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UNIT 5 MANAGEMENT ACCOUNTING [pic]

   

Added on  2020-02-17

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UNIT 5 MANAGEMENTACCOUNTING

Illustration IndexIllustration 1: Income statement on absorption costing basis..........................................................9

Index of TablesTable 1: Income statement on the basis of marginal costing...........................................................9

INTRODUCTIONManagement accounting is a discipline of accounts which reflects professional side, just theinternal one and has a greater significance in decision making. Management accounting helpsin making decisions related with business after planning so that a systematic procedure ofidentifying, measuring, analysing, interpreting and communicating can be followed. In abusiness enterprise, there are different times when management must take decisions regardingdaily business as well as some essential works. For this purpose, they must revise and go through various reports that can impact theirdecisions (Kaplan and Atkinson, 2015). Hence, management accounting report presents theaccurate information to the management so that they can come to a decision. The presentreport demonstrates significance of management accounting in business environment. Forthis purpose, R.L. Maynard company of UK has been chosen as a referred organisation. Thisis a construction based company whose strength is 24 workers. The report containsinformation about different types of income statements that a company uses along with itsbenefits and drawbacks. In addition to this, various issues related to management accountingwill be addressed.LO 1: Demonstrate an understanding of management accounting systems P1 Explain management accounting and give the essential requirements of different typesof management accounting systemsThe management accounting system is a tool which helps the organisation to keep an eye onvarious types of costs and expenses that can be incurred in the production of goods andservices (Macintosh and Quattrone, 2010). In context of R.L. Maynard, the organisation hasseveral expenses which are necessary to be tracked so that they can have better informationregarding different costs. This will also be helpful in keeping a track of business so that theycan manage their day to day works the management accounting has the more importance infield of business as it includes various branches of finance as well as management because ofwhich business enterprises can have an overall control on activities of production.

This contains wide and accurate information which makes it easier for owner of business tohave a control over business activities and take effective decisions as well. In context of citedorganisation, the top management which consists of various managers, owners and board ofdirectors need reports on management accounting so that they can have an overview ofdifferent types of expenses and revenues so that they can reach to a proper decision(Baldvinsdottir, Mitchell and Nørreklit, 2010). The management accounting report containsdifferent amounts discussion like cash available, sales revenues, purchases, etc. which helpsin making decisions related to the organisation. The cost accounting and the financialaccounting reports are used as a base to make the management accounting reports.In addition to above the importance of management accounting, attempts to study those costswhich are related to the production of products and services. As per this, there are somesystems which are used under management accounting systems. These systems are as follows:Traditional cost accounting: This is the conventional method of accounting whichhad a lot of different procedures as compared to modern accounting system. Thissystem is generally adopted by companies who are engaged in production sectors. Forkeeping tracks related to costs, management uses job order process or costingmethods. These methods are mainly based on determining allocation of costs (Lukkaand Modell, 2010). About said firm, these allocations include different costs likedirect materials, direct labour and manufacturing expenses. The job orders are mainlyused by companies for large size projects so that wide number of expenses anddifferent costs related to each factor can be traced back easily. Apart from this, theprocess costing refers to various costs that are related with procedures that areundertaken to produce similar goods and services. The costs involved in this processare difficult to identify as they are run in a continuous way. Lean accounting: The Lean accounting is a modern concept in managementaccounting which presents a very wider view in terms of considering costs. It isevident that different accounting systems which are used in management system onlyconsiders various costs and their calculations (Garrison and et.al., 2010). While Leanaccounting presents a different view where after taking into consideration about costs,it also presents ways that can help in minimising costs which can lead to eliminatingwastages from production. In stated business entity, the finance department givesfinancial information to the top management so that they can take decisions by

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