(Solution) Management Accounting Assignment PDF

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MANAGEMENT
ACCOUNTING
Table of Contents
INTRODUCTION...........................................................................................................................1
SCENARIO 1...................................................................................................................................1
a. Difference between Management and Financial accounting...................................................1
b. Cost accounting systems.........................................................................................................3
c. Different methods of management accounting reporting........................................................4
d. Evaluation of management accounting system along with integration of management
accounting system and reporting system in the organisation......................................................5
SCENARIO 2...................................................................................................................................7
1.Calculation of the cost and preparation of the income statement by using the marginal and
the absorption costing method....................................................................................................7
SCENARIO 3...................................................................................................................................9
1. Explaining the advantages and disadvantages of several planning tools of the budgetary
control.........................................................................................................................................9
2. Analysing the uses and application of the planning tools for framing and forecasting the
budget........................................................................................................................................13
SCENARIO 4.................................................................................................................................13
1. Cost, Volume, Profit analysis................................................................................................13
2. Performance indicators to solve financial problems in organisation....................................14
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18
INTRODUCTION
Management accounting istheprocess of framingthereports of the management andthe
accounts that facilitate accurate statistical and financial data timely. It is also called as
thecost accounting. It helps in analysing the cost of operations andthebusiness for
preparingthefinancialreportsinternally,recordsandhelpsmanagersinmaking
effective decisions for achievement of the organizational goals.
In relation to short term decision making such reports play a vital role
and helps in gaining competitive edge over others. In the recent
times, every organization prepares both financial and management
accounting reports which increases their efficiency of work. Many
organisations started adopting management accounting system, and
managementaccountingreportingwhichincreasedworking
efficiency as well as reduced burden of the company. The report
consists of details about definition of management accounting and
howitdiffersfromfinancialaccounting.Itdescribesvarious
management accounting systems that are used by companies and
various reporting system which saves time and cost of company. It
shows how these both systems are integrated in the company named
ExciteEntertainmentlimitedthatdealsinleisureandthe
entertainmentindustryinUK.Itconsistsofabsorptionand
marginal costing methodwiththe solutionandcomparison of
various planning tools used by company in making budget.It
contains analysis of volume, cost and profit and shows different
performance indicators that can help in solving financial problems.
SCENARIO 1
Section-A
a. Difference between Management and Financial accounting
Management accounting:
Themanagementaccountingaimsatassistingthemanagementofan
organization with both qualitative and quantitative information to manager in decision
making process in order to maximize the profits.
Financial accounting:
Financialaccountingisprocessofclassifying,recording,summarizingthe
monetary transactions of an organization. It is used by the entities to keep a track of the
financial transactions of the organizations.
ParticularManagement accountingFinancial Accounting
DefinitionThis branch of the accounting
isrelatedwithproviding
relevantinformationtothe
mangerstoassistthemin
decisionmakingprocess
relatedwithformulationof
policies, plans and strategies to
run the business(Otley, 2016).
Thisbranchofaccounting
systemisdedicatedtowards
preparationofthefinancial
statementofabusinessto
evaluatethefinancial
performanceofthe
organizationandpresentthe
sameinformationtothe
stakeholders.
Provisionof
followingthe
accounting system
Thisisnotacompulsory
system of accounting that an
organisationisrequiredto
follow.Itsadaptationin
business is voluntary.
Topreparethefinancial
accountsandstatementsis
compulsory for all the business
organisation. No business can
avoid the adoption of financial
accounting in the course of its
business operations.
Timeframeof
preparationofthe
reports
The reports under this system
are prepared as when needed.
The report generation is on the
requirementofthe
organisation.
Thefinancialreportsare
preparedonthefixedtime
basis(Theriou,2015).This
means the reports are prepared
at the end of each accounting
yearcontainingallthe
informationrelatedwith
monetarytransactionsofthe
business.
Formateofthe
reports
Thereportspreparedare
presentedinthesummarized
fromwhichdepictsthe
financial position of the firm.
Thereportspreparedunder
thisaccountingbranchare
completeanddetailedwhich
containing all the information
relatedabout variousaspects
of the business.
Datapublication
and auditing
The reports are presented to
theinternalstakeholders
includingtheinvestors,
shareholders,directorsand
other members of the business.
Inordertoassistthemin
makinganinformed
investmentdecisionoverthe
business.
Thefinancialstatements
prepared including profit and
lossaccount,balancesheet,
statementofcashflowsand
shareholder'sequityare
published and presented to the
membersincludingboth
internalandexternal
stakeholders. This reports are
alsoauditedbystatutory
stakeholder on yearly basis for
each financial year.
Followingthe
accounting
standards
There is no particular specified
format for making the reports
andnostatutorylegal
requirement is there to prepare
them.
Thefinancialaccounting
statement must be made with
abidancewithIFRS,
accountingstanders,GAAP
and rules of book keeping(Li
and Yang, 2015).
AssumptionsFor preparing the report under
this accounting no assumptions
are there it is purely on the
Thisaccountingisbasedon
variousassumptions,
principles and conventions. All
discretions of the company as
in which manner it wants to
execute a report.
thefinancialreportsare
prepared on the basis of the
guidelinesprovidedbythe
relevant statute law.
b. Cost accounting systems-
Cost accounting is one ofthebranch of accounting, which measures, records and reports
information regarding the cost ofthebusiness. The foremost objective of the cost
accounting is ascertainment of the cost and using it in making decision and evaluation of
the performance.
Direct costs:
Direct cost can be defined as a cost with an objective that can be completely
attributed to the production of specific goods and services. The direct cost of Excite
Entertainment Ltd includes those expenses which can be imposed directly to the
particular department, section, job or batch under the organization. The cost is directly
linked to the specific location where it is actually incurred. The direct cost can be fixed
or variable. Its nature is not fixed nor variable. Generally, the direct cost in Excite
Entertainment Ltd is determined for the production to identify the actual cost producing
the finished good(Andersen, 2018). Due to its nature of directly tracing to a particular
predict or department, there is no requirement of allocation this cost to a product or
department or other cost objective. The direct cost of Excite Entertainment Ltd is related
with labour, material fuel, power consumption, commission, piece rate wages and
manufacturing supplies. Direct cost is assist in determining the final sales price of
product as it allocate direct expended incurred on a product.
Standard costing:
Standard costing for Excite Entertainment Ltd can be defined as that system
which is used by the manufactures to identify the difference or the variance between the
actual cost incurred on production of goods and services and the cost which should
actually be incurred as per the budgets or pre determined figures. The actual cost which
should have occurred is termed as standard cost which is integrated with the master
budget and profit plans(McVay, Kennedy and Fullerton, 2016). The actual cost is
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