(Doc) Unit 5 Management Accounting - Assignment
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Added on 2021-02-19
(Doc) Unit 5 Management Accounting - Assignment
Added on 2021-02-19
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Unit 5. ManagementAccounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1 Management accounting and essential requirements of management accounting systems...1M1 benefits of management Accounting systems......................................................................3D1 Integration of management accounting system and report within organisational process....4P2 Different methods of management accounting reports .........................................................4TASK 2............................................................................................................................................6P3 Usage of the techniques of cost analysis to prepare income statement by using marginaland absorption costing.................................................................................................................6M2 Applying range of management accounting techniques.......................................................8D2 Interpretation of above data...................................................................................................8TASK 3............................................................................................................................................9P4 Advantages of different planning tools used for budgetary control......................................9M3 Analyse the use of different planning tools and their application for preparing andforecasting budgets ..................................................................................................................10TASK 4..........................................................................................................................................10P5 Adoption of management accounting systems to respond financial problems ...................10M4 Contribution of management accounting in sustainable success of the organisation whileresponding financial problems..................................................................................................12D3 Application of planning tools to respond financial issue along with attainment ofsustainable success ...................................................................................................................13CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTIONManagement accounting is the concept which includes analysis of business activities ofthe internal management that facilitate in better decision making. This will includes the usage ofprovisions of accounting to ascertain the financial and statistical information which further aideffective controlling of business functions which results in accomplishment of organisationalobjectives within stipulated period of time (Seal and Mattimoe, 2014). These will also know ascost accounting which aid to analyse business costs that further aid in preparation of financialreports that depicts the functioning of internal departments of the organisations. This will allowsthe internal stakeholders of the organisations to perfectly align their interests with the proceduresof the organisation to bring efficiency in their own working. Oshodi Plc is a manufacturingcompany which have specialisation in production of JOJO fruit juice across all age brackets. Themain objective behind the preparation of this report is to provide information to the internalstakeholders of the organisation about the relation and functioning of the internal departments forbetter decision making.This report covers the concept of management accounting and the essential requirementof different management accounting systems, different methods of management accountingreports and usage of the appropriate techniques of cost analysis in preparation of incomestatement using marginal and absorption costing. Also, analyse the advantages and disadvantagesof planning tools for budgetary control and adaptation of the management accounting systems torespond financial problems is covered in the report. TASK 1P1 Management accounting and essential requirements of management accounting systemsIntroduction: Management accounting system includes the preparation of different kindof accounts which help to ascertain the information about the performance of internaldepartments. The different systems which are prepared named as Cost accounting, job costingetc. Oshodi is manufacturing organisation and operate their operations in respect of thepreparation of JOJO fruit juice. Through effective adoption of the management accounting andits systems, organisation wants to improve their decision-making to get predetermined results.This part covers concept of management accounting and requirement of different type of systems(Al-Mawali, Zainuddin and Nasir Kader Ali, 2012).1
Management Accounting: This is the process of formulating accounts that provideaccurate statistical and financial information which is required by the mangers of theorganisation to made day to decisions (Management Accounting, 2018). It is totally different from financial accounting where annual reports are prepared for theuse of external stakeholders. This will only include about the preparation of monthly and weeklyaccounts for internal stakeholders of the organisation. The different kind of systems provides theinformation in respect of the various terms like sales revenue generated, cash, B/R, B/P etc. Management accounting systems: These are the systems which are prepared by themanagement accountant to grab the information about the actual working ability of the differentdepartments of the organisations. The different type of systems which are generally formulatedby the accountant of the organisation includes cost accounting, job costing, price optimisation,inventory management systems etc. The basic function which is further performing by themanagement of the organisation through analysis of the information gathered from the differentaccounts includes planning, organising, controlling and decision-making. All these accountshave their own different aspect and advantage towards the organisation. The different kind ofbenefits which are gathered by the management of Oshodi from consideration of these systems isabout effective decision-making, cost cutting, building higher profit margin etc. The essentialrequirement of the different management accounting systems to Oshodi is understood from thebelow description:-Cost accounting system: It is an accounting method which is used by Oshodi toascertain the amount of total cost of production with the help of the analysis of input costs ofeach step which indulge in production process. The same is used by Oshodi to analyse the costbehind the preparation of JOJO fruit juice. In this regard, accountant first analyses and recordthese costs individually and then after compare the input results with actual to ascertain thefinancial performance (Chiu, Teoh and Tian, 2012). This will help an organisation get theinformation about the contribution of the fruit juice in profit generation of company.Inventory management system: This is the important account which is used by theOshodi to analyse and track the level of inventory, orders, sales and deliveries. The informationgathered from the usage of this accounting system is further used by the organisation informulation of work order, bill of materials and other production documents which indulge in theprocess of the preparation of JOJO fruit juice. This is used by the management of Oshodi is2
