Management Accounting Systems and Techniques Assignment
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Added on 2021-02-22
Management Accounting Systems and Techniques Assignment
Added on 2021-02-22
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Management accounting systems and techniques
INTRODUCTION Managerial accounting is a process of collecting and analysing information of expenses incurred in the business to achieve and communicate that information to management to take better decisions to achieve organisation goals and objectives (Otley, D., 2016). There are different management system used foraccounting are cost-accounting, price optimization etc.It is beneficial in planning, organising, controlling, coordinating and decision making. This report is based on Galway Plc manufactures company who need financial advise. The report will contain importance of management accounting systems in the organisation, methods used for reporting management accounting. Further report will contain techniques of cost analysis, preparation of income statement using marginal and absorption costing. Lastly report tells about different planning tools for budgetary control, their pros and cons and how companies are adapting management accounting to face financial problems. LO 1 P1 management accounting and types of management accounting systems. Management Accounting: It is also called cost accounting. It is a process of identifying, analysing, measuring, interpreting and communicate information to management to achieve organisation goal. It refers to the process of analysing operations and cost to make financial reports (Maas and et.al., 2016). Management accounting is different from financial accounting, financial accounting focuses on providing information to people outside the company and management accounting focuses on providing information within the organisation which is useful for managers to make decisions. It handles profit margins, forecasting, trends, capital budgeting and product costing etc. It plays a major role in organisation. Its purpose is to support the decision of organisation to compete in the market by collecting and communicating information. It is beneficial for Galway Plc manufactures management to plan and evaluate company processes and strategies. Its main role is budgeting. Budget is required for every organisation to carry out its production and operation cost. Management accountant role in the company is to view historical data and predict the future expense. It is beneficial for organisation to controls its operations, to plan, organise, identify problems and make strategies to achieve goals (Cooperand et.al., 2017). There are 4 types of management accounting systems: 1
Cost-accounting systems:It is also known as product costing or costing system. It is a process in which firm estimates the cost of its products for inventory valuation and profitability analysis. It manages the inventory flow in every stage of production. It measures the cost and then compare input with the output of the company. It measures the financial performance of company. There are main 2 types of cost accounting: Standardcost accountingusesratiostomeasurethe efficientuse of materialsin producing products and services. Activity based costingis an approach in which cost is monitored on the basis of activities, resources consumed by each activity and final output cost determines the cost of the product (van Helden and et.al., 2016). It is beneficial for Galway Plc manufactures company to measure profitable, unprofitable activities, to do proper planning, control and utilization of resources fully, guide in expansion of production process and helps in decision making regarding labour and machines. Inventory management systems:It is a process of managing company's inventory by ordering and storing. It also includes managing raw materials, finished goods and warehousing of such items. It is a current asset of the company. Generally company use one of the method first-in-first-out(FIFO),weightedaverageand last-in-last-out(LIFO).Inventorygenerally consist of 4 categories i.e. raw material that company purchase for producing goods, work-in- progressrepresentsmaterialswhichareinprocesstobetransformedinfinishedgoods, completed goods ready for sale called finished goods and merchandise which company buys for resale (Quattrone, P., 2016). There are 2 methods of inventory management: Just-in-time (manufacturing starts when there is a need) Material required planning (record sales and then forecast requirement of material) It is beneficial for Galway Plc manufactures company to forecast sales, reducing cost and time, increase efficiency of employees, inventory turnover and to do accurate planning in making decisions change in trend of product. Job-costing systems:It is a process of assigning manufacturing cost to an individual unit. It is used when a company produce different products and which have different prices. Since there are variations in the item manufactured, job costing system is used to record each 2
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