Deverell Smith Ltd: Management Accounting Systems and Reporting

Verified

Added on 2024/06/28

AI Summary

This report provides a detailed analysis of management accounting principles and their application within an organizational context, using Deverell Smith Ltd. as a case study. It describes various management accounting systems, including inventory management, cost accounting, and job costing, and evaluates their benefits. The report also explains different management accounting reports, such as budget reports, cost accounting reports, and inventory reports, highlighting their importance to management decision-making. Furthermore, it compares marginal costing and absorption costing methods, including the preparation of income statements using both approaches. The significance of planning tools for budgetary control is examined, along with their advantages and disadvantages, and the report analyzes how organizations adapt management accounting systems to address financial challenges, ultimately evaluating how these tools can contribute to sustainable success. Desklib offers a wide array of study resources, including past papers and solved assignments, to support students in their academic endeavors.

Management Accounting
1

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

Contents
Introduction.................................................................................................................................................3
TASK 1....................................................................................................................................................... 4
Introduction............................................................................................................................................. 4
P1) Describe management accounting and explain essential requirements of different management
accounting systems...................................................................................................................................... 5
P2) Explain different management accounting reports used by the organization with the importance of
such reports to management....................................................................................................................7
M1) Evaluate benefits of management accounting systems and their application in context of business.
................................................................................................................................................................. 9
D1) Evaluate how management accounting systems and management accounting reporting are
integrated in organization...................................................................................................................... 10
Conclusion............................................................................................................................................. 11
TASK 2 (M2, D2)..................................................................................................................................... 12
A) 1. Explain marginal costing and absorption costing methods.....................................................12
2. Prepare income statement using absorption costing methods and marginal costing methods............12
B) Using Break Even formulae calculate the following:........................................................................14
TASK 3 (LO3 and LO4)............................................................................................................................ 16
Introduction........................................................................................................................................... 16
A. Explain advantages and disadvantages of different planning tools for budgetary control by
providing example of atleast two........................................................................................................... 17
2

B. Show the application of planning tools for preparing, forecasting and analyzing budgets.............19
C. Compare how organizations are adapting the management accounting system to respond to
financial problem................................................................................................................................... 21
D. Analyze how your management accounting techniques could respond to financial problems and
lead the organization to sustainable success.......................................................................................... 23
E. Evaluate how planning tools can solve the financial problem and lead the organization to
sustainable success................................................................................................................................ 24
Conclusion............................................................................................................................................. 25
Conclusion................................................................................................................................................. 26
References.................................................................................................................................................27
3

Introduction
The report depicts that how the management accounting plays a crucial role in decision making
of the organization and with this it is also explained that how the management accounting
information is used within organization. The various types of management accounting systems
are also explained and with this the reports which are prepared by the managers of the
organization are also highlighted. The cost is also calculated so that using various cost
techniques by preparing statements using marginal and absorption income statement. The
significance of the planning tools are also determined which are used for the budgetary control
and the positive as well as the negative points of these tools are also highlighted. The ways
through which the management accounting can help in getting rid of the financial problem so
that the sustainability can be attained are also highlighted. The example of Deverell Smith Ltd. is
taken so that all the parameters can be practically explained.
4

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

TASK 1
Introduction
This section gives details with the brief explanation about the management accounting and with
this the various benefits of these systems systems are also highlighted. Further, the various
reports which are used and with this how the management accounting systems and reporting are
integrated has also been thrown light on.
5

P1) Describe management accounting and explain essential requirements of different
management accounting systems.
Management accounting investigates about scarcity of the financial resources so that the proper
allocation can be done and the improvement in the Deverell Smith Ltd. can be made (Li, et. al.,
2014). The management accounting or the managerial accounting can be determined as the
process of evaluating, analyzing and recording the financial transactions so that the managers of
Deverell Smith Ltd. can take strategic decisions. And the operations can also be controlled. It
also helps the managers to predict the future by evolving the short and long term policies. It also
enables to determine the financial resources of the organization such as labor, material and other
requirements so that the success in the market place can be made (Li, et. al., 2014). The financial
accounting is different from the managerial accounting as the management accounting provides
the information for the internal users but the financial accounting gives information for external
users.
Types of management accounting systems:
The management accounting systems are used by the managers for taking the crucial decisions
so as to increase the profitability within the organization.
Inventory Management Systems:
The inventory management is the software that is used by Deverell Smith Ltd. so as to track the
level of inventory. It is basically used by the manufacturing industries so that the order bill, and
the work order can be prepared and the documents which are related to inventory. The main
features of the inventory management are to track the assets, reorder, and management of service
and product identification (Li, et. al., 2014). These are the ways which will help in maintaing the
accuracy in the management of inventory so that the data can easily be tracked when needed.
The LIFO and FIFO are the two types of the inventory management. LIFO it explains that the
material which is lastly arrived will be sold first. FIFO says that the stock which is first entered
will; be first out of the stock so that the wastage as well as risk can be reduced.
Cost Accounting Systems:
6

