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Management Accounting System – PDF

   

Added on  2021-02-20

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ManagementAccounting

INTRODUCTIONManagement accounting is structure that provide assistance in preparation of executivereports and other financial accounts in order to provide timely and regular information formanagers to make momentary and periodic decisions.It provides fiscal data and guidance tobusiness enterprise to provide assistance in its overall development. It is a part of organisationalstructure which provide ease in conducting different business operations. Reporting throughmanagement accounting provides a complete analysis of efficiency and performance ofenterprise (Maas, Schaltegger and Crutzen, 2016). The report provides a detailed explanation ofmanagement accounting, evaluation of advantages of management accounting systems, basicneeds for adoption of these systems, planning tools and use of these in budgetary control incontext of Caunton Engineering Limited, UK's engineering company. It is engaged in designing,fabricating, painting and erecting infrastructural steelwork. Company's steelwork is mainly usedin construction industry. It is reputed company in UK's steel manufacturing company. This reportalso exhibits comparative analysis of organisations while discussing financial problems and roleof management accounting system in responding to such problems and some techniques toestimate and analyse effect of financial problems.ACTIVITY 1Management Accounting Systems:Management accounting is accounting which is mainly management oriented. It can bedefined as a unique combination of management and accounting structure that assist companiesby providing qualitative and quantitative information for facilitating process of makingdecisions. It is a kind of accounting adopted by companies to maximise and enhance the overallprofit by organising expenses and revenue (Taipaleenmäki and Ikäheimo, 2013). CauntonEngineering Limited using structure of management accounting to make expansion in industry.Company also adopted more than one systems like inventory management, price optimisation,job costing etc. of management accounting with aim to enhance capabilities and efficiency ofcompany in all aspects. Following is a complete discussion of different types of systems ofmanagement accounting in respective company context as follows:Inventory Management System: Inventory is key factors in determining organisation'scost of product, net income and overall profitability level. This system help to develop a control

structure over inventories processes to mitigate any problems. Most of the companies are worryabout loss of theft of inventories, personal use of inventories by employees and responsiblepersons and increase in unused inventory in warehouse. This system help to develop a processthat assist in controlling in and out flow of stock and goods in entity and also determine periodfor reordering new inventory. Leading manufacturing organisation like Caunton EngineeringLimited also focus toward inventories because any addition in inventory cost can enhance itsproject related to steel work. Company has adopted inventory management system that helpinventory managers or other managerial personnels in tracking and observing large number ofinventories very easily. It reduces excessive inventory expenses to increase net margin of profit.Cost Accounting System: Costs are incurred by organisations in procurement ofproducts and in conducting operations. Profit is determined by deducting all expenses from grossamount of income, so it is considerable factor for corporates and other business entities. Costaccounting system help to regulate and manage different costs within organisation with an aim toachieve higher profitability (Hiebl, 2014). Caunton Engineering Limited also using this system todetermine the cost of projects related to steelwork and filing tenders. It also help company tominimise their expenses in manufacturing and engineering process to increase overallprofitability. Engineers and project heads with help of this systems determine and control costsby increasing efficiencies. Price Optimisation System: Product price is key to success for company as effectiveproduct price can beat competitors. This system facilitates business organisation to minimiseprices of products to reduce competitive adversity. As Caunton Engineering Limited belongs totop companies in manufacturing sector and facing tuff competition from large number ofcompetitors so it is important for company to maintain price of their projects at competitivelevel. This system opens way for management to minimise price with same profit margin. Underthis system each financial aspect is analysed by managers that have direct impact on prices ofproject. It provide help in minimising cost and expenses of different processes and reduce priceof project to maintain profit margin. Job Costing System: This system is applied by business entities having unique productsor products which are absolutely different from each other and require different processes ofproduction. Under it aggregate costs are differentiated in tasks and activities, lastly assign themto specific task and Caunton Engineering Limited applying this system for some of its sub

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