Financial Problem Solving Using Management Accounting in Jupiter Plc

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Management Accounting
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Contents
Introduction..................................................................................................................................................3
Task 1: Demonstrate an understanding of management accounting systems.......................................4
Introduction....................................................................................................................................................4
Describe management accounting and explain essential requirements of different management accounting
systems...........................................................................................................................................................5
Different methods used for management accounting reporting.....................................................................7
Explain benefits of management accounting systems and their application within organization.................8
Integration of Management accounting into an organisation........................................................................9
Conclusion...................................................................................................................................................10
Task 2..........................................................................................................................................................11
Task 3: Explain the use of planning tools used in Management Accounting.......................................14
Introduction..................................................................................................................................................14
Explain the advantages and disadvantages of different types of planning tools for budgetary control.......15
Analyze the use of different planning tools and their application for preparing & forecasting budgets.....18
Evaluate how planning tools for accounting respond appropriately for solving financial problems to lead
organisations to sustainable success............................................................................................................20
Conclusion...................................................................................................................................................21
Task 4..........................................................................................................................................................22
Introduction..................................................................................................................................................22
Compare ways in which the organization could use Management accounting to respond to financial
problems.......................................................................................................................................................23
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Analyze, how in respond to financial problems, management accounting can lead organizations to
sustainable success.......................................................................................................................................24
Conclusion...................................................................................................................................................25
Conclusion..................................................................................................................................................26
References...................................................................................................................................................27
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Introduction
The report provides the explanation of the management accounting and with this it also
determines that how the management accounting helps the managers of Jupiter Plc in enchanting
the vital decisions. The various types of the management accounting systems with that of reports
are also highlighted. The cost is also being evaluated by preparing the marginal and absorption
costing proceeds statement. The consequences of the preparation tools are also highlighted by
analyzing the merits and demerits of each planning tool. With this the customs from side to side
which the preparation tools can help in resolving the financial difficulty is also determined so
that the sustainability of the association can be achieved. The last part of report compares the
ways in which the management accounting systems as well as the planning tools is adapted by
the organization so that the financial stability can be achieved.
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Task 1: Demonstrate an understanding of management accounting systems
Introduction
This section provides the brief description of management accounting and also highlights the
methods which are being used for the management accounting reporting in Jupiter Plc. Further,
the light has also been thrown on the ways in which the management accounting systems and
reporting are incorporated within business.
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Describe management accounting and explain essential requirements of different
management accounting systems.
Management accounting refers to the submission of specialized information and skill for the
training of secretarial preparation which helps the management in determination of policies and
development of the operations (Myrelid, 2013). It includes necessary methods and concepts that
are essential for efficient planning of business actions and controlling by evaluation and
interpretation of performances. It will help the managers of Jupiter Plc in identifying, measuring
and analyzing the financial performance so as to achieve organizational goals.
Roles and Principles of Management accounting
Managerial accounting covers all aspects of accounting intended for informing the
administration of industry operations. It includes trend analysis, budget, sales forecasting and
numerous additional on daily, weekly or monthly basis (Myrelid, 2013).
 Cost accounting: Cost accounting includes methods for evaluating the price of goods,
projects and processes, for the purpose of providing accurate costs on financial statements,
and supporting the management in taking decisions (Myrelid, 2013).
 Price optimising: The utilisation of arithmetic procedure by an organisation to find out the
reaction of buyers to different prices of the products and services is referred to as price
optimising.
 Job costing: It is an estimated procedure which is specific in order. It is used in
circumstances where each job is dissimilar and is performed according to the requirement of
customers.
 Inventory management systems: Inventory management system refers to the method
supervising and domineering the briefing, storage space and the usage of the parts of the
organisation that are used in the industrialized process (Wiedemann, 2014).
Various management accounting systems:
The management accounting systems that can be used in Jupiter Plc so as to enhance the
productivity are as follows:
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Inventory Management Systems:
The inventory management is the system which is being used by the managers of Jupiter Plc in
order to track the accurate level of inventory within organization (Wiedemann, 2014). With this
it is also being used for the various other purposes such as for preparing the ordering bill,
reordering the material and for the identification of product (Myrelid, 2013). Basically there are
two techniques which are used for the management of inventory such as FIFO which means that
the oldest sock will be sold at the initial stage rather than the new one. LIFO is another method
which operates with the principle that the item which is purchased at last will be the first to sell
out (Wiedemann, 2014).
