UNIT 5- Management Accounting Assignment - B.L. Holding Limited
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Added on 2020-11-12
UNIT 5- Management Accounting Assignment - B.L. Holding Limited
Added on 2020-11-12
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UNIT 5- MANAGEMENTACCOUNTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3LO1..................................................................................................................................................3P1 Explaining management accounting and essential requirements of different types ofmanagement accounting systems................................................................................................3P2 Explaining different methods applicable for management account reporting.......................5LO2..................................................................................................................................................6P3 Calculating cost with application of appropriate techniques of cost analysis for preparingincome statement as per marginal and absorption costs.............................................................6LO3................................................................................................................................................13P4 Explaining advantages and disadvantage of different types of planning tool used forpurpose of budgetary control....................................................................................................13LO4................................................................................................................................................16P5 Comparing how management accounting tools help in responding financial problems.....16CONCLUSION..............................................................................................................................18REFERENCES..............................................................................................................................19
INTRODUCTIONManagement accounting is provision of financial data along with advice to organizationfor purpose of business development. The present report would demonstrate understanding ofmanagement accounting systems with its essential requirements and types. Simultaneously, it hasshown each aspect associated to B.L. Holding Limited which was incorporated in year 1856 andbased in London, United Kingdoms It will articulate about different methods for managementaccounting reporting. Similarly, it will calculate cost with adoption of cost analysis techniques toprepare income statement with use of marginal and absorption costing. This report would stateapplication of planning tools in management accounting with merits and demerits of varioustypes of planning used for budgetary control. Furthermore, it will reflect comparison that howbusiness is adopting management accounting system to respond financial problems such as keyperformance indicators, balance score cards and benchmarking on basis of lancer Holding andB.L. Holdings pvt Ltd in United Kingdom.LO1P1 Explaining management accounting and essential requirements of different types ofmanagement accounting systemsManagement accounting is referred as process to prepare management reports andaccounts which provide accurate and timely statistical and financial information required throughmanagers for undertaking regular and short term decisions. It is presentation of accountinginformation for formulating policies must be adopted through management and for assistingregular activities. It helps management for performing functions such as planning, organising,directing and controlling. With context to planning, it formulates policies through forecastsrelated to production, inflow and outflow of cash etc. in broad activity range (Cooper, Ezzameland Qu, 2017). While preparing budgets or to ascertain particular cost centre, this deliversresources to every centre along with delegating the respective responsibilities for ensuringappropriate utilisation. Moreover, the actual work performed could be compared throughstandards for enabling management to control performance in effective format. This helpsmanagement of B.L. Holdings Ltd to communicate financial information related to enterprise asto undertake decisions and to evaluate performance of business, management requirement andinformation. Lastly, this is highly essential for interpreting the financial statements.3
Management and financial accounting both differs in various aspects which are stated asfinancial accounting classifies, records, summarizes and analyses financial affairs of organizationwhereas management accounting helps management for undertaking effective businessdecisions. On basis of application, financial accounting is formed to reflect forth accuracy andtrue picture of financial affairs and management accounting helps management to implymeaningful strategize and steps. On basis of scope it is pervasive in financial and broad scope inmanagement accounting. There is presence of dependency on financial accounting whereasfinancial accounting is independent. Generally, financial accounting is used for potentialstakeholders and investors and management accounting is used for management. With context torules and regulations, financial accounting must be prepared according to GAAP or IFRS andmanagement accounting does not have any specific format to follow any rules (FinancialAccounting vs Management Accounting, 2019). Lastly, financial accounting information isverifiable and in management accounting information reflected is predictive but could beverifiable on immediate aspect.Difference between management and financial accounting is as follows:Basis of differenceFinancial accountingManagement accountingCompulsionsNecessary Not compulsory ObjectiveThe aim of such accounting isfurnish monetary informationto outsiders.It provides assistance to highermanagement team in decisionmaking.Time periodPrepared and published at theend of an accounting year (usually one) According to the needs andrequirements of managersmanagerial reports areprepared. UsersBoth internal (management,employees) and external(shareholders, suppliers etc)stakeholders In this, reports are used andevaluated by managers for thepurpose of decision making.Format specificationIn this, specified format isfollowed by accountant whilepreparing final accounts.Managerial reports areprepared for decision making.So, no specific format isfollowed by the internal
