Report on Types of Management Acounting System

Added on - 06 Jun 2020

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Management Accounting
TABLE OF CONTENTSINRODUCTION..............................................................................................................................1P-1 Management accounting and its different types...................................................................1P-2 Different methods used for management accounting report................................................3P-3 Marginal costs and absorption costs.....................................................................................4P-4 Advantages and disadvantages of different budgeting tools................................................5P-5 Adaptation of accounting system in organizations...............................................................7M-1 The benefits of management accounting.............................................................................9M-2 Management accounting technique and its benefits............................................................9M-3 Different planning tools and their applications.................................................................10M-4 How financial problems and management accounting leads to success...........................10CONCLUSION:.............................................................................................................................11
INRODUCTIONManagement accounting plays a very crucial role in every big, medium and smallorganization. It controls, manage and communicate goals and objectives to the overallorganization. It helps in maintaining the financial performance by preparing plans and budgetsfor specific time period. This report will show the requirements in preparing different types ofmanagement accounting systems. It will also show different methods used in managementaccounting and difference between marginal and absorption cost. How these cost affects theprofits in business. Also the pros and cons of different planning tools for preparing budgetarycontrol. It shows the effect of organization in adopting the management accounting system tosurvive and respond to their financial problems.For undertaking this report the organisation selected is Ryder Architecture. The cited firmbelongs to construction sector and operates in very small area. Thus, this report will help in developing a relevant management accounting system for the cited establishment.P-1 Management accounting and its different typesA process of preparing accounting reports that provide timely and accurate financialinformation required by managers to take daily decisions. These reports identify, measure,analyse, intercept and communicate the organization goals. The key difference betweenmanagerial and finance accounting is that managerial accounting helps managers to takedecisions within the organization while financial accounting helps in providing information tooutside parties. Managerial accounting can be done by various techniques like margin analysis,constraint analysis, capital budgeting, trend analysis, product costing and lean financialmodelling.Essential requirements of management accounting system are:Financial planning-It is a process in which planning is done to achieve primary objectives andgoals. It includes both long term and short term financial objectives by formulating policies anddeveloping procedures. These policies may relate to determination of capital amount, sources offunds and distribution of income as well as use of debt along with equity capital. To do financialplanning the past data and figures are needed of previous one or two years. Also what are the
goals and objectives that has to be achieved. Experienced managers are required to do a brieffinancial planning of the organization.Analysis of financial statements-It is used so that forecast can be done by using the data offinancial statements. It uses the techniques of trend analysis, cash funds, ratio analysis and cashflow statements. It helps in giving information which will help the investors and creditors. Itsrequirement is that the cash statements, fund statements and profit and loss statements is neededto analyse theHistorical cost accounting- It provides data of cost relating to each job, process and departmentso that comparison can be made with standard cost. It guides the management in cost controllingand future planning. For this the past data of each employee, its hiring process and theperformance of that employee in that department is needed.Standard accounting-It is the comparison and analysis of standard cost with actual cost to findthe variance between them. It is done so that remedial actions can be taken to control the cost.The requirement for standard accounting is the cost sheet of the entire department is needed.These costs include all the cost that have been incurred on producing a product.Budgetary control-It is the process of planning and controlling various activities of businessfor directing the business in right direction. It is generally done to find the return on investment.For this the budgets of previous year is needed.Marginal costing- It uses the technique of different costing and break even analysis for costcontrol, decision making and profit maximisation. Break even analysis means a situation wherethere is no profit no loss.Funds flow statements- It helps in analysing the changes in financial position of businessbetween two dates by comparing the inflow and outflow of funds. It helps a lot in financialanalysis and control and future guidance. It is useful in long term financial planning as it isbased on increase or decrease in the working capital. The requirement to prepare fund flowstatements is all the information regarding the inflow and outflow of funds. Funds given byshareholders, employees, etc.
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