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The Role of Management Accounting in the Organization

   

Added on  2020-06-06

13 Pages3758 Words83 Views
MANAGEMENTACCOUNTING

INTRODUCTIONManagement accounting is the tool which is used by an organisation in order to lower perunit costs in the production units and lead the organisation to have competitive advantage in themarket. However, this can be said that the management accountant is the perfect person who iskeen to apply these management accounting tools. Although, there is a strong need to havecertain tools which are used by the organisation in order to lower the business in an effectivemanner. In every manufacturing business, it has been found that without having proper planning,an organisation cannot attain their set aims and objectives. It is crucial to forecast their futureestimation by using various budgets (Abdel-Kader, 2011). This is because, budget is a keyfinancial plan for making overall predication of upcoming costs and expenses that are going tobe done during an accounting period. It happens to be comprehensive framework of operationsand financial planning for definite period of time. Basically, it is formulated for more than oneyears so appropriate outcomes can be generated in more quick time. It is one of the crucialplanning tools of budgeting that can influence management to operate their business such asplanning, coordination and evaluating desired results. TASK 1P1 Management accounting and its different types of management accounting systems:Management accounting is simply the process of explaining, analysing and summarisingthe financial and non- financial information in a most effective manner. This is the method whichis used by the organisation for making the business sustainable (Merchant, 2012). However, thiscan be said that the management accounting is the report which comprises the entire informationand made available to the internal managers. This is the vast information process whichcomprises financial and non-financial information. However, there are various managementaccounting system which can be used by the organisation to reduce all the extra costs from thecost of production. Some of them are defined hereunder:Inventory Management System: Inventory management is an essential part of amanagement accounting through which a management of a company track, record and maintainthe inventory which is required to manufacture the product. Most of the organisation used thissystem to meet out the customer needs and demands without wasting of a time. 1

The inventory management systems mostly used by the organisation to link the managementinformation system and maximize the productiveness of their running operations.Importance of inventory management system in an organisation is: -Orders of inventory: - IMS help business of an organisation, by giving stock or inventoryorder on a time which do not interrupt the production and sale process. Due todigitalization, the organisation maintain all the records related to the inventory in the EDI(Electronic Data Interchange), this system track, record the sales in the real-time format,ordering automatically when the current stock available equals to the predefinedminimum stock level. EDI allows organisation to prepare the proper amount of inventoryby not maximizing the costs through above inventory or stock ordering.Inventory maintenance: - Inventory management systems allow companies to do accurateor proper orders and maintain the records of different type of raw materials which is usedin making different type of products in computerised way. Most of an organisation usedinventory management system to retain units of stock separately from the similarproducts. In this way management of an organisation determines that which units givesup to the mark result and which units needs to be turn down from the stock due to poorperformance of sales in the market.Movement Analysis: - A primary function of the inventory management systems is themovement or trend analysis that helps the managers to obtain the review for furtherdecisions. These movements are used to evaluate that in which months have a high ormaximize stock level or vice-versa. This analysis makes sure that organisation can takeplace the order of the stock, if the stock management system does not reflect properly inupcoming busy seasons in the market. Job Costing System: It will help Ryanair Ltd in determining the all associated costs withthe product, which the company manufactured (Hilton and Platt, 2013). It helps to evaluate thequality of work done by the labour. The duplication of the efforts will be preventing as thesimilar work will be reflected in this system. A job costing system is used to assign the cost ofmanufacturing to each unit of product while keep monitoring on the expenses. Ryanair Ltd canuse this system when the products are similar to keep track or monitor of expenses of an order.Job costing system process consists of:2

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