M2: Management accounting techniques and financial reporting documents
Added on 2021-01-02
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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3P1: Management accounting and its different types of system...................................................3P2: Explain different method of management accounting reporting.........................................4M1: Evaluation of benefits of various management accounting systems...................................5D1: Management accounting system and management accounting reporting are integratedwith organisation process............................................................................................................6TASK 2 ...........................................................................................................................................7P3: Appropriate techniques of cost analysis to prepare an income statement............................7M2: Management accounting techniques and financial reporting documents.........................10D2: Financial reports which applies to interpret many business activities ..............................11TASK 3..........................................................................................................................................11P4: Advantages and disadvantages of different types of planning tools used for budgetarycontrol.......................................................................................................................................11M3: Use of different planning tools and their application for preparing and forecasting budget...................................................................................................................................................13TASK4...........................................................................................................................................14P5: Organisation are adapting management accounting systems to respond to financialproblems....................................................................................................................................14M4: Management accounting in response to financial problem can lead organisations tosustainable success ...................................................................................................................17D3: Various Planning tool to resolve financial problems.........................................................17CONCLUSION..............................................................................................................................17REFRENCES.................................................................................................................................18
INTRODUCTIONManagement accounting is also known by managerial accounting. This accountingsystem provides various costing and operational information to the management which is helpfulin making many internal reports. On the basis of this accounting system, managers make manyimportant decisions regarding to the organisation. There is no specific time to prepare theseaccounting reports, because it depends on company that when they need reports. Basic objectiveof this accounting system is to provide those data and information which is required by anorganisation to make internal managerial decisions. To understand about the managementaccounting concept and practices Bright star financial company is selected. This company wasestablished in 2010. Its headquarter is in Essex (UK). They provides financial services andproducts like mortgage loans, commercial loans etc.In the project report descriptive information about management accounting meaning, itstype are discussed. In addition this report focus on different accounting reports, their uses andlimitation and on various costing techniques. This report describes a way in which organisationovercome from financial problem with the use of financial techniques (Ward, 2012).TASK 1P1: Management accounting and its different types of system.Accounting is a method of keeping financial records in a systematic manner. It is important to keep financial records in a manner which is required to make financial statements ofthe organisation. Accounting should be done according to rules, regulation and in a particular accounting time period. There are many types of accounting. Management accounting is an important part of accounting (DRURY, 2013). This type of accounting is described below:Management accounting is a system of accounting which is related to provide financial and non financial information to the management which is needed in making future plans and policies. This accounting system consist both monetary and non monetary information. It is basically useful in making internal decisions for company. It is not necessary to do management accounting for companies but it has own importance in internal aspect of a business. Difference between management and financial accountingBasis Management Accounting Financial Accounting
Purpose Accountant prepare it for personaluse. For external party use butmanagement also go through it, Regulation No such regulation or law.Prepared as per AS and accountingconcepts. Users Internal management Shareholders, regulators andinvestors. Many important internal decisions based on this accounting system. Bright star financial company use following accounting systems:Cost Accounting System: Cost accounting system is a kind of accounting system whichis helpful in making estimation of cost of products and services. This is necessary for thecompanies to have an estimation about the total cost because it helps in analyse that whichproducts are advantageous and which ones are not. Bright star financial limited use thisaccounting system to estimate their financial services and product's cost. With the help of thisthey focus on those services which are beneficial for them.Price Optimisation System : Price optimisation system is a method of determining priceof products and services. It helps in setting the price at the level which is suitable for both to thecompany and to the customers. This system provides a framework to the organisations to analyseabout the customers reaction on different pricing level. Bright star financial limited applies thissystem in price determining of their financial products and services. It helps them to set the pricethe level which is profitable for them (Parker, 2012).Inventory Management System: Inventory management system helps in tracking themovement of products or services. It is very important system of management accounting.Management of Bright star financial limited use this system to track the movement of financialservices and products. If company wants to check their financial products and services statusthen it will them.Job Costing System: Job costing system is a system which calculates the cost ofproducts and services then assigns cost to each individual units. It is suitable in thoseorganisations which produces various kind of products. It helps in minimisation of cost. Brightstar financial limited provides many kind of financial services so they apply this system in
analyse each product's cost. This helps them in focusing on those financial services and productswhich consumes high cost (Wickramasinghe and Alawattage, 2012). P2: Explain different method of management accounting reporting.Management accounting reports are those reports which are helpful in providing a clearimage of company's performance. These reports provides a basis for making future plans andstrategies so it is important that these reports should be prepared without any error. Bright starfinancial limited prepares many kind of reports which are helpful for them in making futurepolicies and strategies. Following reports are prepared by them:Budget report- Budget reportsare those reports which are helpful in making comparisonwith actual output with budgeted output. These reports consists an estimation of future incomeand expenses and organisations try to work according to this estimation. Basis of making budgetreports are the previous year's data. It contains only financial information. If a company's actualoutputs are more then budgeted then it considered that company is performing well. Bright starfinancial limited makes this budget to analyse their performance. With the help of this theycompare actual income with budgeted income.Performance report- Performance report is a kind of report which review theperformance of companies and as well as of employees (Hilton and Platt, 2013). It is the reportwhich analyse the actual performance without any error. It helps the managers in providing abasis of of evaluating the performance. Managers of Bright star financial limited prepares thesereports in performance evaluation. It provides a framework to them in analysing that whichemployees are eligible to get rewards.Account receivable ageing report- Account receivable ageing report is a tailor madereport for those organisations which deals in credit. This report includes many details in it likeamount which is due, date on which credit transaction done etc. It helps to companies inchecking that how much amount is due by the customers. Bright star financial limited use thisreport in checking that how much collection they have in market from customers. It reduce thework load of finance managers.Cost managerial accounting report- Cost managerial accounting report provides a basisof estimating the profit or loss because it calculates total cost which occurs before selling. Itmakes comparison between selling amount and total cost. If selling amount is more then costthen it considered as profit. On the other hand if cost is more then selling, then considered as
loss. Bright star financial limited prepares this report in checking about the profit and loss fromtheir products and services because it calculates all the cost till sell of product or service andafter that it makes comparison (Otley, 2016).M1: Evaluation of benefits of various management accounting systems.Accounting system Advantage Cost Accounting System At the time of austerity, financialcompany take measure steps to improveefficiency with the help of costaccounting and can form perfect gameplan according to its customer's need. Cost accounting system help ininchoate companies in many ways toget the appropriate knowledge ofprofitable and unprofitable activities.Inventory Management System In today's cut-throat competition,Inventory management system help infully utilization of allocation resources.It help a business to stay ahead of thepack as to work on existing customersand fulfil every possible need.Price optimisation system It reflects a big picture of company andhandle the price of merchandiseaccording to the market demand andforces.It get down the business and takeinitiative while forming the price ofproduct to maximise profit Job costing systemIt helps in analyse each activity's costindividually.It helps in reduction of extra cost of
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