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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
Management Accounting Systems and Techniques Assignment_1
Management Accounting Systems and Techniques Assignment_2
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 for accounting 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
Management Accounting Systems and Techniques Assignment_3
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:
Standard cost accounting uses ratios to measure the efficient use of materials in
producing products and services.
Activity based costing is 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), weighted average and last-in-last-out (LIFO). Inventory generally
consist of 4 categories i.e. raw material that company purchase for producing goods, work-in-
progress represents materials which are in process to be transformed in finished goods,
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
Management Accounting Systems and Techniques Assignment_4

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