about tracking of the entire supply chain that covers everything from production to retail. Thiswill further aid in better decision making about the availability of the raw material andcontinuous production of JOJO fruit juice. The different kind of methods which can be used inthe process of effective inventory calculation is about LIFO, FIFO and AVCO. At present, EOQis used by the organisation to analyse the time period about when they have to make re-order ofthe raw material to continue their production activities without any infringements (DRURY,2013). Price optimisation system: This system is used by the accountant of the Oshodi toanalyse the behaviour of consumers to different price of their offerings. At present, this system isused to ascertain the impact over the sales of JOJO fruit juice when management increase ordecrease the price of the same. This will help the management of the organisation to determinethe proper retail value of their fruit juice which they have to ask from their consumers in marketwhich results in ascertainment of maximum output in terms of sales revenue. Job costing system: This system is used by the manufacturing organisation which hasdifferent production activities and jobs. This will used normally use by the accountants toanalyse and track the cost and revenue generated by particular job. This will further aid inascertainment of the amount of profit that can be gathered from the effective performance of thejob. The same is used by the Oshodi in case of their JOJO fruit juice to ascertain the cost andrevenue from its production. Here, different job numbers are assigned to individual items ofexpenses and revenues. This will provides an opportunity to the management to keep track overthe expenses and take necessary steps to improve their profit margin through reduction in cost. Summary: It is concluded from this part that management accounting is importantconcept which help in building effective relation in between the different departments of theorganisation. Also, different accounting systems provides the information about the differentaspects like expenses, sales and revenue which further improves the decision-making of themanagement to improve profitability (Eierle and Schultze, 2013). M1 benefits of management Accounting systemsType of management accounting systemBenefitsCost accounting systemIt is linked with the controlling cost under3
standards. This system helps Oshodi tomeasure the efficiency of different processes aswell as assist to bring further improvements. Inventory management systemThis system is associated with tracking therecord of availability of materials inwarehouses. In aboveOshodi company, it ishelping in improving accuracy of its inventoryorder. As well as it is beneficial in effectiveproduction of JOJO fruit juicePrice optimisation systemIt is related with the setting prices on aneffective level so that customers can afford. Inthe above company, it ishelping to ascertainthe behaviour of consumers based on differentprices of JOJO fruit juice. Along with, it ishelping to Oshodi to maximise its operatingprofit with adoption of best prices Job costing systemThis is related to assigning cost to each jobseparately. In theOshodi company, it ishelping in estimation of all type of costs inprocess of preparation of JOJO fruit juice. Aswell as it is also helping in reduction ofduplication of efforts in Oshodi (Granlund andLukka, 2017).D1 Integration of management accounting system and report within organisational processType of reporting & Systems Integration with organisational process Inventory management report: This reportis prepared on the basis of the integration ofthe information gathered from system.Integration of report in organisational process isunderstood from the point that it help Oshodi tomanage raw materials of JOJO fruit juice andestimation of required level of purchase ordersPerformance report: This report isThe integration of this report in process is4
prepared on the basis of the informationascertained from contribution of differentsystems. This will includes about the actualperformance of different departments ofOshodiascertain from the fact that this will help ingetting specialisation in production of JOJO fruitjuice as all the deviations and misalliances areremoved with the contribution of this report. P2 Different methods of management accounting reports Introduction: Management accounting report is a document which includes theinformation about departmental functioning analysed from systems. This part covers aboutdifferent of accounting reports and their importance to an organisation. Management Accounting Report: Accounting reports are important in nature andprovide clear insight that how business is performing (Ittner, 2014.Lääts and Haldma, 2012). Inthe present report, different reports are formulated by the management of the Oshodi to bringinterrelation in between functioning of the departments of the organisation to grab desiredresults. These reports are prepared every quarter which provide holistic view of businessfinances. The different kind of reports which are prepared includes Inventory managementreport, Accounts receivable report etc. All these reports have their own different importancetowards an organisation. The basic kind of benefits that can be seen over Oshodi is about highamount of productivity, profitability etc. Inventory management report: This is the report which includes the information aboutinventories. The main objective of this report is about bringing balance between inventoryinvestment and customer service. This report provides the information to Oshodi is about thelevel of raw materials they have in proper preparation of JOJO fruit juice. The main benefit ofthis report to the organisation is about the maintaining the level of stock and raw material andhave control over the unnecessary costs and expenses which ultimate results in improvement ofprofit margin (Morden, 2016). Accounts receivable report: It is the report which provides the information about unpaidcustomer services invoices and unused credit memos by date range. This report is used by theOshodi to analyse the overdue payment of their different consumers or debtors. Further, thisreport also help to look the credit period given to them and compare how much time is passedfrom which the payment is due from such consumers or debtors. The importance of this report is5
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