(Docs) Management Accounting : Assignment

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ManagementAccounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1: Types of management accounting systems and its essential requirements......................1P2: Different Management accounting reports and its importance to management..............4M1: Importance of management accounting reports to management....................................5TASK 2............................................................................................................................................6P3 Calculate cost using appropriate techniques of cost analysis to prepare income statementusing marginal and absorption costing...................................................................................6TASK 3............................................................................................................................................1P4. Advantage and disadvantage of planning tool used for budgetary control......................1TASK 4............................................................................................................................................4P5. Comparison with other organisation in response to financial problem............................4CONCLUSION................................................................................................................................5REFERENCES................................................................................................................................6
INTRODUCTIONManagement accounting is the practice that includes identifying, measuring, determining,interpreting and providing expertise in financial reporting for the purpose of formulatingappropriate strategies. It involves preparation of various financial and statistical reports such asProfit & Loss a/c, balance sheets etc. that assists management in making authentic and reliableshort and long term decisions. It involves ascertaining policies about day to business activities tomaking future investment decisions etc. TESCO is a British multinational supermarket chainbelonging to retail industry (Abrahamsson, Englund and Gerdin, 2011). The report will provide abrief understanding about management accounting including its types and methods used. Furtheran income statement for company will be prepared by using marginal and absorption costs.Project will also provide synopsis about various planning tools with their advantages anddisadvantages along with comparing ways in which a firm could adopt various managementsystems to resolve its financial issues.TASK 1P1: Types of management accounting systems and its essential requirementsDefinition:According to Management Accounting Practices Committee “managementaccounting is the procedure of identification, measurement, accumulation, analysis, preparation,interpretation and communication of financial information used by management to plan ,evaluate and control within an organisation and to ensure appropriate use of and accountabilityfor its resources.”Management accounting involves various internal systems that is used by a company tomeasure and evaluate its various procedures for effective control of firm's operations.Management accounting differs from financial accounting as the later one focus majorly onformulating information from external parties like public, stockholders,lenders etc. according togeneral accepted accounting principles (Boyns and Edwards, 2013). On the other handmanagement accounting take into consideration organisation's financial information such asbreak even charts, trend charts, product cost analysis etc. and prepares reports for internal andconfidential usage so as to enable managers for making decisions and determine most feasibleways to conduct firms operations effectively.1
The main role of management accounting is to perform a series of activities to ensure itsorganisation's financial security, managing essentially all finance related matters and therebyassisting in effectively drive the overall business management and its related strategies.Management accounting has four major principles :Influence:Communication is way to provide insight about the future that is influential.The whole concept of management accounting starts and ends with conversation. The principlesare designed in such a manner that allows company to improve its business actions by facilitatingintegrated thinking at all stages. This involves discussing about needs of decision makers so as toget most relevant information could be sourced out and determined (Chenhall and Moers,2015).Relevance:It strives to attain information that is relevant. Management accountingcritically examines information related to micro – macro factors, past, present and future andother financial-non finance data. This help management to analyse and scan out the mostrelevant information for making authentic and reliable decisions.Value:management Accounting by comparing firm's proposed strategies with itsbusiness models n light of its macro environment reveals out value that is expected to generatedby their application.Trust:Accountability and examination enhances the quality of decision making processthat helps firm to fulfil interests of its stakeholders that increases their trust and credibility oncompany. Management accounting professionals are thus trusted to be accountable, ethical andconsiderable in context to firm's values, government norms and social conduct.In context to TESCO which is the third largest retail brand in world in terms of revenuesit becomes critically important to maintain its financial credibility and performance levels byeffectively preparing various finance reports for each accounting year with the help of variousmanagement accounting systems. These reports helps firm in taking various critical financialdecisions such as reducing down its operating costs, generating cash from operations, introduceproduct innovation etc. Mentioned below are some most prominent management accountingsystem (Chiwamit, Modell and Yang, 2014)TYPE OF MANAGEMENT ACCOUNTING SYSTEMS:Price Optimisation System:It is a mathematical system that focuses on calculatingrelationship between the demand of a product at different price levels. This information related2
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