(Solution) Management Accounting System PDF
Added on 2020-12-29
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ManagementAccounting
Table of ContentsINTRODUCTION...........................................................................................................................5TASK 1............................................................................................................................................5P1. Management accounting and its different types of system...................................................5P2. Explain different method of management accounting reporting. ........................................6M1. Evaluation of benefits of various management accounting systems...................................7D1 Management accounting system and management accounting reporting are integratedwith organisation process. ..........................................................................................................8TASK 2............................................................................................................................................9P3 .Appropriate techniques of cost analysis to prepare an income statement.............................9Annex (A)....................................................................................................................................9Annex (B)....................................................................................................................................9M2. Management accounting techniques and financial reporting documents..........................11D2. Financial reports which applies to interpret many business activities...............................12TASK 3..........................................................................................................................................12P4. Advantages and disadvantages of different types of planning tools used for budgetarycontrol.......................................................................................................................................12Budget: A plan to control the accounts in future. It is always stated in value of money. It is aidea to predict that how much amount is required for our business or for each department of acompany. Budget are made annually. Mostly it is used by firms as a pricing tool..................12M3. Usage of different planning tools for preparing and forecasting budgets.........................15TASK 4............................................................................................................................................1P5 Comparison of how organisation adopt management accounting system so as to respond tofinancial problems.......................................................................................................................1M4 Analysis of how in responding to financial problems management accounting can leadorganisations to sustainable success............................................................................................3
D3 Various planning tools to resolve financial problems...........................................................3CONCLUSION ...............................................................................................................................4REFERENCES................................................................................................................................5
INTRODUCTIONManagement accounting can be defined as a process which involves partnering inmanagement decision making, planning and performance management system. It also helps inproviding expertise knowledge related with the financial issues and controlling the managementproperly in accordance with the formulation and implementation of an organisation's strategy(Adler, 2013). It is also known as cost accounting and assist in analysing the cost involved in thebusiness operations to prepare the financial reports, records to successfully accomplish thebusiness goals. To understand the concept of management the present report is constructed andit is based on theLM Engineering Ltd. which deals in civil engineering and planning servicesbased in UK and serves the people of northern British Columbia. The report will include the roleof management accounting and will describe the importance of different types of managementaccounting systems, different methods used for the management accounting reporting. The reportwill also show the appropriate techniques used to conduct cost analysis for preparing an incomestatement using marginal and absorption costs. Further, the report will include the use ofplanning tools for budgetary control. In last it will discuss the ways adopted by the organisationin management accounting system to respond with the financial problems. TASK 1P1. Management accounting and its different types of system.Management accounting: It can be described as the accounting process related to themanagement of the internal part of an organisation. This process is majorly used in formulatingmanagerial reports which helps the organisation in constructing suitable policies and businessplans for the future. The accounting system is not mandatory to be maintained, it depends on thecompanies if they want to maintain it or not. In general, the accounting system has its ownimportance in the internal part of the business organisation and helps in achieving the desiredobjectives effectively and efficiently. The different types of management system are as follows:Cost accounting system: This accounting system helps in analysing the costs of theproducts which will include all elements like fixed cost, variable cost, etc. the costaccounting system is very essential for the organisations to maintain the estimated costsof the products and services as it helps in generating information about profit and loss of
the organisation. The LM Engineering Ltd. uses this cost accounting system foranalysing the cost of their different services that helps them in focusing on the serviceswhich are beneficial. Price optimisation system: The price optimisation system is the process thatdemonstrate a framework which helps in determining the price of the products andservices in appropriate manner which will satisfy the perspective of customer as well asthe organisation effectively. It also helps in analysing the view of the costumers on thevarious pricing levels. The main purpose of this system is related with providing thefactors that play a important role in price setting. The LM Engineering Ltd. use thisaccounting system for setting the price of the products and services at that level where itwill be suitable for the company and customers as well. Job costing system: This system is used to calculate the total cost that is involved inrendering products and services and also tracks the costs by the jobs and determinestandardized reporting of the profitability by the job (Arroyo, 2012). This accountingsystem is used by the organisations which provide varieties of products and services. TheLM Engineering Ltd. deals in different financial services so, they are required toconstruct an estimate about the cost incurred in each individual unit.Inventory management system: This is considered as one of the important accountingsystem as it is used to track the status of the products and services which helps inanalysing the requirement of goods and services for the organisation. This managementaccounting system works properly in the overall supply chain management within anorganisation. LM Engineering Ltd. has adopted this system to keep a track on theirservices and also helps in keeping a check on the financial products and services. P2. Explain different method of management accounting reporting. The different types of accounting reports holds their own importance for the businessorganisation but management accounting reports have their own significance. These accountingreports has a great impact on the internal management of an organisation. It helps the accountsmanager to formulate the effective strategies and decisions for the company. These managementaccounting reports consist of both the monetary and non monetary informations. The LMEngineering Ltd. prepares different types of reports which are described as follows:
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