Management Accounting - Fashion Entertainment limited

Added on - 21 Feb 2021

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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION................................................................................................................................3TASK 1.................................................................................................................................................3Question 1. Management accounting and its types..........................................................................3Question 2. Different methods of management accounting reporting.............................................5M1. Benefits of management accounting systems...........................................................................6D1.Management accounting systems and reporting are integrated with process of Fashionentertainment limited company........................................................................................................7Question 3. Preparation of income statements.................................................................................7M2. Management accounting techniques to produce financial statements.....................................9D2. Interpretation of produced financial reports...........................................................................10TASK 2...............................................................................................................................................10Question 4. Use of planning tools of management accounting.....................................................10Question 5. Role of management accounting to solve the financial issues...................................11M3. Use of planning tools for preparation of budgets in Fashion entertainment limited company........................................................................................................................................................13M4. Management accounting systems in response to solve financial issue..................................13D3. Planning tools in response to solve the financial issues.........................................................13CONCLUSION..................................................................................................................................14REFERENCES...................................................................................................................................15
INTRODUCTIONThe term management accounting is linked with a kind of accounting system that isinvolved in the process of preparation of internal reports with the help of financial and non financialinformation (Nørreklit, 2017). This accounting is very crucial for the aspect of managers. It is sobecause with the help of it they make their future plans and policies as well as determine thefinancial position. In the absence of this accounting, it may be difficult for companies to managevarious activities in an effective manner. Herein, the project report Fashion entertainment limitedcompany is selected that is involved in the manufacturing of designed cloths. The company islocated in London, UK and size of entity is medium. Along with the project report describes aboutvarious types of tasks in which term management accounting is defined in broad sense. Such asexplanation of management accounting and its types are mentioned. Along with various techniquesand methods of reporting is also described. Further, the income statement is prepared with help ofmarginal and absorption costing techniques. Additionally, limitation and drawbacks of planningtools of budgetary control along with importance of management accounting from overcoming thefinancial issues is mentioned in the end.TASK 1.Question 1. Management accounting and its types.The management accounting may be defined as an important part of accounting that isassociated with the internal management of companies with help of internal reports (Santini, 2013).As per the accounting rules and regulation this is not necessary for companies to implement thisaccounting as financial accounting. But looking at its importance, this accounting is becomingessential part. In the aspect of Fashion entertainment limited company, they use this accounting aswell as its various types that are mentioned below:Inventory management system- It is an accounting system which is linked to the an effectivemanagement available goods including all kind of goods such as raw material, finishedgoods, work in progress (WIP) etc. The companies who use this accounting system they takebenefit of it not only in management of inventories but also for controlling the cost ofstorage. As per above discussion about inventory management, it can be said that it isessential for keeping cost of storage under control as well as for taking crucial decisions. Forexample in above selected company, they use this accounting system in the aspect ofmanagement of their raw material such as cotton, silk etc.Price optimisation system- This is defined as an accounting system that is aligned to themeasuring customer's reaction on different pricing levels. On the basis of this reaction of
customers it helps in marking the exact price of products. Without implementation of thisaccounting system, companies may face various issues such as lower sales because if pricewill not effective then customers will not prefer to buy. So it is essential for companies inkeeping prices of their products and services at a suitable level so that selling can beincrease. In Fashion entertainment limited company, they use this that helps them in sellingthe cloths at an effective prices. Along with they evaluate customers' reaction on multi-pallevel of prices.Cost accounting system- It is a kind of accounting system that is linked to the providing costregarding information to companies (Humphrey and Miller, 2012). The key aim of thisaccounting system is to minimising the costs so that profit can be earned. With the use of it,organizations can get detailed information about various kind of costs such as productioncost, advertisement cost and many more. So this is essential for minimising and keeping thecost under control as per the estimated set before. In the aspect of above fashionentertainment limited company, they implement this accounting system with an objective tokeep cost of various operations below to standards. As well as above company is involved inthe manufacturing of cloths so this accounting system is useful for them in producing clothsin lower cost that leads to higher benefit to them.Job costing system- Under this type of accounting system of management accounting,detailed information is provided about cost of job that is involved into multi-pal tasks(Takeda and Boyns, 2014). With the use of this accounting system companies can find outvariation into actual job cost and standard cost. It is essential for organizations forminimising the cost of job with the help of detailed information provided by this accountingsystem. In the context of above, Fashion entertainment limited company they use thisaccounting system that provides below mentioned information such as:Direct material cost- The detailed information about price of material as well as quantity ofmaterial purchased is provided by this accounting system.Direct labour cost- Along with above cost regarding information, the job costing systemprovides information related to number of labours and wages paid to each labour (Bryer,2013).Overheads- In organizations, there are various kind of overheads occurs that is recognizedby help of above mentioned accounting system.So these are the main types of management accounting as well as each of them have ownimportance.
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