The cost accounting systems help in controlling the cost so that the revenues can be increased
and the overall profitability of Deverell Smith Ltd. can be enhanced. There are various types of
cost accounting such as the standard costing, normal costing and actual costing (Li, et. al., 2014).
The actual costing determines what the actual cost of product is such as in Deverell Smith Ltd.
the actual cost is the cost of recruitment and the executive services. The standard costing is the
cost which is set so as to identify the variances in case of Deverell Smith Ltd. the standard cost
can be the cost of raw materials. The normal costing is used to value the manufacturing cost of
goods based upon the manufacturing overhead rate (Money Matters, 2018).
Job Costing Systems:
It helps in assigning the particular cost to the particular type of product so that the evaluation can
be made easily for the value of products. In case of Deverell Smith Ltd. the particular cost will
be assigned to each of the recruiter.
7

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

P2) Explain different management accounting reports used by the organization with the
importance of such reports to management.
The reports are prepared by the top level managers of the organization so that through which the
various auditors can easily measure the financial performance and the position of organization
and thus it may help in decision making process (Kolakowski, 2018). The various management
reports are prepared by Deverell Smith Ltd. for crucial decisions such as:
Image: Types of reports
Source: By Author, 2018
Budget reports: The budgetary reports are prepared so that the proper allocation of the
resources can be done to all the activities of the organization and the wastage of resources can be
reduced (Kolakowski, 2018). These reports also helps the managers in evaluating variances by
comparing the actual results with the budgeted one and the areas where the improvements are
required can be made. In Deverell Smith Ltd. the budget are prepared so that the performance of
each department as well as the employees can be evaluated.
Cost Accounting reports: The cost accounting reports show the clear picture about the expenses
and revenues of the firm. This will help Deverell Smith Ltd. in analyzing all the factors through
which the cost can be controlled and revenues can be maximized (Kolakowski, 2018). The cost
8
Budget Reports
Inventory Reports
Cost Accounting Reports

of product per unit is determined so that the value of goods can be mentioned in the financial
statements of organization.
Inventory reports: The inventory report keeps the record of comprehensive account of stock
and the information related to the supply of various items. These reports in Deverell Smith Ltd.
will help in evaluating the place of all the items and the stock available in store (Kolakowski,
2018).
Importance of reports:
Helps in Profitable operations: The reports provide the proper direction for the achieving the
goals which motivates employees to perform better and thus helps in enhancing the operations of
the organization which in turn helps in achieving the overall objectives of organization (Money
Matters, 2018).
Important for decision making: These reports are used by the managers of Deverell Smith Ltd.
to take the crucial decisions related to minimizing the cost and maximizing the profits
(Kolakowski, 2018). This will also help the top level managers of Deverell Smith Ltd. to make
improvements by evaluating the variances.
Forecasting Cash Flow: The budget reports are prepared which shows the analysis of future
cost and the revenues which may impact business through current trend charts so this helps the
Deverell Smith Ltd. in deciding the ways to allocate the money so that the higher revenue growth
can be generated (Kolakowski, 2018).
9

M1) Evaluate benefits of management accounting systems and their application in context
of business.
The use of the management accounting systems in Deverell Smith Ltd. provides various benefits
to the organization which are as follows:
Increases the bar of profitability: The budgetary control and the capital budgeting is included
in the management accounting which will enable Deverell Smith Ltd. in cutting down the
expenditures of the organization while performing operations (Money Matters, 2018). The
reduction in the prices of the products will increase the revenue of the organization and in turn
the area of profit will also be increased.
Simplifies the decision making: The management accounting systems help in preparation of
various reports which helps in taking important decisions easily. The key facts of the Deverell
Smith Ltd. are stated in the reports which assists the managers to manage the activities related to
cost and so that the appropriate decisions can be taken (Money Matters, 2018).
Transparency in Cost: The transparency in the cost of Deverell Smith Ltd. is maintained as the
actions taken by the organization can be evaluated that they are the budgeted actions and thus the
evaluation can be done so analyze the areas where the cost can be controlled and the profits can
be maximized to achieve sustainable success.
Future prediction from past: The future trends that may impact the organization can be
predicted by taking actions according to the past trends of profits in the market (Money Matters,
2018). This will enable Deverell Smith Ltd. to evaluate and set long term goals.
10

Paraphrase This Document

Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser

D1) Evaluate how management accounting systems and management accounting reporting
are integrated in organization.
Both are integrated as the management accounting systems helps to predict the future by
analyzing the future and past trends while the management accounting reporting helps in
management of all the activities within the organization (White, 2015). With this evaluation it
also assists in the analysis of the financial performance of the organization as it analyzes all the
cost and the expenses of Deverell Smith Ltd. The transparency of cost is also maintained through
the areas of the increased cost can be evaluated and accordingly the actions can be made to
improve those activities (White, 2015).
11

Conclusion
It can be summarized that the management accounting is essential in the organization as a result
that the overall goals of Deverell Smith Ltd. can be achieved by minimizing the cost and
maximizing the revenues. The various reports are prepared which will enable in taking the
appropriate decisions.
12