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Management Accounting System Assignment - Network Rail Ltd

Added on - 23 Nov 2020

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MANAGEMENTACCOUNTINGSYSTEM
INTRODUCTIONManagement accounting system involves the preparing and providing the managerswith the timely statistical and financial information so that they can use these information whiletaking effective decisions for the company. It is a process in which managers analyse theoperations and cost which is incurred by a business in order to prepare the internal financialreports, accounts and records in order to support the decision making process. In order tounderstand the management accounting system Network Rail Ltd is taken, it a manufacturerand owner of most of network rails spread in Great Britain. It work with the department fortransport with no shareholders and reinvest all its income in railways. The following reportcontains the detailed information about the requirements of various management accountingsystem and various methods which are used in management accounting reporting. It also statesthe various techniques to analyse the cost and preparation of income statement. This report alsotells about the advantages and disadvantages of various planning tools and compares that howorganisations are adapting various management accounting system in order to overcome thefinancial problems.ACTIVITY 1Part AManagement accounting:Management accounting is also known as managerialaccounting or cost accounting which help managers to measure, analyse, interpret andcommunicate information and support their decision making process. It focuses on the variousfields of accounting which mainly aim at informing the top level of management about themetrics in business operations. In this accountants uses the different types of informationwhichare related to cost incurred in the production process or any services purchased by anorganisation. Network Rail Ltd also uses various types of management system in order toimprove its operational efficiency and reduce its overall cost of production and increasing itstotal profit for the year. Management accounting also contains the various forms of budgetswhich help managers to analyse the company's performance and estimate its future expense andrevenue. It also helps managers to find out the internal problems related to the operations of thebusiness and identifies the various risks and make meaningful decisions for the company inorder to overcome these problems. It also includes budget which help companies to make1
estimates about the company's future revenue and the expenses which it may incur in thefuture. It helps managers to find out the deviation from the actual performance and budgetedperformance. There are various types of accounting systems which help companies to optimizeits cost and increase the operational efficiency resulting in the over all improvement in thecompany's performance. Following are the various types of management accounting system:Cost accounting system:Cost accounting system is also known as the product costingsystem or costing system, which provides a framework for the companies in order toestimate the total cost incurred by its production department in producing its goods orservices. This system estimates the cost in order to analyse the profitability of theorganisation, controlling of the cost and valuation of its inventory. It is very importantfor a business organisation to estimate its total cost and check the profitability of thefirm in order to find out the products which are profitable for the organisation andwhich are not so that companies can focus their maximum resources in production ofthose products. In Network railway manager also make estimates of the cost ofmanufacturing a railway line in Great Britain in order to analyse that whether theproject of profitable or not.Price optimisation system:Price optimisation system is system in which manager triesto optimize the price of the product and service provided by it. It is the use of variousmathematical analysis which is done by the company in order to determine that howcustomers might respond to different prices at which it offers products and serviceswith the help of its different channels. In Network Rail price optimisation system isused in order to identify the price at which various consumers can avail its service andproducts. It help the managers to identify the prices for its products in order to meet thecompany's expectations such as profit maximization.Job costing system:Job costing system is a system which compiles manufacturing costindividually for every job involved in the production process. This type of costingsystem is usually used in the companies which produce a unique quality of product andworks on special order. It helps the managers to allocate the cost to its various job andhelps them to identify the cost of individual cost which is incurred by the company. InNetwork Rail Ltd it also uses the job order costing system which helps it to identify the2
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