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Management Accounting Systems

Added on - 12 Nov 2020

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Management Accounting
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3P1 (a). Management accounting systems and their requirements in the context of business unit.....................................................................................................................................................31. Explaining the manner in which management accounting differs from financial...................32. Importance of management accounting in decision making aspect........................................43. Cost accounting system...........................................................................................................54. Inventory management system................................................................................................55. Job costing system...................................................................................................................6P2 (b). Managerial reporting system...........................................................................................61. Presenting varied managerial reports and their role in decision making.................................62. Stating reason behind the presentation of information in an understandable manner.............7TASK 2............................................................................................................................................8P3. Use of absorption and marginal costing method in decision making....................................8TASK 3..........................................................................................................................................10P3 Presenting the use of managerial accounting techniques in planning..................................10Different types of budget and their advantages as well as disadvantages.................................10Defining budget preparation process and methods pertaining to price determination..............11Stating the importance of budget as s tool for planning and control purpose...........................12TASK 4..........................................................................................................................................13P5 Explaining ways in which managerial accounting tools help in responding financialproblems....................................................................................................................................13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15
INTRODUCTIONIn the recent times, business units prefer to employ management accounting tool with themotive to make optimum use of financial resources. Moreover, MA field of finance furnishesinformation about cost and thereby helps in taking decision about future aspects. By usingmanagement accounting techniques firm can do effectual financial planning which in turn makessignificant contribution in the attainment of goals. This report is based on the case scenario ofTech Ltd which manufactures and offers mobile chargers as well as electronic gazettes to thecustomers. In this, essential requirements of management accounting in the context of Tech Ltdwill be described. Further, report also depicts the role of managerial report indecision making.Besides this, report will provide deeper insight about the use of marginal and absorption costingin decision making. It also exhibits the manner in which MA techniques help in planning andresponding financial problems.TASK 1P1 (a). Management accounting systems and their requirements in the context of business unit1. Explaining the manner in which management accounting differs from financialManagement accounting is the process of preparing managerial reports and accountswhich aid in the long & short decision making aspect of business organization. It lays high levelof emphasis on identifying, measuring, analyzing, interpreting and communication informationthat contributes in the goal attainment (Mondal and Percival, 2010).Management and financial accounting can be distinguished in the following manner:Basis of differenceManagement accountingFinancial accountingMeaningIt focuses on providingmanagers with suitableinformation about internaloperations so they becomeable to take prominentFA is concerned with therecording of businesstransactions and providingstakeholders with theframework for decision
decisions.making.UseGive input to the internalmanagement team for takingdecision about budget etc.Enables both internal andexternal stakeholders inanalyzing the financialperformance of firm(Financial Accounting vs.Management Accounting,2018).Form of reportingIn this, no prescribed orspecific format is followingfor reporting purpose.Financial reports areprepared by taking intoaccount standardized format.Frequency or time durationAs per the requirements ofmanagementteammanagerial reports areprepared.On statutory basis, financialaccounting report are draftedand presented on annuallyand semi-annually basis.Statutory complianceNoYes or mandatoryRulesUnder MA, no need to followspecific rules while preparingreportsIFRS, GAAP, IAS2. Importance of management accounting in decision making aspectManager of Tech Ltd can take suitable business decisions considering managementaccounting aspects about following matters:Management team can make proper forecast about future aspects. Such field of financeenables manager in deciding whether more funds should be invested in equipments ornot.It facilitates appropriate decision making at both strategic and operational level. TechLtd’s manager can assess whether firm should purchase product from third party ormanufacture them in house (Lukka and Modell, 2010). Thus, management accountingtools help company in taking the most important decision pertaining to make or buy.Variance analysis technique of management accounting enables manager to build onpositive results and make efforts to manage the negative aspects.Facilitates appropriate forecasting of cash flows through budgeting and helps in makingsuitable estimation about the rate of return.
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