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Management Accounting: Advantage & Disadvantage

   

Added on  2021-02-19

16 Pages4279 Words41 Views
ManagementAccounting

Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1 Management accounting and its systems which are essentially required...............................1P2 Methods of management accounting reporting......................................................................2M1 Benefits of systems used in management accounting with their application........................3D1 Evaluation of management accounting systems and its reporting's integration withinorganisational processes...............................................................................................................3TASK 2............................................................................................................................................4P3 Calculating cost by using appropriate techniques in cost analysis.........................................4M2 Application of range of management accounting techniques...............................................7D2 Interpretation of data of business activities............................................................................7TASK 3............................................................................................................................................8P4 Advantages and disadvantages of planning tools used in budgetary control.........................8M3 Use of different planning tools and application of them in preparing and forecastingbudgets.......................................................................................................................................10TASK 4..........................................................................................................................................10P5 Comparison of application of management accounting system by different organisations torespond financial problems........................................................................................................10M4 The way in which management accounting can lead organisations to sustainable success12D3 Use of planning tools in solving financial problems to lead organisation towardssustainable success.....................................................................................................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14

INTRODUCTIONManagement accounting is a technique of keeping record of internal environment of theorganisation and it is also known as managerial accounting. With the help of it managers try toanalyse that the efforts which were made by them to reach predetermined goals are resultingpositively or negatively (Alyousef and Mickan, 2016). This report is based upon LSI Architects(Design) Limited which is a client of Equilibrium Asset Management a medium sized financialconsultant established in United Kingdom. This assignment covers various topics such asmanagement accounting system and methods for their reporting, calculation of costs with thehelp of different costing techniques and use of planning tools in management accounting. Alongwith this, use of all the management accounting systems in respond to financial problems is alsocovered under this project.TASK 1P1 Management accounting and its systems which are essentially requiredManagement accounting: The process which is used by managers of the businessentities to determine that organisation is performing well or not is known as managementaccounting. There are various types of systems which are used by management of LSIArchitects (Design) Limited in order to execute business activities in appropriate manner.Description of all of them is as follows:Cost accounting system: It can be defined as a framework which is used by differentcompanies to determine cost of different products or services which are delivered to clients. InLSI Architects managers are using this system to estimate accurate cost of different buildingswhich are constructed according to requirements of customers. Essential requirements of it forthe organisation is that it helps to analyse up to date information regarding expenses which arerelated to different operations (Azmitov and Korabelnikova, 2015).Price optimisation system: It is a system which guides organisations to set best suitableprice for all the products or services which are sold to clients. Managers in LSI ArchitectsLimited are using it for the purpose of setting such rates for all its services so that higher profitscould be generated by fulfilling requirements of customers. Essential requirement of it for thecompany is that it guides top level executives to make sure that they set optimum prices for allfacilities so that objectives such as profit maximisation and customer satisfaction could be met.1

Inventory management system: It can be defined as a system which is used bycompanies for different activities such as monitoring, evaluating and overseeing processes whichare conducted for management of stock used for business operations. In LSI Architects all themanagers are using it to keep track record of materiel which is used by the company to constructbuildings. Essential requirement of it for the organisation is that it guides management to beaware of actual status of stock so that material could be ordered on right time (Boiral, 2016).There are three different types of it which are as follows:LIFO: In this method of inventory management recently received goods are used forbusiness operations, therefore it is called Last in First Out.FIFO: While using this method of inventory management managers use earlier receivedinventory for business execution, hence it is called First in First Out.AVCO: In this method all the goods are used by organisation on the basis of theiraverage cost for business activities so it is called Average Cost Method of inventorymanagement.From all the above described methods management in LSI Architects Limited are usingFIFO method to manage inventory. One of the main reason behind using it is no effect ofpurchases at the end of the period on net income and cost of goods sold. P2 Methods of management accounting reportingManagement accounting reporting: Managers follow specific procedures to preparemanagement reports which is known as management accounting reporting. There are varioustypes of reports that are generated by managers in LSI Architects to analyse that business is ableto reach long term goals or not. All of them are described below in detail:Performance report: In most of the business entities this type of report is generated bymanagers for the purpose of analysing that operation and staff members are performingappropriately or not. In LSI Architects Limited management generate it to monitor thatall the employees are working productively or not so that organisational goals could beachieved. It is beneficial for the company because with the help of it decisions for thebetterment of enterprise could be formed if the performance of business is very low(Campanale and Cinquini, 2016).Inventory management report: It ca be defined as a report which covers detailedinformation regarding goods which are utilised by organisations to perform all the2

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