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Management Accounting Importance: Doc

   

Added on  2020-11-12

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MANAGEMENTACCOUNTING1
Management Accounting Importance: Doc_1

Table of ContentsINTRODUCTION...........................................................................................................................3LO 1.................................................................................................................................................3P.1. Management Accounting and Different types of Management accounting Systems...........3P2. Methods used for Management Accounting Reporting.........................................................4LO.2.................................................................................................................................................5P.3. Prepare an income statement using marginal and absorption costs.....................................5LO.3.................................................................................................................................................7P.4.Advantages and Disadvantages of different types of planning tools used for budgetarycontrol..........................................................................................................................................7P.5.Management Accounting Systems helps to respond to Financial Problems.........................8CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12Books and Journals....................................................................................................................122
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INTRODUCTIONManagement accounting is the system which helps managers in making plans, policiesand strategies; it aids in decision-making process. This practice of management is applied to awider organisational context. It is a vast concept that includes important accounting practicewithin it which guides and directs the managers. In this report we will discuss about theimportance and fundamentals of management accounting, different tools and techniques,common costing systems like, job costing, absorption cost and the way managers resolvefinancial issues with the use of management accounting system.LO 1P.1. Management Accounting and Different types of Management accounting SystemsThe accounting system which analyse the cost incurred in business and prepare financialreports that aids managers with the relevant information. It assists in planning and formulation ofbusiness strategies which enables to achieve goals and objectives of organisation. The origin ofmanagement accounting system helps the managers to forecast about future and enables inunderstanding performance variances. There are no set principles, but according to role it playshere are few accepted principles. These are, Management by exception, utilisation of resourcesof company and Integration. These principles help in decision making process, internalmanagement, maintain customer value, etc, that are needed to be fulfilled objectives oforganisation.Management accounting is a vast concept that differs from financial accounting system.Information provided is used by internal management, which may not be audited and focus onfuture trends. Whereas, the financial accounting focuses over past data and follows generallyaccepted principles as well as information is audited (Chiwamit, Modell and Scapens, 2017). Types of Management Accounting SystemsCost-accounting systems: It refers to system which tracks down the inventory as it goesdown various stages of production within organisation. It is generally meant formanufactures. This system helps management to maintain required inventory and thus,reduce the cost of warehouse and security. 3
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Inventory management systems: In this system, the goods or inventory manage businessoperations to the entire supply chains. It varies from business to enterprise and depends uponthe size and nature of business. It helps managers to make effective decision and investment.Job-costing systems: The managers can calculate cost of each job within organisation. Job-costing system helps managers to know the amount of cost incurred on each job. This is arelevant costing system that helps in maintaining data which is useful for business operations.It is useful in construction business while making a particular batch of products (Goddardand Simm, 2017).Price optimising systems: It is used to determine the reaction of consumers in relation todifferent prices of products/services provided by company through different channels.Thisenables managers to choose the price that will meet all its objectives.Difference between management accounting and financial accountingManagement accountingFinancial accountingIt helps in providing key information withinthe organization. It helps in providing information to peopleoutside the organization, particularlystakeholders. It is an optional aspect that can be initiatedbased on will of the management. It is mandatory for the organization to presentits financial accounting reportsIt generally focus on future regulationsIt generally focuses on past transactionsP2. Methods used for Management Accounting ReportingThere are various types of reports prepared by management to know about the internalissues and to get relevant information about them. They are:Performance report: The report is meant to understand overall performance of company.It focuses over each employee within organisation. These are relevant reports as they helpmanagement to make strategic decision and provide deep insight in working of company.Budget: They are prepared by every organisation whether it is a small business or large.Department wise budgets are made in big companies. These budgets help to measure theactual performance with set standards.Sales Report: This report helps to know the revenue earned from sales by company. Itshows which avenues has generated more profit and which avenues are in loses, it helpsmangers to know which salesperson has contributed more to the sales of product/services.4
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