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Management Accounting System Assignment Sapmle

   

Added on  2020-12-10

21 Pages6229 Words444 Views
MANAGEMENTACCOUNTING SYSTEMAND TECHNIQUES

Table of ContentsINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................1LO 1.................................................................................................................................................1P1. Explaining management accounting and essential requirements of management ..........1accounting system..................................................................................................................1P2. Explaining different methods used for management accounting reporting.....................4M1. Evaluating benefits of management accounting system and their application ..............5within an organisational context.............................................................................................5D1. Critically evaluating how management accounting systems and management .............6accounting reporting is integrated within organisational processes.......................................6LO 2.................................................................................................................................................7P3. Calculate costs using appropriate techniques of cost analysis to prepare an ..................7income statement using Marginal and Absorption Costs.......................................................7M2. Accurately apply a range of management accounting techniques and produce ..........10appropriate financial reporting documents...........................................................................10D2. Produce financial reports that accurately apply and interpret data for a range of ........10business activities.................................................................................................................10LO 3...............................................................................................................................................11P4. The advantages and disadvantages of different planning tools......................................11M3. Use and application of different planning tools for preparing and forecasting ...........13budgets..................................................................................................................................13D3. Planning tools for accounting respond to solve financial problems..............................14LO 4...............................................................................................................................................15P5. Adapting management accounting systems to respond to financial problems...............15M4. By responding to financial problems' management accounting can lead ....................16organisation to sustainable success......................................................................................16CONCLUSION..............................................................................................................................17REFERENCES..............................................................................................................................18

INTRODUCTIONManagement accounting is a term which is concerned with the application of professionalknowledge and abilities in policy formulation, planning and controlling for the undertakings. It isa process which involves concept of evaluating, identifying and preparing management accounts,reports and business strategy to provide accurate, fair and timely information related tofinancial, managerial and non-financial matter necessary for decision-making & also helps ininterpreting & communicating information to company's stakeholders (Otley, D., 2016). Furthermore, the company has used different management accounting techniques for controlling cost,making budgets. It has also explained that how a company uses different managementaccounting tools in solving its financial problem and thereby achieve its organisational goal.Management Accounting reporting has also been explained which contains material informationabout the company's financial position, cost incurred, non monetary information thereby helpingin formulating business plans & strategies, preparing budgets, measuring performance, decision-making and estimating future profits and cost to be incurred (Otley, D., 2016).MAIN BODYLO 1P1. Explaining management accounting and essential requirements of managementaccounting system.Management accounting is defined as a process or technique of identifying, evaluating,monitoring, measuring and communicating the financial, non financial, economical andmanagerial information to organisation people for better decision-making, defining businessstrategies & plans essential for achieving organisational goals and objectives effectively andthereby generating maximum profits. It emphasises on factors such as planning, controlling andproviding information to the management for internal decision-making. The process ofmanagement accounting is related with preparing management reports and accounts which helpsin providing correct, relevant, accurate and timely financial as well as the statistical informationas required by the management of the organisation to make day-to-day and short-term businessrelated decisions (Otley, D., 2016).1

Distinction between Management Accounting and Financial Accounting.S. No.Basis Management AccountingFinancial Accounting1Nature of InformationFinancial and Non-financialInformation.Mainly financial information.2Information usesTo help in planning,monitoring, controlling anddecision-making. To record the financialperformance and position ofthe company at the end of theperiod and communicating itto its users.3Information usersInformation is used by Internalusers mainly i.e. by managers,employees (Otley, D., 2016).Useful for external users viz.shareholders, creditors, banksetc.4Time periodIt emphasises on futureaspects useful for growth ofbusiness. It considers past transactions(Otley, D., 2016).The essential requirements of management accounting system are as follows: 1. Cost Accounting System - The Cost Accounting system is a process which is used by thecompany to make estimates, analyses the product cost for ascertaining the profit levels, costincurred in carrying on business activities i.e. for manufacturing a product, inventory valuationand controlling cost (Otley, D., 2016).It has two types:1. Process Costing Method - It is a cost accounting system which emphasizes on ascertainmentof the operating and manufacturing costs incurred separately for every wok process. It takes intoconsideration the products of similar nature useful in such costing method. It is calculated bytotalling of all cost amount and divided by total output for ascertaining cost per unit (Otley, D.,2016).2. Job order Costing Method - It is a process which emphasizes on ascertainment of the operatingand manufacturing costs incurred separately for every wok job. It involves collection of cost ofproduction that is engaged in production of some specific unit or a group. This cost accountingmethod is used for costing the unique products and also helps customers in ascertaining exactcost incurred for producing a product.2

