Management Accounting System - Pavestone

Added on - 22 Nov 2020

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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3P1.Overview of management accounting and essential requirements of different types ofmanagement accounting systems...........................................................................................3P2 Explain different methods for management accounting reporting....................................5M1.application of various management accounting system to get desired advantages.........6D1 Evaluation of how management accounting system and it's reporting integrated withinorganization process...............................................................................................................6TASK 2............................................................................................................................................7P3. Calculation of costs and preparation of income statement:..............................................7M2 application of range of accounting techniques for calculating profit............................10D2 financial reporting of results get after implementing accounting techniques.................10TASK 3.........................................................................................................................................10P4 Explain budgeting control and tool for controlling.........................................................10M3 Analyse the use of different planning tools and their application for preparing andforecasting budgets...............................................................................................................13TASK 4..........................................................................................................................................13P5. Ways in which organisations are adapting Management Accounting systems to respond tofinancial problems................................................................................................................13M4. Analysing how in responding to financial problems, management accounting can leadorganisations to sustainable success....................................................................................15D3. Evaluation of how planning tools for accounting respond to solving financial problems16CONCLUSION.............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTIONManagement Accounting refers to the process undertaken by financial managers of thecompany to prepare management accounts and reports. This is done to provide statistical andfinancial information that are accurate and necessary to take short term decisions of a company(Kumarasiri and Jubb, 2016). It is generated on a weekly or monthly basis for company's internalstakeholders like chief executive officers (CEO) and department managers unlike financialaccounting which helps external stakeholders determine the financial condition the company byannual reports. The reports of management accounting include sales revenue generated, cashavailability, accounts payable states, raw materials, inventory, outstanding debts, etc.The following assignment is based on Pavestone, one of the leading manufacturingcompanies. It was founded in 1980 and undertakes manufacturing of segmental concreteproducts to industrial, retail, contractor, residential and commercial businesses. The assessmentincludes requirements of different types of management accounting systems, different methodsused for management accounting reporting, advantages and disadvantages of planning tools forbudgetary controls and how organisations are adapting management accounting systems torespond to their financial problems.TASK 1P1.Overview of management accounting and essential requirements of different types ofmanagement accounting systemsManagement accounting is a detailed process of identification, interpretation, analysingand presenting accounting information of a company which is acquired by cost and financialaccounting (Maskell, Baggaley and Grasso, 2016). It helps the managers of the firm to formulateeffective policies and enhance their decision-making process.Difference between management and financial accounting:There is a huge difference between management and financial accounting which arediscussed below:Users:Management accounting is an internal function and is implementedinternally with employees and managers of the firm whereas financial accountingis the point of consideration for external users like shareholders, banks, creditors,etc.
Regulations:Management accounting does not consider external rules andregulations and no application of accounting standards is imposed. Whereas,various set of rules and regulations are imposed in financial accounting.Sources:Management accounting undertakes both financial and non-financialdata, whereas, only financial data is used in financial accounting.Role of management accounting in an organisationIn Pavestone, management accounting plays a vital role which is described below:It improves communication within the organisation which leads to better decision-making of the managers.The information produced by management accounting is relevant which helps themanagers to formulate effective policies.It helps the firm to exploit market opportunities by generating value throughcritical analysis of information.Management accounting helps to build trust in the firm as it promotes ethicalpractices within the organisation.Different types of management accounting systems:Organisations use various types of management accounting system which helps them toconduct their managerial operations effectively (Pavlatos, 2015). Types of managementaccounting system used in Pavestone and their requirements are described below:Job Costing System:This system includes the process of assembling information aboutthe costs used for a specific job. Such information helps in reimbursements of the cost inorder to submit it to a client under specific contracts (Schaltegger, Burritt and Petersen,2017). This system is best suited when manufacturing goods are different from oneanother. It helps the Pavestone managers to manage information and monitor and keep arecord of the cost required in each job. The cost flow in this system is mentioned below:The cost of direct materials, direct labours and manufacturing overheads isdetermined.Job cost sheets are prepared to track inventory of Work In Progress.Inventory of finished goods is determined.Finally cost of goods sold is acquired.
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