Management Accounting Techniques - Doc
Added on 2020-12-29
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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1ACTIVITY 1....................................................................................................................................1Management Accounting & its requirements..............................................................................1Methods of management accounting reporting............................................................................3Different types of Management Accounting Techniques............................................................4ANNEX A....................................................................................................................................5ANNEX B..................................................................................................................................10ACTIVITY 2..................................................................................................................................11Advantage & Disadvantage of planning tools...........................................................................11ANNEX C..................................................................................................................................14Adaption of management accounting system for resolving financial problems........................14CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTIONManagement accounting is basically the process which involves preparing of themanagement reports which helps to ascertain the accurate and timely data to the users so thatfinancial and statistical information generated from the reports can be used by them in theirdecision-making.The present study is based on the management accounting system which focuses onpreparation of the effective and efficient reports which help users to aid decision making.Different costing techniques, planning tools of budgetary control will also be explained in thereport for their understanding and requirements in the organisation. In addition to this differenttype some of the methods used for the management accounting reporting will be discussed in thereport.Some tools which are generally used by the management which helps in solving thefinancial problems will also be explained in the given report for effective learnings of the entiremanagement accounting systems.ACTIVITY 1Management Accounting & its requirementsManagement Accounting is an accounting process according to which benefits managersof a business organisation in making important decision so that organisation can run smoothlyand can achieve more profits. With this accounting method managers of company analysefinancial information of firm and plan & project its future financials.Through manager accounting managers are able to eliminate unnecessary cost incurredduring production and distribution process so that performance and efficiency of companiesoperations can be improved(Ax and Greve, 2017). Management Accounting SystemsSystems of management accounting is used in an business organisation to improve itsprofitably and market share by managing cost and by preparing & formulating various reports &plans. Various management accounting systems are used by companies for different purpose,these systems are discussed below-Cost Accounting SystemAccording to (Boučková, 2015), Cost Accounting System is an essential requirement ofmanagement accounting as it enable manager in making decisions regarding allocation of cost tothe different production departments and different products.1
This is the most important management accounting systems which is required to use inmanaging different types of cost of manufacturing such as labour cost, cost of material andoverhead cost. With this accounting system a company is able to sale its product and services at alower price by minimising cost and setting up higher profit margin which in turn enhancesprofitability and performance. This systems also required for companies in tracking its inventorylevel and requirement of raw materials because cost of a product is determined after evaluatingthese elements(Bromwich and Scapens, 2016). Further, this provide various Cost Accounting Techniques with which a businessorganisation is able to analyse cost of its product and service and make budget of future expensesof production. These accounting techniques are Job Costing, Process Costing, Contract Costing,Marginal Costing and Services Costing. This is beneficial for a business venture which isincluding wide range of products and services in its product portfolio. Because, this type ofcompanies can use suitable techniques of each department to determine and manage cost. This system is also required in management accounting as it compare actual cost ofproduct with the standard cost, differentiate direct & indirect cost and operating and nonoperating expenses.Inventory Management System This system is also an essential requirement of management accounting according to (),as it helps manager of production department by determining requirement and availability ofinventory. Further, manager are able to manage inventory according to demand of customers andrequirement of production department. It is necessary for a company to manage its stock aswithout inventory a company can not manufacture its goods and services. Further, this system uses various software's so that inventory managers can track level ofinventory, sales volume and cost of inventory available. Further, this system is require togenerate bill of all the material included in production process and supports in placing orders. Most important benefit of this system is it helps managers in managing supply chain of acompany as without checking inventory level a company is unable to place further order for rawmaterials(Carlsson-Wall, Kraus and Lind, 2015).Job Costing SystemsThis system is required as with this manager can determine cost involved in a particularjob and it gives all the related information of manufacturing cost of each job separately which in2
turn benefits manager in resolving problems of each product and job. According to (Chenhalland Moers, 2015), Event Management Companies and Furniture Manufacturers uses this systembecause this businesses manufacture different type of products.Price Optimising SystemPrice Optimising System benefits a business organisation in setting its prices which givessatisfaction to customers. Further, with this systems manager can track change in customersdemand of products & services according to changes made in prices and with this they madepricing decisions. Thus, this system is also an important requirement of management accounting.Benefits of Management Accounting SystemsManagement Accounting is important as with this managers can make various decisionssuch cost minimisation, price determination and inventory management which in turnenhance profits, market share and customer base of the business organisations. Further,theses accounting systems are also important for companies as it provides optimum utilisationof resources which in turn enhances production output and sales volume by managing waste.Further, systems of management accounting is beneficial for companies by determiningframework of operating activities related to business. Systems of management accounting is applied in various departments of an organisationsuch as marketing, manufacturing, selling and financial(Hald and Thrane, 2016).Methods of management accounting reportingManagement Accounting Reports are prepared and presented by business organizationswith the purpose of making important decision and resolving problems occurred in differentdepartment. This reports are also used by managers for evaluating efficiency of companiesfinancials and operations. Further, future plans of companies are formulated on the basis ofprevious years reports. These reports are presented to internal users of companies only andprepared according to the understanding of managers. It is not required by manager's to followall the accounting principles during the preparation of management accounting reports.Types of Management Accounting ReportsBudgetBudget shows details of future expense and incomes of a business firm and it is preparedon the basis of historical data. Thus, Budget Report is used by managers to monitor and controlcost so that operations of company can be operated according to the allocated cost in future3
Financial plan. Further, companies develop budget for different departments which helpsmanagers in evaluating performance of each department. This report is essential for management accounting as with this managers are able to setincentives for their employees and can negotiate with suppliers for prices of rawmaterial(Honggowati and et.al., 2017).Cost Accounting ReportsThese reports are prepared for computation, controlling and monitoring cost involved inmanufacturing of products. All types of cost such as raw material, indirect & direct labour andOverheads are included in this reports with this managers are able to make decisions related tocost reduction, management of waste, determining cost of overheads and labour. This reportgives an exact information of expenses incurred by company.Performance ReportsPerformance Reports are prepared with the purpose of analysing financial, managerialand operational performance of a business organisations. Managers of a business firm set futureobjectives and goals in accordance with these reports. Further, this reports also helps managers indeveloping future strategies so that organisation can achieve higher profits and market share.Different types of Management Accounting TechniquesManagement Accounting TechniquesManagement Accounting techniques are used by business organisation with the purposeof managing risk, developing strategies and taking decision related to business expansion. Thistechniques are used by businesses for analysing both financial and non financial information.Various management accounting use by companies are discussed below- Marginal Costing Marginal Cost consider additional cost incurred in production of goods and services dueto increase in sales units. Thus, these technique of management accounting helps business firmsin calculating and determining extra cost included in production process (Marginal Cost). Thistechniques gives accurate amount of profit to the business firms as manufacturing cost of productis controlled and monitored on a daily basis and manager make decisions to improve the costwith the changes(Jansen, 2018).Advantage4
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