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Study on Management Accounting (MA)

   

Added on  2020-06-06

20 Pages5716 Words41 Views
MANAGEMENTACCOUNTING

INTRODUCTIONAn area of study where financial plans are prepared, implemented, monitored andevaluated within an enterprise is referred as management accounting (MA). This is basicallyused by firms for making several kinds of business decisions of internal environment. Further, itnot focuses on external business environment and not supports to make decisions related to thesame (Nørreklit, 2014). In the present study, Harrods Limited Company is taken intoconsideration. This firm is a small business enterprise and has market presence in retail industryof UK. Throughout the project, systems of MA and methods involved under its reportingprocedure are explained. Apart from this, income statements are formulated for selected firmusing two MA techniques i.e. marginal and absorption. Besides this, planning methods which areconsidered by Harrods Limited in order to control over the budgetary are evaluated in theproject. Moreover, the current assignment focuses on systems of MA which support the retailerfor making effective solutions for several financial issues. TASK 1P1 Explaining MA and its systems along with key requirements, applied by Harrods Limitedwithin businessBusiness ReportFrom: Management accounting OfficerTo: General ManagerHarrods LimitedSubject: Systems of management accountingDate: 24th November 2017IntroductionAt the workplace of each firm, wide range of decisions and judgements are needed to take in1

proper manner. For this, some methods are applied by it which support to determine requiredinformation in adequate manner. The present business report reflects some systems of MA usedby Harrods Limited. Apart from this, essential needs of these all the approaches are alsodescribed under this stated report. SystemsCost accounting: Expenses are one of very essential and sensitive part for every organisationwhich must be lower. If level of total cost is high in the firm then it will create negative impacton the financial performance directly. The cost accounting system is a procedure in order torecord, segregate, analyse, summarise as well as allocate courses of actions for controllingexpenses. It consists of different types like activity based, target, throughput, environmental,standard cost accounting etc. Basic components included under this system are like rawmaterials, labour and overheads (Bruynseels and Cardinaels, 2013). Essential needs of this forHarrods Limited is to determine level of total expenses associated at the workplace. Further, itis supportive for ascertaining cost incurred to produce and sale one unit up to consumers. Forsegregating total expenditures in the firm also this method is used by the retailer. Apart fromthis, for presenting as well as interpreting information for management planning, evaluatingperformance and controlling cost accounting is significant. The company invests in variouscapital projects and expansion also where this stated system of MA is highly supportive. Hence,essential requirement of cost accounting in Harrods Limited is to assess expenditures incurredwithin firm.Stock management: Inventory is also very significant part for the firms which must be lower atthe end of every financial year. The basic issue behind this is that, higher the stock createnegative impact on company for generating revenue. On the basis of this system management ofHarrods Limited able to manage and reduce stock within enterprise. So that, inventory turnoverratio will be improved along with financial performance. Moreover, it majorly deals with timethat when to order the stock and how much. When these both the aspects clearly known by themanagement then it can improve performance. Further, objective of inventory management is toreduce total cost of stock and gain higher returns (Inventory Management, 2013). For thisparticular situation, economic order quantity and just-in-time, theses two tools used. Whilemanaging this aspect valuation is also mandatory to do. To make stock valuation, LIFO, FIFO2

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