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Report On Small Scale Entity - Management Structures & Accounting
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Added on 2020-02-05
Report On Small Scale Entity - Management Structures & Accounting
Added on 2020-02-05
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MANAGEMENTACCOUNTING1
Table of ContentsIntroduction..........................................................................................................................................3TASK 1.................................................................................................................................................3P1 Explain management accounting and give the essential requirements of different types of management accounting systems......................................................................................................3P2Explain different methods used for management accounting reporting......................................5TASK 2.................................................................................................................................................8P3 Calculate costs using appropriate techniques of cost analysis to prepare an income statement of marginal and absorption costing...................................................................................................8TASK 3...............................................................................................................................................11P4Explain the advantages and disadvantages of different types of planning tools.......................11P5 Compare how organisations adapt management accounting systems to respond to financial problems.........................................................................................................................................13Conclusion..........................................................................................................................................13References..........................................................................................................................................142
INTRODUCTIONIn today's time, management continue increasing with enhancement of number of interfacesof complexities in the business which give birth. Small scale entity has been selected for this projectreport whose management structures are defined in the report. This project is all about explainingmanagement accounting system and reports. The cost statements under absorption and marginalcosting along with types of planning and various tools and techniques used in eliminating financialcrisis occurred in the firm.TASK 1P1 Different types of management accounting systemPrimary concern of management is to reduce its cost as revenue can be generated byreducing all kinds of cost incurred in the business. Management accounting is a terminology underwhich various streams are included such as accounting, finance and management in order tostrengthen the overall business of an individual. Tools and techniques covered in the managementaccounting will be used by an entity owner in uplifting the existing business conditions of the firm.The primary responsibility of the firm is to get rid of all the current problems faced by an entity inhandling complexity in the business (Renz, 2016). The quality of decisions gets improved whenmanagement accounting principles are followed by an individual in improving their business.Qualified chartered accountants verified as per ICMA will maintain the books of accounts of anentity.In the current case scenario, small scale entity has chosen who have 50 employees but poorperformance of the business. The small number of employees is not strong enough in order to facethe external difficulties of the business (Otley and Emmanuel, 2013). Adoption of managementaccounting principles will be helpful for all business users in amending their business structure inorder to relieve all their stress. The structure of an entity will be redefine using this kind ofapproach under which tasks and duties are delegated to individuals in accomplishing all the desiredaims and targets of the business. There are different kinds of management accounting systems to beused by an entity in improving their business is given as below:Cost accounting systems- It is that kind of systems which involves techniques helps in determiningthe cost incurred in the business (Otley and Emmanuel, 2013). Cost is regarded as major factor ofevery business in which needs to be evaluated in order to eliminate from the business. The costaccounting systems has categorised into two categories such as process and job order costing.Job order costing- The overall business segments and products are separately treated as single job3
order whose cost and selling price are determined. The cost is separately determined in order tofacilitate its variety of users of the business. It is ideally used by that organisation which deals inwide number of products. The manufacturing organisation uses job costing system to generate orderreceipt of the customised products. The job order will includes each and every detail related to theproducts such as colour, size, price discounts offered on a particular product.JOB ORDER OF YZ COMPANYJob No.3696Item: Manufacturing platesCustomer: XYQuantity: 2000 unitsDate required: March 24, 2017DateDirect MaterialsDirect labourOverheadApril 15£5000April 16£1200£250Total£5000£1200£250Total Cots£6450Cost per unit£6450Process costing- Another important concept used in cost accounting system which describes amethod of collecting manufacturing costs incurred in an entity (Hoque, Covaleski and Gooneratne,2015). In manufacturing certain units the production cost is used in order to process the number ofunits produces by an entity. It is suitable technique in that case which involves production of massunits in order to grab large number of customers into their pocket. This assesses the overall processof production incurred in the business in order to ascertain the overall cost involved in singleprocess of making of products or services.Inventory management systems- It is another important system of management accounting systemused in an entity in order to improve their business practices (Tucker and Parker, 2014). Theprimary aim of this particular approach is to regain all the energy of the business by extracting theworst inventories out of the inventories required in making of products. The management of all theinventories is essential that helps in achieving the desired gaols and the objectives framed by anentity as they held responsible for completing the tasks and duties. The stock can be purchase indifferent forms such as FIFO, LIFO and just in time order. Just in time is preferred by the ownerunder which inventories are purchased just to meet out the order as this helps in saving thewarehouse cost to be incurred in the firm (Hoque, Covaleski and Gooneratne, 2015). Several waysused by an entity owner for inventory management just to procure the inventory for the bettermentof the business. The software can be used to refill the inventory when it reaches the particular to4
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