Management Accounting - Advanced Engine Research Ltd

Added on - 21 Feb 2021

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INTRODUCTIONManagement accounting is the process of analyzing various business activities thatprovide information related to stakeholders and regulators that are working in the organization.Accounting plays an important role for the success in business for gaining more opportunity aswell as profitability (Maas, Schaltegger and Crutzen, 2016). It help in providing variousbenefits such as planning, taking decision, managing business in strategic form and identifyingproblems that influence company’s operation.Present study based on Advanced Engine Research Ltd. company that is providing anauto racing engine manufactured in Basildon, Essex, England. It was established in 1997.Report emphasized on meaning of management accounting and its essential requirementthat help in fulfilling business objectives. It also includes different types of managementaccounting systems. It also includes different methods used for management accountingreporting. It includes analysis of different cost that help in preparing income statement by usingmarginal and absorption cost. Furthermore, it includes advantages and disadvantages of differenttypes of planning tools used in budgetary control. It also emphasize on adapting managementaccounting system that help in responding to financial problems.LO1P1Management accounting and essential requirements of different types of managementaccounting systemsManagement accounting is also known as managerial accounting that will be used foranalyzing cost of business and operations that help in preparing financial report, records and thataid in taking decision for the company. It also helps in preparing internal financial report andrecords and enhancing in achieving goals of the company. On the other hand, managementaccounting include doing interpretation, identification, analysis of accounting information thathas been obtained with the help of financial accounting (Chenhall and Moers, 2015). It helpsbusiness managers in the formation of policies, in daily operations of the firms and makingdecision by classifying important factors affecting the business. Effective managers are requiredfor effective management accounts so the effective utilization of the resources could be done
along with minimization of risk. In effective management all the resources should be allocatedwell so that nothing goes on vain and all deviations and errors could be well defined and couldbe controlled effectively. There are different benefits of managerial accounting such as planning,decision making, identifying early signs of problems and strategic management. Profitability isanother concept that evaluates different aspects for gaining financial gains in the future. Breakeven analysis is another segment that provide effective use of resources.Management accounting is essential for business because:Measurement of performance:-It helps in measuring performance of employees and efficiencyin the organization. This process include comparison between actual performance with thestandardized performance that help in setting deviations that is necessary steps can be taken andimplemented.Assessment of risk:-Anotheressential requirementof accounting managementis that it help inidentifying risk factors that is in enterprise can be minimized through effective managementstrategy that will be followed by advanced engine research limited company for manufacturingengines.Allocation of resources:- Organizations becomes able to achieve efficient and effectiveutilization of resources that help in allocation of resources to the various aspects that will beenhancing changes in creating enterprise that is helpful for collecting information and data (vanHelden and Uddin, 2016). For example: Advanced research engine uses effective use ofresources that help in building various aspects for the future.Financial statement presentation:-It is also an essential requirement that help in providingproper presentation of financial position in the enterprise. It is important for providing variousaspects that help in providing changes that evaluate effective use of resources that help inaccepting challenges in creating changes for the future.There are different types of management accounting system as follows:-Job costing system:-This help in identifying manufacturing cost that provide various aspects inenhancing valuation of job and providing standardized actions that create change in providing
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