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LO 1 1 Management accounting and essential requirements

   

Added on  2020-12-18

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Management accountingreport

Table of ContentsINTRODUCTION...........................................................................................................................1LO 1.................................................................................................................................................1Management accounting and essential requirements...................................................................1Different types of methods for management accounting.............................................................2LO 2.................................................................................................................................................3Preparation of income statements using different management accounting techniques.............3LO.3 ................................................................................................................................................5Explaining the advantages and disadvantages of different planning tools for budgetary control.......................................................................................................................................................5LO 4.................................................................................................................................................9Different management accounting system to be used for reposnding various financialaccounting problems....................................................................................................................9Key performance indicators.........................................................................................................9CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12

INTRODUCTIONManagement Accounting system is refers to a system adopted by managers as to developthe efficiency of the company in context with its financial performance. It is a process ofproviding all the relevant financial information to the managers so that they could use them anddevelop effective strategies for enhancing financial performance of the company and its costefficiency as well. Professional leads is a famous accounting firm of UK. It provides accountingservices to various companies. The present study shows a report of an intern as to provide abrief information about the management accounting system to a client of the company. Thereport includes a description of management accounting and management accounting system.Further, it also shows various types of management accounting system and their requirementswithin a business organisation. It shows numerous methods for the management accountingreporting. The report also shows preparation of income statement using different techniques ofmanagement accounting. Furthermore, it also shows different planning tools of budgetary controlsystem and various systems of management accounting that can be adopted by managers as torespond different financial problems.LO 1Management accounting and essential requirements.Management accounting is a process that helps in prepare financial report and it helps inmaking decision for achieve organizational goal and meet objective. This account statementprepare by managers for evaluate and analyze all data for making decision and improve work. Itmain purpose is make plan and strategy and policy formation for set goals and take actionaccording to prepared statement. All data helpful in making decision by manages like cost,profit, price and saving so they make any strategy for achieve goal after evaluation and analyzeof all data. So this is a tool of evaluate all costs and data than making decision and make plan(Malmi, 2016). financial accounting is a system that records all data and double entries book keeping offinancial year (Dutta and Patatoukas, 2016). It track all transaction that related to finance andrecord, summarize and analysis of data and information.1

Difference between management accounting and financial accounting :- Management accounting Financial accountingLegal requirement It has no legal requirement inorganization.Limited and other companiesmust prepare this account.Format of presentationManagement of organizationmainly focus on require allinformation and data ineffective way. It format are compulsorilytrues and fare according torelevant act (Christensen,Nikolaev and Wittenberg‐Moerman, 2016).Area of coverageIt cover internal part opforganization.It includes all external partiesthat out of organization.Types of data useQualitative and quantitativeboth data includes.Only qualitative data use.Following types of management accounting system:- Cost accounting systems :- this system is a framework that use by firms for makeestimate and set cost of product through that it also analysis of profit. This system helps in makebudget, standard cost and actual cost. Firm easily evaluate profit of all department oforganization through analyze gap between cost and revenue. After analyze all data like pastpresent and future than management take decision related to investment and expand business.This system of accounting important for all organization.Inventory management system :- this management system is use by all manufacturingorganization because through this system firms track every information about inventory. It trackswhole supply chain and raw material that work in progress. It includes stock production towarehouse and warehouse to shipping so it makes easy to manage inventory. So this systemincludes all tracking of inventories. Orders, sales and deliveries. This system is very useful formanufacturing organization that helps in manage all records and easily evaluate aboutinformation of products and goods. for example if organization have reorder level and minimumstock level that helps in manage cost and funds for purchase goods and maintain order. Reorderlevel means that sufficient costs are available with organization that it take same order (Bucci,2

Hyde and Keen, 2019). Minimum stock level mange minimum amount compulsorily with it andmaximum stock level fix limit of cost for purchase stock.Job costing system :- this system is very useful for organization that make products andservices according to order by customers. That means different types of customers give order fordifferent design and products so organizations has to produce according to demand and orderreceive. In this process more cost incur so firms use job costing system that helps in calculateeasily all cost and revenue. Through this system they can easily calculate per item cost andrevenue. Firms evaluate that revenue is earned or not more than expenses that means profit earnon per item or not so it helps in evaluate and making decision that order accept or not thatdepend on profit and loss (Maas, Schaltegger and Crutzen, 2016).Price optimizing system :- this system is use by all types of organization becausethrough these firms evaluate customers reaction regard price of products. Customer wants toquality products on low price and if organization provide products at low price so customerdemand increase and if price is high for customers that effect on customers demand. So firmeasily evaluate and analyze customers reaction and they can set their price of products and alsotake decision about price of products.Benefits of management accounting system :- management accounting system helps inorganization for measure actual performance (Gunarathne and Lee, 2015). It also beneficial incomparison of actual budget with required budget so management easily take decision accordingto reports and also make plan for improve and develop of performance for achieve target.LO 2Different types of methods for management accounting reportingManagement accounting reports is tool that helps in understanding everything related to businessand activities of firms. It includes expenses, revenue, tax and collection of data. Followingmethods are used for management accounting report:-Financial report :- Financial reports shows the overall financial transactions of thecompany. With the help of these reports, management can analyse overall financial performanceof the business. Further, it can also be seen as a summarised report of the overall businessoperations. In this regard, with the help of these reports, the managers can analyse variousfinancial information and developing strategies for the company.3

cash reports :- cash reports shows overall cash flow of the organisation. It includes allthe cash flow in organization (Nitzl, 2016). With the help of this report, managers can developbetter control over the business activities.Sales report :- Sales report shows information about the sales activities of the company.With the help of this report, overall sales activities of the business organisation. In this regard,the managers can develop effective strategies through which the company could achieve itsbusiness gaols. Item cost report :- this report is very lengthy and consume more cost because thisincludes all cost and expenses according to material, labor and other expenses on per product sothat helps in evaluate and calculate profit on per products. This report divides all cost accordingto different expenditure and then analyze about earn profit.Management accounting system is a process of control and effective manage throughevaluate of data and profit for making decision. It is very best way of evaluate all things andmake strategy very effectively for earn more profitability. It also helps in compare past presentand future year records. It affects to top management because they have to evaluate time to timeall records and evaluate performance in short term. Management accounting reporting is measureactual performance of organization and compare require budget and available budget. Itconsumes more cost and time because it evaluates and calculate profit on per product accordingto labor and material and other expenses (Van der Stede, 2016).Preparation of income statements using different management accounting techniquesMarginal costing:marginal costing is a technique of costing in which all variable costs are being consideredas as the product cost (Jermias, Gani and Juliana, 2018). Whereas, all the fixed costs are being considered as period cost. In this regard, fixed costs are nit being taken into account while calculating cost of production.Importance of marginal costingMarginal costing method is helpful for business for taking its short term decisions.Marginal costing helps in controlling cost of production because it eliminates overhead cost.Marginal costing helps in effective decision making and profit planning.Absorption costing:4

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