Management Accounting Systems and their Essential
Added on 2020-06-05
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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Management accounting systems and their essential requirements.................................1P2. Methods of management accounting reporting ...............................................................4TASK 2............................................................................................................................................5P3 Difference between income statement made through marginal and absorption costing...5TASK 3 ..........................................................................................................................................9P4 Advantages and disadvantages of planning tools which are used for budgetary control..9P5 Adopting management accounting systems for responding financial troubles .............11CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
INTRODUCTIONManagement accounting is a well defined procedure that helps in analysis of financialand non-financial data that will be use in crucial decision making that is related to investmentand operational control in firm(Renz, 2016). MA focuses on increasing returns by reduces costof various options like production or expenditures. Taj store is a grocery shop that operates theirbusiness in London, United Kingdom. This organisation is working in small level but they starttheir business in 1936. This report will asses management accounting with its variants and theiressential use in corporation. Some methods of MA are discussed in this report. This assignmentconsist detailed explanation of income statement. Various budgets are also discussed in thisreport. TASK 1P1. Management accounting systems and their essential requirementsIt is compulsory for every organization to make right decision at correct time to ensureprofitability of business. Management accounting helps in the decision making systems becauseit has many variants that are able to solve many financial and non-financial problems. Raisefunds for business operations are not easy for small enterprise like Taj Store. They depend on theloans with low interest rates to raise funds and assign those funds in that areas which enableshigh return for firm (Banerjee, 2012). Financial accounting helps in assignment of funds withhelp of its other functions like inventory management, cost management etc. Basic focus of MAis recording transaction that arise in daily operations in corporation. There are variousdifferences in financial and managerial accounting that are given as below:Financial AccountingManagerial AccountingIt is made for external stakeholders likeconsumers, suppliers, etc.It is made for internal stakeholders like junioremployees, board members, managers, etc.Historical data is required in this type and itdoes not follow proper time schedule toprepare.It is a present year document that is made forfuture purpose.It includes all transactions that happen inorganization as a whole. It records only particular and specific data. It focuses only on the financial data.Although it concentrates in financial and non-1
financial areas both.It is mandatory for organization to keep allfinancial data to meet legal requirements. There is no legal boundaries that pressurise tokeep the management accounts. Small scale companies have limited resources that have to put in that task which canprovide high returns. Management accounting process recognises all mistakes attempted bymanagers repeatedly in inventory control and price optimising system. It helps in diminishing theconfusion among various functional levels and it also reduces the time that is taken to make acall. Cost accounting and job costing are some other kinds of systems that focus on minimisingthe expenditure that are associated with production department. Complete explanation is given asbelow:Inventory Management system- If an organization does not manage its raw materials andkeep extra goods in their warehouses that increases cost of carry and enhances overall expenses.On the other hand if firm have less than required inventory it delays production and maximiseexpenditure of supply chain(Herzig and et. al., 2012). This kind of action will affect demandmeeting negatively and reduces customer base for corporation. Inventory management system isa software that is used for managing deliveries, recording of available and sold stock, etc. Formaking an order, it is necessary to identify accurate number of orders that can be measured byEOQ i.e. Economic Order Quantity. This software of accounting helps in the decrement ofwastage of resources by tracking all records. It also assures smooth operations of business bykeeping all records regarding inventory which has to be in warehouse for the next production.Some organizations keep their product’s record on the basis of margin. If an item earns moreprofit then it gains more attention of supply chain management system. 2
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