Understanding of Management Accounting System Doc

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Management Accounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Demonstration of understanding of management accounting system.........................................1TASK 2............................................................................................................................................4TASK 3...........................................................................................................................................6Explanation of use of various planning tools of budgetary control............................................6TASK 4............................................................................................................................................9Report showing comparison of Different ways to respond various financial problems.............9CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................13
INTRODUCTIONManagement accounting refers to a set of tools and techniques which helps the managersin their decision making process by providing all the relevant information of the company. Thepresent study includes essential requirements of various types of management accounting systemand description of methods of the management accounting reporting. It also shows thecalculation of marginal and absorption costing methods. The study also includes advantages anddisadvantages of various planning tools of budgetary control and adoption of managementaccounting system to respond various financial problems.TASK 1Demonstration of understanding of management accounting systemManagement accountingManagement accounting can be defined as a process which includes various methods,tools and techniques, which helps the managers in detecting various important informations fortheir decision making process. Reports prepared under management accounting helps the internalusers of the business to determine the position of the organisation.Management accounting is a synonym of cost accounting. It can also be defined as aprocess of determining, analysing, explaining and transferring all the informations using someprofessional skills to the managers of company as to help them in performing their part ofperformance i.e. decision making and development of plans and strategies for the company(Kaplan and Atkinson, 2015). It is totally different from financial accounting, as managementaccounting contains the informations which helps the managers in their decision making process.Whereas, financial management reports helps the outsiders to know the position of the company.Management accounting systemManagement accounting system refers to a system of management which involvesprofessional knowledge and skills of the managerial accountant to form the managerialaccounting report in such a form so that it could transfer all the relevant and importantinformation to the managers in their decision making process.Management accounting system uses all the informations included financial and nonfinancial informations for the purpose of preparing their reports effectively and understandableeven by a non commercial person, So that they can be easily conveyed to the managers.Essential requirements of different types of management accounting systems1
There are many numbers of management accounting system. Each type of accountingsystems are essentially required by the company for having better control over overall businessorganisation. Essential requirements of some management accounting systems are as under:Cost accounting system:This is the system of managerial accounting which helps themanagers in having cost control over the business. With the help of this system,managerial accountant prepares cost reports and enables to determine cost incurred byeach department.Requirement:This system of management accounting is required to calculate the selling price ofeach product by adding set profit in the cost of the product.It helps the managers in detecting the areas containing a\wastage through whichthey can develop effective strategies as to eliminate wastage from each area.It is essentially required in the fir for the purpose of having cost control in thecompany.With the help of this system managers can develop plans to enhance the overallefficiency of company.Inventory management system:this system of management accounting provide thecompany a better control over the movement of inventory of the company within oroutside the business. In includes various methods of inventory valuation like FIFO,LIFO, weighted average method, etc.Requirement:Its is essentially required by those businesses which need to maintain hugenumber of inventory like manufacturing concerns, etc.it provides a complete detail above each movement of the inventories within thecompany.Managers can detect the wastage of insufficiency of inventory easily(Otley,2016). With the help of which they can take effective decision to eliminate suchproblems.Methods of inventory management system also helps managers in detectingminimum requirement of the inventory in the business. It helps them inmaintaining the sufficient amount of inventory within the business.2
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