Management Accounting Assignment : TPG Processing Assignment
Added on 2021-02-19
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MANAGEMENTACCOUNTING1
Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................1P1. Requirement of management accounting systems................................................................1P2. Methods of management accounting reporting.....................................................................3Benefits of management accounting system................................................................................4Critically evaluate management accounting system and reporting.............................................4P3 Preparing cost and profitability statement using absorption & marginal costing system......5Interpretation:................................................................................................................................11Part B.............................................................................................................................................12P4. Advantage and disadvantage of different planning tool......................................................12P5. Compare organizations that adapting to system of this accounting to respond to financialproblems....................................................................................................................................14Conclusion.....................................................................................................................................16REFERENCES..............................................................................................................................17Books and journals....................................................................................................................172
INTRODUCTIONManagerial accounting (MA) is that branch of accounting which is concerned withrecording and analysing the cost related, financial information along with qualitative informationof the business. The main purpose of management accounting is to assist the managers of acompany in their decision-making process. Techniques of managerial accounting system areapplied by the companies for deriving the meaningful information from cost data that eventuallyhelps them in taking quality-decision for the entire organization. In the present report, concept ofMA will be discussed, various kinds of management accounting systems along with theirbenefits will be highlighted. Further, why integration of management accounting is required isgoing to be covered in the report. The report is about TPG Processing, a company belonging to manufacturing sector. Thecompany deals manufacturing, transportation, distribution and services relating to business.Different techniques of management such as absorption and marginal costing will be applied forpreparing the income statements. Moreover, a comparison will be seen in the project reportregarding how different organizations apply management accounting in dealing with theirfinancial issue and how management accounting leads an organization to sustainable success.PART ARequirement of MA SystemDefinitions of management accounting Managerial accounting is defined as a procedure of evaluating and analysing theexpenses and costs of a business organization for preparing financial report meant for internaluse by the management of the company (Krishnan, 2015). Management accounting implies for the process which in turn lays emphasis on providingmanagers with financial information and resources for decision making purpose (Langfield-Smith and et.al., 2017).The aim of managerial accounting is to facilitate the manager of a business enterprisewith the much-needed information relating to costs through which manager becomes enable insetting the prices of company's products and services. Management accountants focuses onpredicting the future expenses and income of then company by preparing budgets. They verythoroughly analyse each and every activity of the business for the purpose of appropriately1
allocating and assigning the costs and other resources to each of the responsibility centre in thebusiness. The primary difference between the managerial accounting and financial accounting isthat latter is concerned with the presenting and reporting the financial information for theexternal use by different stakeholders such as customer, investors, government etc. While formeris concerned with the presentation and reporting of financial data for internal use by themanagement for decision-making. Role of management accounting :-Managerial accounting plays an integral role within the business as :It facilitates managers with necessary planning tools through which they undertake theirshort and long term planning.It aids in developing a management information system as reports from all otherdepartments are forwarded to management accountant for taking corrective actions (7Roles of Management Accountant, 2019).Managerial accounting helps the managers in exercising the controlling functions byperforming various techniques of measuring performance such as variance analysis,budget etc. and evaluating it in order to find the reasons for deviations so that neededactions could be taken. It facilitates the managers in accurately forecasting the costs and income of the businessfor a future accounting period. It also allows the managers in keeping a check on the cash inflow and cash outflow whichtakes place in the business, which in turn aid the managers in making more effectivestrategies for increasing the cash inflows and reduce unnecessary cash outflow.Different types of MA systems exists which different organizations employs inaccordance with their business requirements. They are as follows:Stock management system:- This system of management accounting is a process oftracking inventory, order, sales and deliveries of products. Through this system, managers oforganization evaluate and analyse to movement of stock from production to storage and fromstorage to delivery (Hald and Thrane, 2016). It includes FIFO and LIFO method and managersmaking decision about to order and maintaining to manufacture process.2
LIFO :- it is the method of stock management that means product that recent purchased onparticular cost so it first to be sale. FIFO :- it stands for first In first out and it refers that the oldest inventory recorded swill be soldfirst. In addition to this, there are several tools available which can be used for inventorymanagement include EOQ, JIT etc. Stock management tools provide deeper insight about stockwhich need to maintain within an organization for ensuring smooth functioning of operations.This in turn helps in maximizing profitability by reducing the cost associated with holding andordering aspects. Cost accounting system :- It is an essential type of management accounting that is usedby management of TPG to estimate the cost of their product to analysis profit. Productionprocess includes fixed and variable cost. Cost that never changing with quantity and quality ofproduct is called fixed cost. Those cost that changing with unit of production, is called asvariable cost (Schaltegger and Burritt, 2017). It also reduces difficulties because manydepartments includes in organization and all have different income and expenditure. Managersuse to this system and calculate to cost very effectively and efficiently. For example – labourcost and overhead. Cost management system is highly significant which in turn helps in turnhelps in setting appropriate prices of products or services. It clearly presents expenses incurredfor offering products or services. Hence, by dividing total costs from number of items per unitcost can be assessed. Further, by adding gross margin % in per unit cost price can be determinedeffectually.Job costing system :- It can be defined as the framework for allocating and accumulatingthe costs of manufacturing of a particular product or job. It uses by manufacturing organizationwho produce products according to demand and order of customers. This system makes to easyprocess of organization because in TPG, many types of job considered and every job consumecost like labour, overhead and material. Mangers also keep records in proper manner through it(Armitage, Webb and Glynn, 2016).Price optimization system :- Management of TPG use to this system of accounting thathelps to evaluate and understand behaviour of customer with changing price of products. It alsohelpful for organization because they understand through fluctuation in demand and supply and3
then change prices of product (Lapsley and Rekers, 2017). That consumer can easily afford andorganization achieve goal and meet objective. Methods of management accounting reporting.Reporting of management accounting helps to evaluate and analyse accuracy of data andinformations of all reports of TPG. All report of organization provide helps to managers inmaking effective decision, and they easily achieve goal and objective. Reports of managementaccounting is essential and useful for stakeholders because they can measure performance andsituation of organizational profit. Stakeholders like CEO, owners and investors.Account receivables report :- This report includes those types of customers that theyused to products and services of TPG but not yet paid by customers. That means customers oweorganization's payment. On the bases of those customers, management make to this report. TPGalso evaluate to health of customers related to finance. Account receivables is the assets oforganization.4
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