Management Accounting | R L Maynard Ltd Co | Assignment
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Added on 2020-02-12
Management Accounting | R L Maynard Ltd Co | Assignment
Added on 2020-02-12
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Unit 5. Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................3P1 Types of Management accounting Systems that are required for R. L. Maynard Limited4P2 Different methods of management accounting reporting..................................................7M1...........................................................................................................................................9TASK 2............................................................................................................................................9P3 Income statement according to absorption and marginal costing.....................................9M2.........................................................................................................................................12TASK 3..........................................................................................................................................13P4 Benefits and limitation of planning tools used for budgetary control.............................13Capital Expenditure Budget:...............................................................................................19M3.........................................................................................................................................19P5 Adaption of management accounting systems for responding to financial problems.....20CONCLUSION..............................................................................................................................22M4.........................................................................................................................................22REFERENCES..............................................................................................................................23
INTRODUCTIONThe procedure of analysing, interpreting and presenting data related to accounting, that isusually gathered with help of cost and financial accounting, to provide further assistance tomanagement in field of making decisions, creation of different policies and regular commercialactivity of organization is termed as Management Accounting (Management accounting - Whatis management accounting? 2017). It measures the performance, provides assessment of the risksinvolved, allocates the resources and gives presentation of different finance related statement tothe managing staff. It allows to taking of corrective decisions for performance improvement. In the followingassessment R. L. Maynard Limited Company has been taken into consideration. The companywas incorporated on March 22 in year 1973. In Buckinghamshire its registered office is situated.The organization has been flourishing efficiently for the past 43 years and 11 months. At present,there are 3 progressive directors and 1 active secretaries as per the modish yearly return proposedon June 10 in the year 2016. It has been engaged in the construction of property anddevelopment. Emphasis is laid on the provision of employment agency services and on dwellingswhich are private. The ultimate purpose of this assessment is to analyse information that howManagement Accounting will be applied to the wider business environment of R. L. MaynardLimited.3
TASK 1P1 Types of Management accounting Systems that are required for R. L. Maynard LimitedManagement Accounting is the process of evaluating, analysing, measuring, interpretingand communicating information in order to pursue organisational objectives. Theobjectives/benefits of Management Accounting are described below:Help in planning and establishing future policies: The first objective ofmanagement accounting is to plan in advance to eliminate future obstacles. Itincludes forecasting on the basis of present and past conditions and framed futurepolicies and targets on the basis of it.Assist in interpreting financial information: It helps management of R. L.Maynard Limited to interpret financial and technical data in efficient way, so thatit can benefit in decision-making policy of company.Assist in performance control: Management accounting of organisation aid incontrolling performance of different responsibility centres and departments of R.L. Maynard Limited.Management accounting system is the process of gathering financial data from variousdepartments such as sales, inventory, production, etc. Than converts the information to formulatereports. There are many type of management accounting systems are available, such as:1.Cost Accounting System: Used for estimation of cost of products, raw materials,inventory valuation and cost control.2.Inventory Management System: Assist in tracking and estimating level of inventory,orders and sales.3.Job costing System: This system is used by R.L. enterprise to value the cost ofmanufacturing of commodities in accordance to competitors and market demand 4.Price Optimisation: It is analytical and mathematical method that provide idea tocompany that how customers will react on different pricing methods.Management Accounting encapsulates those accounts which serve managerial purpose.They provide timely piece of data in accordance with financial status of the organization on aday-to-day basis (Brandau, Endenich and Trapp, 2013). The departmental managers make shortterm decisions with the help of these. It is an accumulation management, finance and accounts.4
All the kind of information that is related to tasks like business strategy, financial accounts, etc.It provides great boon to the small-scale business.The company R. L. Maynard Limited is basically a property construction company andmanagement accounting system is followed in their organization. This has caused efficient andeffective running of the organization. For the sake of company's internal people such asfunctional or departmental heads, operational officers and board of directors, managementaccounting needs to be done on a daily, weekly or monthly basis.Management Accounting systems require some necessities that are followed by R. L.Maynard Limited:The costings which are related to the production of different types of goods and servicesprovided by company have been covered in management accounting. The frequently preferredmanagement accounting systems are mentioned below:Transfer of PricingThroughput AccountingTraditional cost accountingLean accountingThe above-mentioned accounting systems have been further discussed below:Traditional cost Accounting System: The costs of production overheads are allocated tothe products that are generally manufactured by the company in this system. Thistraditional method is often referred to as Conventional method. Per current statisticsmostly traditional way of cost accounting is preferred by companies like R. L. MaynardLimited. The indirect costs of the manufacturing units get distributed over the units ofproduction. This procedure is carried out based on criteria involving volume or quantityof the units that are produced, over-head production and direct labour over-head. Itconsiders Process and Job Order costings (Salehi, Rostami and Mogadam, 2010). Wherecostings can be easily identified for individual projects in case of large or big projects,there the Job order costings finds applications. But allocating the costs individually onhomogeneous products, which undergo through various processes, becomes difficult tohandle.Lean Accounting: It’s a fresh term or one could say that it serving as a revolutionary tothe management accounting system. This is so because management accounting only5
takes costings into consideration but this brand-new concepts puts focus on cost reductionmethods by excluding the waste material caused in production. Accounts coming underthis category provide data that is related to value streams assessing, profits measurementand making of decisions to the assigned officers. Excess of any of the costs provided willbe cut down in system based on information provided through above mentionedcategories. Increase in sale revenue by reduction of cost of wastage materials, eliminatingthe waste generated availability of plant's capacity, money saving by cost step-down; areincluded in the advantages provided by Lean accounting.Throughput Accounting: The volume of the raw material or the product that is passedthrough a system or process is usually termed as throughput. In management accountingsystem, the throughput accounting cannot be seen as a activity for costing. This happensbecause it mainly lays its focus on determining the constraints that arise when units arebeing manufactured (Abrahamsson, Englund and Gerdin, 2011). Constraints are notenough in relation to raw material, turnover of labour, waste of plant's capacityrequirement; and are provided from organization. Therefore, this category of accountingsystem eliminates such type of constraints in organization and lead to insisting of morethroughputs for enhancing the quantity and quality of production. This will ensure thatfor each of the units produced, the costing will remain low through these ways. Transfer Pricing: When the commodities are being transferred from one department/ toanother or from holding company to subsidiary one, then transfer pricing is evaluated.Moving and transferring of products from one place to another generally adds up someextra costs to it for every single process of transfer. The costs that are being generated intransfer pricing are generally shifting price and opportunity price. Amount of money thatwill be bared by company in the case of outsourcing of goods to firm outside, comesunder the category of opportunity cost (Frezatti, Guerreiro and Gouvea, 2011). Whiledependence on production cost is shown by variable cost. This type of managementaccounting system provides flexibility to the company and hence this is a benefitprovided through it.Essential requirements of different types of management accounting systemsIt is necessary for RL Maynard to implement management accounting system in its retailstores in order to establish stability between management and workforce.6
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