Understanding Management Accounting (PDF)
Added on 2020-10-22
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MANAGEMENTACCOUNTING
Table of ContentsINTRODUCTION...........................................................................................................................1LO 1.................................................................................................................................................1Section A: Understanding management accounting Systems ....................................................1Section B: Methods used for Management Accounting Reporting ...........................................6LO2 Marginal and absorption costing method of Excite entertainment ltd................................7LO 3 ..............................................................................................................................................10Planning tool used in Management Accounting ......................................................................10LO 4 Compare the ways in which management accounting will be used for reducing financialproblems....................................................................................................................................13CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................18
INTRODUCTIONManagement accounting is process that is used by the managers to prepared a report onthe basis of gathering information regarding to statistical and financial matters of the company.This management helps the company to take longer and shorter decision for future growth andperspective. To manage the accounts, it provides the stability to use the resource and make actualand estimated budget to invest in any project or can take risk in market to achieve moreprobability in business (Renz, 2016). Management accounting is prepared on the basis ofoperational activities which can in terms of raw material utilized, inventory management, cashflow budget and any other activities which help business to sustain their stability in market.Present report is based on Excite Entertainment Ltd. which is leisure and entertainment industryin UK. It conducts various promotional activities relating to concerts and festivals in UK. So tomange their accounting department various facilities are required to address their effective andsustainability in the market (Messner, 2016).Report will include the difference between management accounting and financialaccounting and its various accounting concept and its different accounting reports. It alsoincludes the costs which are allocated in the business to identify the cost expenditure and incomein the management of business and its befits to be incurred in this system. Further it includes Theplanning tools used in management accounting and its effectiveness in the business. Lastly thereport ends up with different ways to deal with financial problems and other relevant matters inthe organisation. LO 1Section A: Understanding management accounting Systems Excite entertainment Ltd is one of the leading company engaged in promotion of theirconcerts and festivals at different location throughout the United Kingdom. To manage theirbusiness into large scale they have to organise their accounting systems in a systematic andaccurate manner (Management Accounting – Meaning, Advantages and Limitation, 2019). Thus,management accounting is the process to manage the data and information of the companyinternally so that they can take an appropriate decision for the growth of the business. Financialaccounting is that process which manages the finance of the business and transaction recorded1
regarding the cash flows and other income and expenses are also mentioned which is made at theend of the financial year of the company. Difference between management accounting and financial accounting: Factors Management Accounting Financial accounting Format of presentation It focuses on internal operationof the company (Accounting VFinancial Management, 2019).e.g. A proper format is usedregarding managing theiroverall business plan and theirbudgets. It focuses on income andexpenditure and balance sheetof the company which relatedto financial matters of thecompany. E.g. Manage thefinance of the companyregarding the assets andliabilities of the company. Legal Requirements It is not specified by law as noproper norms and standardsare set to follow the rulesregarding operationalactivities. eg. Governmentcan't put pressure to disclosetheir information regardingexpenses incurred. To maintain the financialtransaction of the companythey have to follow properrules as the financial mattersare prepared for the outsidersand even government alsoverify the company workingcondition through this report(Kaplan and Atkinson, 2015).e.g. Company are requiresdisclosing every materialinformation as per theinternation accountingstandards. Areas of courages within theorganisation It manges the products andservices and other operationalactivities to make an authenticaccounting. E.g. All theIt covers the entire structure ofthe organisation by managingtheir financial activities andproviding data to investors,2
department discuss their issuesand expense with theaccountant which shows theirexpenses and income in thecompany. lenders and shareholder to takeand appropriate decision forthe growth of the company. e.git reflects the financialcapability of the company tothe outsider which help themto invest in their company forfuture growth. Types of Data usedIt prefers to take costtransactions and data arerecorded in terms of cost. e.g.cash expense and income areincurred in this accountingpurpose. It incited with financial mattersof the company. e.g. It reflectsthe assets and liabilities of thecompany in systematicmanner. Cost accounting Systems: This system is used by the company to mange their cost andestimated the total expense incurred during the previous year to analyse the profitability of thecompany in the upcoming year. This framework helps them to control the cash flows andmanage their operational activities in a better way. If company wants to grow their business intolarge scale or expand their activities, cost management is the specific factors which manages thecompany stability in the market. They are provided strategies to companies to invest in variousfactors if they have optimum cash flows (Cost Accounting Systems, 2019). To manage the costaccounting, it works by tracking the expense incurred in raw material to the process spend infinished product.Standard cost in cost accounting systems help them to manage the price which aredirectly related to the prices of the products produce and services which they are offering for thedelivery of products (Standard Costing, 2019).Direct cost includes cost related to direct labour,Direct materials and other expense which is beard by manufacturing company directly. Directmaterial are those material which is directly consumed by the suppliers to the manufactures toproduce such products. Direct expenses are such expense which directly charged on respect ofvolumes of the cots incurred by the company. Variable cost are such cost which changes as per3
changes in the prices of the products. It decreases in respect of decrease in prices or cost andsxame increases with increases in cost. Company makes estimated cost before they deal in suchactivities and after assembling all the matter they compare the actual cost with the estimated costwhich company bear at the time of production of products or services. Steps used in standard accounting as firstly to set the standard in which the cost areestimated or predetermined which is based on the targets of the company. e.g. in this the costs isset for labour cost as 8000. Secondly to measure it with actual result as the cost which is set to bemeasured with the actual cost which is disclosed. E.g. the actual cost arise is 8000.aftercomparing both the results i.e. actuals and estimated the results arise the total cost which ismanaged by the company. e.g. the actual labour cost is 14,400. After getting results the actualresults arises between the actuals and estimated cost is the variances. e.g. 6400 hrs. which is theactual hours for efficiency variance. After that calculation, analyse the various from the availabledata which gets the results in terms of cost of the company. After that various other factors whichis to incurred at the time of production or any process is also to be calculated which determinedduring the work committed. Further lastly after gathering all the information calculated thevariance and make report regarding the standard costing of a particular product or managementof the company.Examples:4
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