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Management Accounting System (Pdf)

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Added on  2020-10-22

Management Accounting System (Pdf)

   Added on 2020-10-22

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Management Accounting
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Table of ContentsINTRODUCTION................................................................................................................................3MAIN BODY.......................................................................................................................................3LO 1......................................................................................................................................................3P1. Explaining different types of management accounting systems...........................................3P2. Management accounting reporting methods.........................................................................4M1. Application and benefits of management accounting system..............................................5D1. Integration of management accounting system and management accounting reporting.....6LO 2......................................................................................................................................................6P3 & M3. Calculation. ...............................................................................................................6LO 3......................................................................................................................................................6P4. Advantage and disadvantage of budgetary control planning tools.......................................6M3. Application and use of different planning tools...................................................................9LO 4 .....................................................................................................................................................9P5 Comparing on how organisations adapt the management accounting systems for responding to the financial problems.............................................................................................................9M4 Analysing how use of management accounting can lead the business to respond to financial problems and result in sustainable success of the organisation................................................12D3 Evaluation of the planning tools for responding to the financial problems while achieving sustainable success of organisation...........................................................................................12CONCLUSION..................................................................................................................................12REFERENCES...................................................................................................................................14APPENDIX........................................................................................................................................16
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INTRODUCTIONManagement accounting is a process of preparing, recording, presenting all the informationincluding financial as well as statistical data related to the business in the managerial report. Withthe help of managerial report, decision related to the business and investment can be made by thecompany. The report is about Babcock & Wilcox Ltd which is the global leader in the business ofadvanced energy & environmental technologies, services for power, renewable and industrialmarkets. The present report is based on explaining the types of management accounting system andits essential requirements in every business. It will define benefit of using management accountingreporting in the business. Also, it will discuss about the cost techniques which has been used forascertaining the profit. Income statement will be prepared by using marginal and absorption costingmethods. Further, report will disclose about different budgetary planning tools which can be used byorganisation for solving financial problems. Benefits and drawbacks of such budgetary planningtool will be discussed as well.MAIN BODYLO 1P1. Explaining different types of management accounting systems.Management Accounting system is defined as a process of preparing internal managerialreport which aids the management or managers of the company in decision making process. It isconcern with the business activity related to identification, analysing, evaluating and interpretinginformation of financial as well as statistical nature. Information should be interpreted in correctand accurate manner so that it can benefit internal as well as external parties of the company havinginterest in. Communication of information also plays an important role in decision making processfor investors as it can provide them with important and relevant information on time which canaffect their investment decision. With the help of internal managerial report, budgeting orforecasting can be done for future period which in turn can help in minimizing the cost expenditureand improves performance level as well.Different types of management accounting system can be used by Babcock & Wilcox Ltd are asfollows:1.Cost Accounting System –This system of management accounting is also known asProduct costing system. It is defined as a framework which assist the business organisationin making estimation of cost expenses for their products and services. It helps indetermining the amount of cost to be incurred for carrying on production function andprofitability associated with it (Kaplan and Atkinson, 2015). With the help of costaccounting system, Babcock & Wilcox Ltd can control its cost expenditure and makes
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proper valuation of inventory. Two main types of cost accounting system are as follows:Process Costing Method – It is a method of costing which helps in collecting separately allthe manufacturing costs incurred for carrying on each process. Job order costing method – It accumulates cost amount related with the manufacturingprocess for every job process separately. This method is considered as most suitable whenBabcock & Wilcox Ltd is carrying on production business of some unique products.2.Inventory Management System – Is a system in which the company is facilitated with theease of managing and monitoring the inventory level in the company. This system ofmanagement accounting helps the company in assessing the current as well as correct levelof inventory present within the business organisation for conducting of business operations(Hemmer and Labro, 2017). Valuation of inventory is made under this method so as toascertain the minimum stock level and its reorder for overcoming the situation of stock outand eradicating business loss to be incurred from this. For undertaking the process ofinventory valuation following methods can help Babcock & Wilcox Ltd :LIFO – Is a method of valuing inventory in which the goods or inventory purchased at lastare made available for sale by giving first preference. LIFO stands for Last In First Out.FIFO – Another mode of valuing the inventory. FIFO stands for First in First Out. In thisinventory bought at first are eligible for sale on the first preference. 3.Price Optimization System – With the help of this method, Babcock & Wilcox Ltd canunderstand the mechanisms of change in demand factors. The company can evaluate changein demand at different price level. It assists in determining the level of profit which can beearned from the difference between value of a product from perspective of buyer as well asseller. It helps company in formulation of pricing strategies for earning more profit.P2. Management accounting reporting methods.Management Accounting report assist in making future plans, regulatory frameworks,decision making process and measures performance level of the company. The managerialaccounting report is prepared on the basis of internal information of the company including bothfinancial as well as statistical matters. This report assists the management of Babcock & Wilcox Ltdin making crucial decision for the benefit of future business operations. There are different types ofmanagerial accounting report with the help of which Babcock & Wilcox Ltd can make use foraccomplishing set defined business goals:1.Budget Report – This type of report define about budgetary plans and strategies which canhelp the company in improving its business expenditure. With the help of budget report,Babcock & Wilcox Ltd can measure the performance level of its business operations as well
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