Job Costing Systems:
In job costing systems are being used by the Jupiter Plc so that the appropriate cost of labor used
in a particular job can be determined. Through this technique the expenses as well as the
revenues are being tracked which in turn helps in evaluating the value of product (Wiedemann,
2014).
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Different methods used for management accounting reporting.
Managerial accounting reports are the tools which help in understanding the actual position of
organization. Managerial coverage includes compilation of information that gives functional in
sequence about the operations (Kolakowski, 2018). Managerial accounting intelligence are
prepared in a way that makes sense for commerce.
 Financial Reports
The financial reports are prepared by Jupiter Plc so that the financial operations of the
organization can easily be evaluated by the auditors of organization. Profit and loss statement
shows the overall spending and earning. Balance sheet summarizes how a great deal the
corporation earns and the debt it owes. It is important in order for managerial office since it
shows the details how much the profit and sufferers have fluctuated (Wiedemann, 2014).
 Item Cost Reports
The managerial accounting shows how much spending has been made in each category which is
necessary to understand the true profitability of the business (Kolakowski, 2018). Item cost
report breaks down all the expenses on the basis of their contribution to different types of
earnings. This is very useful information in Jupiter Plc for determining the best aspect of the
business with increased profitability.
 Sales Reports
Sales reports illustrate the sources of business revenue; accent those which are most and slightest
successful. This is very useful for the management accounting. Sales reports highlight the
business activities earning most income (Kolakowski, 2018).
 Pro Forma Cash Flow
Pro Forma Cash Flow shows the wealth that is predictable to come in, and how much spending is
anticipated during short and medium term accounting periods. It gives a monthly summary of the
incoming and outgoing cash (Kolakowski, 2018).
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Explain benefits of management accounting systems and their application within
organization.
The importance of administration office systems in an organisation is as follows:
1. Helps in forecasting the future:
Forecasting helps in the process of judgment making. Through management accounting the
diversity of various markets can easily be understood and this in turn will help the higher
authority of Jupiter plc in making the critical decisions in accordance with the future trends
(Kasravi and Ghasemi, 2017).
2. Forecasting cash flows:
It is very essential for the business to predict the cash flows and impact of cash flow on business.
Forecasting of cash flow will enable the organization to evaluate revenue as well expenses so
that the areas through which the cash can be controlled can easily be determined by Jupiter Plc.
Management accounting involves designing budgets and trend charts, which are used by the
managers to decide allocation of money and other resources for the generation of projected
revenue (Wiedemann, 2014).
3. Helps in Make-or-buy decisions:
Cost and production accessibility are the deciding factors in making this alternative (Kasravi and
Ghasemi, 2017). Management accounting helps in developing insights which helps in decision
making at both operational and strategic levels that is it cheaper to procure material from a third
party or to manufacture them.
4. Analysing the rate of return:
Before investing in any project, the organisation needs to analyze the rate of return so that the
most profitable investment can be selected from the various opportunities (Kasravi and Ghasemi,
2017).
5. Helps in understanding performance variances:
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There are differences between what was suspected and what is achieved. For this purpose
management accounting helps the management in building positive variances and manages
negative ones, by the use of analytical techniques.
Integration of Management accounting into an organisation
Management accounting is a classification of managerial organization whose accomplishment is
elastic depending on specific approaches. Every administration accountant can use an exact
practice that best suites the organisation, however the casual assortment of approaches enhances
the chances of discrepancy (Klychova, et. al., 2014). There are various methods of integration of
management accounting in an organisation which includes Active-based costing (ABC),
Resources Consumption Accounting (RCA), Lean accounting and others. These methods are in
general referred to as methodologies. Supervision accounting methodologies are based on scope,
effect and applications.
Activity-based costing (ABC) method: It means that the sustained purpose of technologies in
the developed business increases the output and decreases straight expenses like labor and outlay
of raw materials (Klychova, et. al., 2014).
Resources Consumption Accounting (RCA) integrates two or additional of the techniques and
ensures that the system of conclusion making has measured numerous options for determining
the sustainability and profitability of the business (Klychova, et. al., 2014).
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Conclusion
It can be concluded from this part that the management accounting is one of the crucial factor
which is used in the organization so that the organizational goals can easily be achieved. This has
also helped Jupiter Plc in analyzing the cost and revenues so that the appropriate decisions
regarding future growth can be taken.
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Task 2
Calculation as per Marginal Costing:
Budgeted income statement of the year according to marginal
costing
Particulars Amount Amount
Sales Revenue 800000
Marginal Cost of sales:
Opening stock Nil
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