Accounting Controls Report: Evaluating Standard Costing for Business

This report provides a critical analysis of accounting controls, particularly focusing on the implications of retaining a standard costing system for Active Sports Life, a company facing reduced sales and profitability. The report begins with an introduction to accounting controls, emphasizing their role in financial reporting and management. It then presents a case study examining the challenges faced by Active Sports Life, including the impact of standardized operations on customer demands and cost minimization. The core of the report evaluates the benefits and limitations of standard costing, such as improved cost control, enhanced data for management decisions, and potential cost savings in record keeping, while also addressing its drawbacks like materiality limits and worker morale issues. Based on this evaluation, the report offers recommendations for Active Sports Life, including updating variance analysis, optimizing raw material utilization, and checking production levels and quality to improve operations. The report concludes by summarizing the key findings and emphasizing the importance of effective standard costing systems and provides references to support the analysis.

ACCOUNTING
CONTROLS

Table of Contents
INTRODUCTION...........................................................................................................................1
Report..........................................................................................................................................1
Critical evaluation of implications of retaining the standard costing system.............................1
Recommendation:.......................................................................................................................3
CONCLUSION ...............................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Management accounting is one of the branch helps the management and organisational
structure. Accounting control is a method which are implemented with in organisation and firms
to achieve core competence. Accounting control maintain discipline and control while preparing
financial statements and accounting reporting. Accounting control system is made of Compliance
policies, laws and legislations regarding financial reporting and financial management. This
enhance the capacity of building and maintain financial structure with in organisation.
This report demonstrate the ability to apply concepts in management accounting control
and performance measurement to various business scenario and case studies. Modern business
issues and problems are critically analysed and investigate (Golden, Skalak and Clayton, 2011).
Report
To Production manager
Active Sports Life
There is a problem in from of production department of Active sport life which
produces female sports wear. Reduction of sale reduce the profitability and sales graph. There is
a statement submitted by operational manger to analyse various factors those are related with
the standard costing principles. It is an estimation of pre analyse cost of performances or an
operation those are associated with products and services which is been deliver to any
individual. These are basically target costs which is derive from historical data analysis. By the
help of this, establishment of cost standards for every activities and their periodic evaluation to
analyse the reasons for a specific variances. Active sports life company need to responds
individually to various customer requirements on regular basis that can help them to determine
exact issues they are getting during the period of time. With the McDonaldisation of firms
operations has led to minimise costs to standardising services. The same system has provided
assistance in raising the demand of different consumers for the products of the referred
organization (Hall, 2012).
Critical evaluation of implications of retaining the standard costing system
In accounting controls, it a tools for making appropriate planning about budgets,
managing and controlling costs of the company to increase its productivity as well as standards.
It is generally, forecasting total required costs of a manufacturing process. It can be used for the
purpose of analysing actual cost in the accounting statements and after that record variances
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those are showing comparison among actual and standard costs. In order to analyze the impact
of standard costing system evaluation of same is done in which limitations and benefits of the
same will be discussed in detail.
Benefits of standard costing:
Improve cost control:
As it has been seen that Active sport life has recorded a reduce sales volume during the
period of time. The primary advantages of standard costing is to make plan for improving cost
those are going to be incurred over production process. This will be done by setting up specific
benchmarking to particular units of manufacturing (Miller, Proctor and Fulton, 2013).
More useful data for management planning and decision making:
Administration development is a appropriate costing standards which is useful in
controlling production costs and actual costs that should be closely related with the set
standards. Active Sport life needs to make budgets in more effective manner and estimate costs
for bidding on a specific jobs. It is more suitable for top management to make crucial decision-
making.
Cost saving in record keeping:
It will require more detail information about record keeping during accounting time
period than real cost system. It needs no special calculation to identify actual units costs during
production process (Advantages and disadvantages of standard costing, 2011).
Helps in enhancing budget:
Through the system of standard costing management of the referred organization can set
appropriate budgets. It became more easy to complete a particular activity in the given limit and
hence overall cost of the production can be kept controlled (Kanellou and Spathis, 2013).
Limitations of standard costing:
There are basically three main limitation that can make huge impacts on a business
using standard costs such as:
 Disputable materiality limits for variances: In some point of time examine materiality
limits can be more controversial. The management of Active sports life has the
responsibility for identifying various constitutes associated with the products.
 Non-reporting of certain variances: It has been seen that workers dis not always
reports all instance or variances. It will directly make huge impacts on the efficiency of
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budgeting. Management is not able to determine every negative exceptions those are
affecting the productivity of the company in coming times.
 Low moral for few workers: According to the management by exception method which
targets on unusual variances. They always use to focus unfavourable variances and does
not consider favourable one which leads to downfall of sales and revenues.
Recommendation:
After making analysis of the mention case of Active sports life which is dealing in female
sports were. They are facing some specific problems about reduction in sales volume as per the
mention statements. The major problems found is of this sort of issues is because of
McDonaldisation in the firms operations that makes them to minimise costs. There are some
useful suggestions that are more helpful for the company to remove internal issues those are
related with the sales capacity.
 Updating the variances in a standard costing system: By using regular monitoring of
variance it can be possible to overcomes various profitability issues.
 Raw material utilisation: It allows managers to see the effectiveness of their provider. It
would be consider unfavourable because of match material orders those are deliver with
the order situated. Check production levels and quality: It is incorporated as all the costs as per the
standard costing per units. It consists of labour and overhead informations. It will control
the operations up to a definite level.
CONCLUSION
From the above project accounting control report, it has been concluded that standard
costing systems needs to be followed in an effective manner so that chances of mistake can be
control. For this purpose, its limitations and benefits can easily be examine in order to make
proper analysis of various reasons of failure in sales volume. On the basis of evaluation some
effective recommendation is also be provided to Active sports life to manage their operations in
more accurate manner.
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REFERENCES
Books and journals:
Golden, T. W., Skalak, S. L. and Clayton, M. M., 2011. A guide to forensic accounting
investigation. John Wiley & Sons.
Miller, K. C., Proctor, T. Y. and Fulton, B., 2013. Teaching managerial responsibilities for
internal controls: Perception gaps between accounting and management professors.
Journal of Accounting Education. 31(1). pp.1-16.
Kanellou, A. and Spathis, C., 2013. Accounting benefits and satisfaction in an ERP environment.
International Journal of Accounting Information Systems. 14(3). pp.209-234.
Hall, J. A., 2012. Accounting information systems. Cengage Learning.
Online
Advantages and disadvantages of standard costing. 2011.[Online]. Available through:
<https://www.businesswritingservices.org/cost-accounting-sp-962412722/968-
advantages-and-disadvantages-of-standard-costing>.
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