Case Study on Management Accounting.
Added on 2021-02-19
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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Explaining different systems of management accounting and their requirements................1P2. Various methods of reporting which are used in management accounting...........................2M1. Application and benefits of different management accounting systems withinorganisational context..................................................................................................................4D1. The way in which management accounting systems and reporting are integrated withprocess of organisations...............................................................................................................4TASK 2............................................................................................................................................5P3. Using costing techniques to prepare income statement.........................................................5M2. Applying range of management accounting techniques and formulating final accounts.....6D2. Production of financial reports that can help to interpret the data for business activities....6TASK 3............................................................................................................................................7P4. Different planning tools used in budgetary control with their advantages and disadvantages......................................................................................................................................................7M3. Analysing the use of planning tools in preparation and forecast of budgets........................8TASK 4............................................................................................................................................9P5. Comparison of different organisations on the basis of the ways in which they implementmanagement accounting system to resolve financial problems...................................................9M4. Analysing the way in which management accounting lead companies to respond financialproblems.....................................................................................................................................11D3. Evaluation of the use of planning tools in responding financial issues..............................11CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
INTRODUCTIONManagement accounting is a procedure which is focused by managers of companies inorder to evaluate actual performance the business. Main purpose of it is to guide internalstakeholders such as employees, managers etc. to analyse that business's position is good or not.If an entity is ignoring it then it can affect the formulating of accurate reports on insider activities(Abdel-Maksoud, Cheffi and Ghoudi, 2016). The enterprise which is selected for this report isRolls Royce. It is one of the major car manufacturing companies which are established in UnitedKingdom and selling its products in national as well as international market. This assignmentcovers various topics which includes detailed analysis of management accounting, its systemsand reporting, application of costing techniques, advantages and disadvantages of planning toolsused in budgetary control. Apart from this, comparison of two companies on the basis of usingmanagement accounting to respond financial issues is also covered in this project.TASK 1P1. Explaining different systems of management accounting and their requirementsManagement accounting: It can be explained as the technique which is utilised by topauthorities of an organisation to analyse that the efforts which are made by them for bettermentof company are resulting favourably or adversely. Managers in Rolls Royce also pay attentiontowards it so that higher level of accuracy could be provided to internal stakeholders with thehelp of management reports.Management accounting systems: In most of the organisations different frameworks arefollowed by managers in order to analyse actual situation of the business, all of them areconsidered as the management accounting systems. Top level executives of Rolls Royce guidemanagers to follow some of them that may help to collect appropriate data. These are analysedunderneath:Inventory management system: The method which is mainly concerned withmonitoring and recording of information related to stock used for carrying out operations isknown as inventory management system (Arunruangsirilert and Chonglerttham, 2017). Fororganisations such as Rolls Royce it is very important to use it because it helps to keep detailedinformation about goods which are utilised for business processes. It is required for the company1
as with the help of it managers will be able to check that inventory is needed for operationalactivities or not. Three different kinds of it are discussed below:AVCO (Average Cost Method): In this system all the inventory is used for businessactivities on the basis of average cost.LIFO (Last in First Out): This method guides managers to utilised recently acquiredgoods for carrying out operations.FIFO (First in First Out): This system demonstrate that if it is used by managementthen they should use earlier bought material for manufacturing cars.Managers in Rolls Royce are using first in first out method as it helps to utilise inventoryproperly.Price optimisation system: For all the organisations it is very important to setappropriate price for all their products so that large number of customers could be attractedtoward the business. For this purpose, companies such as Rolls Royce apply this system whichhelps to analyse responses of clients on different prices which could be set by them for theirgoods. It also guides to set the right and most preferable rates for the cars engineered by them. Itis very important for the enterprises to use it because without it, it will be very difficult to figureout that what price will be right for the products.Job order costing: All the organisations perform different activities for carrying outoperations and to keep detailed track of all of them this system could be used. Management inRolls Royce are utilising it to accumulate and assign engineering costs to different units that aremanufactured by it. It is essential for the company to use it as it is required to segregate theexpenses on the basis of different jobs which are performed according to conditions ofpatronages (Banham and He, 2014).Cost accounting system: It can be defined as a framework which is focused for thepurpose of estimating costs of various items manufactured by the company. Rolls Royce'smanagers are using it estimate the right cost which have taken place while engineering the carsso that most profitable operations could be determined. It is very important for the managementto use it as with the help of it forecasting of future expenses could be performed. P2. Various methods of reporting which are used in management accountingManagement accounting reporting: For all the business entities it is very important toformulate management reports so that actual and accurate information about operational2
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