Essential Requirements of Management Accounting System : Report
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Added on 2020-07-22
Essential Requirements of Management Accounting System : Report
Added on 2020-07-22
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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Management accounting and essential requirement of its various types.........................1P2. Methods of management accounting reporting................................................................3TASK 2............................................................................................................................................5P3. Income statement and difference between absorption and marginal costing...................5TASK 3............................................................................................................................................8P4. Merit and demerit of various planning tools that can be used in budgetary control........8P5. Adapting management accounting for responding financial problems..........................10CONCLUSION ...........................................................................................................................12REFERENCES..............................................................................................................................13
REPORTFrom: Management Accounting Officer To: General ManagerSubject: To write a report to GM covering management accounting and management accountingsystem together with different costing techniques and reporting to enable the organizationimplement them.INTRODUCTIONWith time, doing business is getting more complicated. Companies want to expand theirorganisation in order to earn higher profit and become more powerful. Management accountingincludes modern techniques which do not focus only on recording data. It concentrates onreducing the wastage of resources and help in making significant decisions relating to fixedinvestment. In management accounting, financial data is analysed after completing the procedureof collection. Unicorn grocery is a small company which is running their business in Manchester,England. They are operating in retail industry and in the present scenario, around 40 employeesare working in their firm. This report will discuss about essential requirements of managementaccounting system. Various tools and techniques of accounts will also become the part of thisassignment (Zoni, Dossi and Morelli, 2012). The way in which two organisations can respond totheir financial problems by using management accounting will be explained here as well.TASK 1P1. Management accounting and essential requirement of its various typesEvery organisation want to expand their reach and provide their goods and services to morepeople. In present era, technology made has changed the way of doing business. Companies neednew techniques of accounting in order to cope up with different challenges relating to optimumutilisation of resources and following legal obligation made by government. People think thataccounts department of an enterprise only do work of recording financial data and make annualreports which is mandatory for an organisation but their role in changing (Fullerton, Kennedyand Widener, 2014). They also provide great assistance to other divisions like marketing,production etc. The information they gather help making crucial decision relating to long terminvestment and finding right source of acquiring debt. 1
By using techniques of management accounting, manager of an organisation can determinesuccess or failure of a plan. They can find the reason between set targets and attained goals. Mostof the enterprises complain about various problems relating to cash flow, it is difficult for amanager to decide the right amount of cash that they should keep in their firm. Managementaccounting assist in solving this trouble but they cannot tell the exact figure because of thedifferent risks that is present in the business environment (Weißenberger and Angelkort, 2011).Financial accounts has to follow various principles like GAAP but managerial accounting do nothave any relation with them and its main focus is to support management in reaching their longterm objectives. For a small company like unique grocery, minimising wastage of resources issignificant for attaining short term goals because they have limited resources and their financialposition is not too sound. Management accounting basically focused on two areas, first is relatedto fixed investment and other is determining right sources of debt. Reducing cost of production,managing inventory etc. are its additional advantages. Tools and techniques of this type ofaccounting are bit expensive so cited organisation must think about all the pros and cons whichthey may face after adopting this process. Following are some management accounting systemsand their essential requirements:Inventory management system – An organisation who is running business of grocery shouldfollow proper procedure for storing and carrying their stock. This tool assist an enterprise indelivering various goods in appropriate. By using this technique, manager can find the rightamount of quantity that they should store in their warehouse. If they keep more amount than theirstorage cost will go up which will result in unnecessary expenditure (Lavia López and Hiebl,2014). Nowadays, customers do not like to wait in line, if any organisation keep less quantity intheir retail store than they cannot fulfil the demand of buyer in an appropriate time. There aremany software for inventory management which can be considered as the necessary requirementfor this method. Price optimisation system – When a company sell variety of product than they face problemsrelating to deciding the correct price for a product. Sometime customers do not by an itembecause of high rate, which is set by company for earning more profit. An organisation could sella commodity by charging more amount but they fail to analyse this advantage in right time. Amathematical programme is required for implementing this system in an effective manner.2
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