department. From assessment, it has identified that information served through managementaccounting must be relevant, reliable and up to date. Moreover, team of higher managementtakes decision pertaining to internal operations and functions by taking into account managerialreports.The types of management accounting are stated below:Cost accounting system: This is framework which is used through organization forestimating cost of product with context of inventory valuation, profitability analysis along withcost control. It is replicated as method of accounting with aim to capture production cost toassess input cost at each step of production with fixed cost such as depreciation on capitalequipment. It is first measure and tracks each cost at individual aspect whereas input to actualoutcome to aid management with objective to measure financial performance and cost comprisesto assets and liabilities of business of B.L. Holdings Ltd. This is very essential tool on basis ofmanagement in budgeting or for setting programs to cost control and increase net margins ofbusiness in the future (Hiebl, 2018). It is categorised in two types which is job order and processcosting.Job order costing: Usually organization use this method to assign cost to specific unit orproduct as every job would be assigned as per cost which should be used in appropriateformat.Process costing: It is referred as accumulation of cost via every process, operations anddepartments. Further, work performance of every unit is uniform and standardised forcontinual mass production with assembly operation and engagement as well.Inventory management system:This system tracks goods through wholesale supply chain with portion of businessoperation. There is consideration of retail, warehouse till shipping of stock movement with theirparts. This is replicated as method to oversee and control the ordering, storage and application ofevery component implied in corporation related to production of goods it sells. This is mix ofbarcode scanner, barcode printers and mobile devices and desktop software to streamlinemanagement of inventory such as consumable, suppliers, goods and stock. The business'sinventory is replicated as key assets and accounts with context of investment and tied through5
product selling (Nitzl, 2018). It is set of process which is required for utilising to oversee andorganising materials or goods in facility. It could be performed by two methods:LIFO: This is last in first out which is applicable to place accounting value to inventoryand operates with assumption that purchase inventory as last item is placed at first to sell.FIFO: With context to this inventory management system, first and oldest stock isimplied first and inventory generated on recent basis is used until stock in warehouse isshipped.P2 Explaining different methods applicable for management account reportingManagerial accounting reports are considered as tool to understand numbers behind thatwhat is going in business. It lays emphasis on inside information gained by financial accountingand this reports are applicable to plan, regulate, decision making and for purpose of measuringperformance. In this context, they are generated on continuous basis throughout bookkeeping andaccounting period as per requirements. Due to multiple critical decisions along with dependencyon authenticity of reports must carefully designed through experts who adopts at bookkeeping.Moreover, managers of B.L. Holdings Ltd analyse these particular reports for highlighting thecertain patterns and transformed in useful information for business. The explanation for thesereports are stated below:Budget reports: These budget managerial accounting reports are highly critical tomeasure performance of business and generated through department wise for large organizationand as whole for small business perspective. In order to this, every organization sets budget forpurpose to understand grand scheme of business as it is estimate on basis of experience althoughgreat budget caters unforeseen circumstances which might arise (Saeidi and Othman, 2017).Each source of earnings and expenditures are listed by company and it tries to attain its goals andmission to stay within amount is budgeted. These managerial accounting reports are related tobudgeting which guide managers for offering better incentives to employees, cut cost and torenegotiate terms with suppliers and vendors. Thus, budget report is highly critical to anybusiness.Accounts receivable ageing reports: As if business is highly reliable to extend creditthen these reports are very important. Breaking down the left balances of client into specificduration which allows managers to determine defaulters and to extract issues in process ofcollection in organization. In case, there are many defaulters then company might be in need to
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