2. Price optimisation system - This method of management accounting system helps company inanalysing that how customer will behave towards different price changes with different channelsof its products and services (Otley, D., 2016). It studies the customer response towards differentprice. This method helps the company in analysing the best possible price for its product andservices which it can charge from its customers and in-turn will maximize the business profitsand able to achieve its goal and objectives effectively. It also helps in determining the futureprofit by studying fluctuation in demand with reference to price changes. It considers threefactors as price elements:1. Strategy of pricing a product.2. Product value for both buyer and seller, and3. Strategies and procedures used for increasing profits level (Otley, D., 2016).3. Inventory Management System - It is a system of managing inventory, stock levels bymonitoring and tracking goods, products within supply chain and area where business carries outits operating and manufacturing functions. This method helps company in ensuring thecontinuity of workflow, evaluating exact inventory figure and its reorder before stock outsituation arises. The main function of managing inventory is to keep a check on detailed recordof new or returned product when it enters or leaves a warehouse (Otley, D., 2016). Thismanagement accounting system has following two sub types:1. LIFO - LIFO stands for “Last in, first out”. It is a method of inventory valuation in which lastinventory item purchased is sold first among all the inventory held.2. FIFO - FIFO stands for “First in, first out”.It is a method in which goods purchased first arethe goods sold first (Otley, D., 2016).4. Job Costing System - This method is defined as a process in which manufacturing andoperating cost are assign to each and every product and service, so as to monitor and keep a trackof expenses incurred. Cost information associated with the specific product or any businessactivity or specific job process is determined for the knowledge of customer which helps them ingetting cost reimbursed under terms and conditions as defined in contract (Otley, D., 2016). Itdivides cost into Direct material, labour and overhead costs.By using job costing system, the3

company can ascertained cost at any stage of job completed and comparing it with estimatedcosts prepared thereby helping in controlling cost and maximizing profits of the businessorganisation.P2. Explaining different methods used for management accounting reporting.The management accounting reporting is a term which provides detailed information related tofinancial, non financial and managerial matters of the company. It helps company in makingdecision related to internal processes of the business organisation. This is considered as a processof planning, monitoring, evaluating and decision making on the basis of material informationprovided about the company's financial position, cost incurred thereby helping the company informulating business strategies & plans, preparing budgets, measuring performance, estimatingfuture profits and cost to be incurred (Mohd Fuzi, N. and et.al., 2019).Different used for management accounting reporting are as follows:1. Cost Managerial Accounting Report - This report helps in evaluating the cost involved inmanufacturing or producing a specific product, unit or group of units. It helps in realizing theproduct cost prices and selling prices and comparing for determining the profit margins. The costmanagerial accounting system distributes the cost into direct raw material costs, direct labourcost and overhead cost. The total cost figure ascertained is divided by the total number of outputproduced for determining the cost per unit of a product or service (Mohd Fuzi, N. and et.al.,2019).2. Budget Report - This report helps business organisation in analysing the performance ofvarious business departments and business operations. It helps company in controlling cost,business expenses by preparing budgets & business strategies for future period. With the help ofbudget report, the company can achieve its objectives with limited budget amount therebymaximizing profit and minimum cost of production. 3. Performance Report - This report provides detailed information about the success journey ofperformance of a business project or of employee performance. It helps the company inmonitoring and reviewing the performance thereby assisting in decision making (Mohd Fuzi, N.and et.al., 2019). Such reports provide deeper view of the working of business organisation. It isimportant for every company to monitor and keep a track of its strategy & policy developed for4

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