Report On Big Swing Company - Aspects Of Management Accounting
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Added on 2020-02-03
Report On Big Swing Company - Aspects Of Management Accounting
Added on 2020-02-03
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MANAGEMENTACCOUNTING1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................4TASK 1............................................................................................................................................4P1) Management accounting and significance of its types..........................................................4P2) Different methods used for management accounting reporting............................................7TASK 2..........................................................................................................................................10P3) Different costing methods and their differences.................................................................10TASK 3..........................................................................................................................................13P4) Advantages and limitations of management accounting for budgetary control tool...........13P5) Significance of management accounting systems to solve out financial problems............16CONCLUSION..............................................................................................................................19REFERENCE.................................................................................................................................202
ILLUSTRATION INDEXIllustration 1: Marginal costing to prepare income statement.......................................................10Illustration 2: Income statement through absorption costing.........................................................113
INTRODUCTIONManagement accounting is essential for decision making and preparing strategic plansregarding business operations. In this regard, entire development of organization and effectivebusiness performance can be obtained through utilizing adequate management accounting tools.The present report is based on understanding different aspects of management accountingcomponents for Big Swing Company. It is a small sized dance festival organizer of UK thatorganizes events of dance and sports in the country. In this report, different types of managementaccounting systems and methods used for reporting will be determined. In addition to this,various costing methods to present income statement and technique to decision making processfor business activities will be highlighted. However, advantages and limitations of budgetarycontrol as a management accounting tool are presented here. Along with this, significance ofmanagement accounting for decision making and strategies for expansion of small business unitand increasing its services will be discussed.TASK 1P1) Management accounting and significance of its typesManaging DirectorBig SwingManagement accounting is the composition of all accounting systems including finance,cost, corporate and accounting related to business activities. In this process, managementaccountant of Big Swing Company recognizes business performance through financialstatements and different recorded information of entity. It leads to generate variety of ideas anddecision making process for further business operations. Therefore, price determination andbetter performance of business organization can be obtained by utilizing managementaccounting tools. Including this, it is essential for the optimum allocation of resources and fundefficiently (Dobroszek and Szychta, 2015). In accordance with this, it is determined thatmanagement accounting is helpful for the overall development of business entity and enhancingservice qualities of goods and services provided by company. Therefore, managementaccounting is considered as the key component for effective business operations and systematicmanagement of firm. By analyzing the business performance, management accountant of entity4
makes decision for achieving organization's effectiveness at the high level by preparing budgetand making decisions regarding business operations of small business entity. Thus, managementaccounting is crucial for systematic management of Big Swing. Moreover, planning is obtainedfor reducing waste material and also remain helpful for proper production and distribution ofgoods produced by the firm (Fayard and et.al., 2014). Apart from this, planning includingforecasting and decision making is obtained for effective growth of firm that is determinedthrough utilizing management accounting tools. Hence, management accounting plays animportant role in enlargement of small business unit and enhancing its service qualitiesadequately.Kinds of management accounting systemsManagement accounting system is liable for financial and inventory management offirm that put a direct impact on the organizational structure of company. Therefore, differentmanagement accounting systems and their importance can be described as follows:-Job order costing: - Under this accounting system, costs are assigned for each productor bulk of goods. It is related to determine the overall expenses of product incurred forproduction of goods. In this regard, cost incurred for project accomplishment is obtained that isusable for ordering and incurring expenses. However, job order costing is related to determineprice for projection and implementing planning procedure for reaching out the set goal of task.It is useful for price determination regarding purchasing raw material and production processfor supplying goods and services provided by Big Swing (Kreibich and et.al., 2014). Inaccordance with this, recording is done for expenditures and implementing project activity.Therefore, job order costing is relevant for recording of direct materials, labor costs andoverheads. Including this, recording also includes work assigned to each individual for workingin a team. Thus, job order costing is liable for keeping record of project activities. For instance:if project is related to construction of any building then recording of material used, labor feesand outstanding expenses is included under job order costing method. Including this, records arealso maintained regarding assigning work to each employee of the organization.Process costing: - Under this costing method, expenses incurred for production ofproducts are recorded. Therefore, after manufacturing process, step forwarded to production inwhich organization has to incur expenses. It includes cost on inventories, custom equipment5
cost and price of goods sold. Therefore, records are prepared and maintained regardingincurred costs for the production process. However, management accounting tool as processcosting is interlinked with production and distribution system of goods and services provided bycompany (Osadchy and Akhmetshin, 2015). However, costing recording is obtained forprocessing and expenses incurred for production system. In this regard, process costing isrelated with price determination of products. Under this process, Big Swing uses differentqualitative products and materials. Therefore, material and qualitative features used in thisprocess affects the pricing of finished goods. In this regard, it is obtained that process costing isrecording of expenses that incur in the production process of firm.Throughput costing: -It is the costing of finished goods which is set according toquality, features and expenses incurred for manufacturing and production process for Big Swingorganization. Thus, according to incurred price for manufacturing and production process,actual price of goods and services is determined (Shields, 2015). It is interrelated with differentfactors such as demand, competition and setting pricing related to different determinants. In thisregard, throughout process is interlinked with market essential to make position and sustain itsvalue for long term efficiency. Under throughout process, market activities are involved such aslaunching and advertising products in the market. Inventory accounting system: Through this management accounting system, inventoriesand liquidity position of entity is analyzed. However, it is useful for optimum utilization ofresources and funds influences further business operations. In addition to this, different ideasare generated for managing all goods and services. Thus, management accountant of Big Swinganalyses all inventories and products to be produced and supplied affects profitability andmanagement of entire operations effectively.Cost accounting system: It is one of the great tool for cost effectiveness and producinggoods and services provided by entity adequately. In this regard, it is suitable for pricedetermination and creating balance between production and supplement of goods efficiently.Thus, cost accounting system is essential that is related with entire business activities andprofitability of organisation.Significance of management accounting systems6
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