinformation related to the internal operations. Such field of accounting provides manager withappropriate cost information for planning, controlling and decision-making purpose. On the contrary to MA, financial accounting focuses on providing information aboutbusiness transactions to both internal and external stakeholders (Hilton and Platt, 2013). Hence,financial accounting places emphasis on recording, summarizing and presenting informationabout business transactions over the time frame.Difference between management and financial accounting can be presented on the basis offollowing aspects:Basis of differenceManagement accountingFinancial accounting
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MotiveCompany’s motive behindthe adoption of MA tools isto develop competent planand formulating suitablegoals for the near future. This field of accountingprovides deeper insight aboutNeedPreparation of managementaccounting reports areoptional Unlike MA, business entity isrequired to maintainaccounting records andpublish report at the end ofan accounting year. StakeholdersManagerial reports are usedby the departmentalmanagers for decisionmaking In FA, stakeholders includeboth internal and externalsuch as management,personnel, shareholders,suppliers etc. RegulationsNo need of followingspecific rules, regulationsandguidelines(WickramasingheandAlawattage, 2012) Under this, for the purpose ofappropriate accountpreparation and report thereis a need to comply withGAAP, IFRS and IAS. Time frameAs per the need andrequirement of managementreports are prepared onweekly, monthly andquarterly basis. Financial accounting reportsare prepared on annual basis 2. Presenting the importance of management accounting information as a decision making tool In the context of Tech Ltd, significance of management accounting is high pertaining todecision making aspect. For attaining success and ensuring smooth functioning of operationsbusiness entity is required to make prominent decisions. Hence, by taking into accountmanagement accounting tools departmental managers of Tech Ltd can take decision about thefollowing aspects:Make or buy decision: MA field helps in ascertaining the cost of manufacturing chargersin house as well as outsourcing. This in turn helps managers is taking suitable decisionfrom the perspective of cost saving and profit maximization. Cash flow forecasting: Management accounting facilitates forecasting of cash flows andthereby helps in taking suitable decisions. In other words, through the means of
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