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Management Accounting System and Its Application: Assignment

   

Added on  2021-02-19

17 Pages4785 Words36 Views
Management AccountingSystem and Its Application.

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1 ...........................................................................................................................................1Different types of management accounting system.....................................................................1Different method used for management accounting reporting....................................................2Benefits and application of management accounting in the organization...................................4Evaluation of management accounting system and management accounting reporting.............4TASK 2............................................................................................................................................5Income statement by using marginal and absorption cost...........................................................5TASK 3............................................................................................................................................8Advantages and disadvantages of planning tools used for budgetary control.............................8Application of planning tools in preparing and forecasting Budget..........................................10TASK 4..........................................................................................................................................10Adaption of Management Accounting system for resolving financial problems..........................10Use of Planning tools in resolving financial problems..............................................................12CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................14

INTRODUCTIONManagement accounting is used to measuring, analysing, evaluating and identifying theinformation from the various accounting data and take the effective and efficient decision for theorganization to improve the performance and profitability of the organization. KEF limitedcompany is medium-sized manufacturing company. The report highlights the role ofmanagement accounting the various department of the organization and the different types ofmanagement accounting system. It focuses on the methods of management accounting reportingand various ways to improve the performance of the organization. It also provides the range ofmanagement accounting techniques to calculate the production and total cost of the organization.The report also highlights the pros and cons of different types of planning tools for controllingthe budget of the organization. It evaluates the various ways to adopting management accountingsystem and solve the financial problems of the organization.TASK 1 Different types of management accounting systemManagement accounting : Management accounting is the process of identifying, measuring,analysing and interpreting information to the manager of the organization for achieving the goal.Management accounting is also known as cost accounting. In other words managementaccounting refers to transferring the data into the useful information for the mangers to take thefinancial and management decisions (Management accounting, 2019.).Requirement of different types of management accounting systemThe aim of financial accounting system is to provide the information to the external users likestakeholders, government, lenders etc. but on the other hand the aim of management accountingis to provide the information to the internal users. The different types of management accountingsystems are cost accounting, inventory management system, job costing system etc.Inventory management systemInventory management system regulate the inventory in the organization. KEF Ltd. Companyuse the inventory management system for specifying the shape and placement of goods in theorganization and order the goods from the manufacturing units on the demand of the customerand maintain the minimum requirement (Gowid, Musharavati, and Hamouda, 2019). It helps inordering and storing the inventory in the organization. By inventory management systemmanager can manage the inventory level in the company or warehouse or on the scarcity of1

inventory they can order the inventory from the other department to maintain their inventorylevel and provide the goods to the customer within proper time and place. The aim of inventorymanagement is to estimate the inventory level and manage the under stock and over stock ofinventory in the warehouses.Cost accounting systemCost accounting is used by manufacturers to record the activities of production department. It isalso known ad product costing system or costing system. KEF Ltd. use the cost accountingsystem in their organization to regulate the flow of inventory at the various stages of theproduction system (Lu, Gu, and Predko, 2015). It helps to estimate the cost of the product andservices of the organization and calculate the profitability and productivity of the organization.The main cost included in job costing is job order cost and process costing. Job costing systemThe purpose of job accounting system is to determine the cost of the particular job of thebusiness. It is used to assign and accumulate the manufacturing cost of an individual unit ofoutput in the organization. The requirement of job accounting in KEF Ltd. is to accumulate themanufacturing cost. It is mainly used when the output are sufficiently different from the otherand each unit of output has significant cost. Through the job costing management system anaccountant or manger can keep track of each job cost and maintain the data which are relevant tothe operation and management of the business. Price optimization systemPrice optimization system is the process of finding the pricing sweet spot and maximize the priceof the product against the customer willing to pay the price. Price optimization system is used bythe KEF limited to determine the price of their product against the customer willingly pay totheir competitors to attract the customer toward their organization. It helps the organization tocalculate the demand of the product with the changes in the price.Different method used for management accounting reportingManagement accounting report helps the small and medium size business like KEF limited tomonitor the performance of their company and prepare the budget by estimating the cost of theorganization for the particular accounting year. On the basis of their business and businessactivity the manager and owner of the KEF limited company change their reporting system by2

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