Report on Management Accounting System

Added on -2020-02-12

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MANAGEMENT ACCOUNTING
TABLE OF CONTENTSMANAGEMENT ACCOUNTING.................................................................................................1INTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................3P1 Explain management accounting and the reasons for usage of various managementaccounting systems......................................................................................................................3P2: Explain the methods that are practiced for preparing reports................................................5P3 Calculation of cost by using absorption and marginal costing methods................................7P4 Merits and demerits of various planning tools that are used in the management accounting ......................................................................................................................................................9P5Financial Problems in Management accounting System:......................................................14CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTIONManagement accounting is the domain that help business firms in identifying the areaswhere firm is not performing well and need to make improvement. There are number of toolsand techniques of the management accounting that are used to measure the firm performance. Inthe current report, management accounting systems are explained in detail and along with this byusing absorption and marginal costing method income statement is prepared. In middle part ofthe report, different planning tools of management accounting are explained in detail. Along withthis, different method of management accounting reporting are also explained in the report. Inthis way, entire research work is done in the present study. TASK 1P1 Explain management accounting and the reasons for usage of various managementaccounting systemsManagement accounting is known as provision from which varied sort of decisions aremade by the managers that are financial or non-financial in nature. The scope of managementaccounting is very vast because it encompass number of areas like decision making, preparationof plan and developing performance management system. Apart from this, managementaccounting ensured that financial reporting will be better in the business firm and there will beeffective control in the business which helps managers in devising proper organization strategy.It can be said that there are number of areas in which management accounting help managers inmaking decisions that are related to business (Zimmerman and Yahya-Zadeh, 2011). In respectto the above mentioned areas there are different tools and methods that are used by the managersto make decisions. Some of the important tools of management accounting are variance analysisand budgeting etc. It is very important to keep track record of the business performance. In thisregard variance analysis is used by the managers. By using variance analysis method time to timedeviation that comes in the firm performance is identified. It can be observed that performancemay be good or bad and same is identified by using variance analysis method. Budget is the oneof the important method that is used to measure performance. It is very important for the firms tomake strategic use of resources. This can be done in the business by preparing and implementingproper plan in the business. If there will be plan then in planned manner resources can beallocated among different business activities and by doing so cost can be minimized in the
business. Thus, it can be said that there is huge importance of the management accounting for themanagers because by using same on the multiple areas in single time period managers can focusto improve performanceAccounting system refers to the process or procedure that is followed to record varieditems in the accounting records. There are different sort of operations that are performed by thefirms on different levels. There are some firms that are producing single product or multipleproduct. Accordingly, one need to use appropriate accounting system in order to ensure thatcosting will be done in the systematic way (Macintosh and Quattrone, 2010). Apart from this, insome firms small procedure is followed to produce goods. Contrary to this, in case of some firmslong procedure is followed to manufacture product at the workplace. Thus, it can be said that inthe cases of small process costing and recording of expenses is easy task. Apart from this, in caseof long procedure costing is very different task. Thus, same management accounting systemcannot be prepared by all sort of firms. . There are different sort of management accountingsystems that are used to record expenses in the business. Requirements of these managementaccounting systems are as follows.Cost accounting system:This is systemthat is used by the large size business firms forcomputing cost of the product. Under the cost accounting system all expenses are clubbedtogether to find its overall value. For example, during manufacturing process all variableexpenses elements costing is done separately and value of same is added to find outoverall value of the variable expenses in the business. Similarly, in case of fixed cost allfixed expenses variables values are recorded separately and added to find overall value offixed expenses in the business. It can be said that in cost accounting system separateclassification of all sort of expenses is done and this help managers in identifying theextent to which variable expenses increased at rapid rate in the business. Job order costing:It is a system that is used by most of business firms. This is becausein the job order costing system different product lines that are manufactured are taken into consideration (Ward, 2012). Moreover, there are some firms that manufacture productsaccording to the amount of order received from the clients. Different clients give differentspecifications for product manufacturing. Thus, cost of these different orders will also bedifferent because specification provided by the client are not same. In such kind of casesjob order costing system is used and under this for each product line separate calculation

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