Management Accounting Principles and Effective Planning Tools

Desklib provides solved assignments and past papers to help students succeed.

Management Accounting Principles
and Effective Planning Tools for
Managing Accounts
1

Table of Contents
Introduction:...............................................................................................................................3
Task 1.........................................................................................................................................4
Part A.........................................................................................................................................4
Part B..........................................................................................................................................6
1..............................................................................................................................................6
2..............................................................................................................................................7
3..............................................................................................................................................8
4..............................................................................................................................................9
5............................................................................................................................................10
Conclusion:..............................................................................................................................11
References:...............................................................................................................................12
2

Introduction:
This report shows the calculation of profits beneath the absorption in addition to marginal
methods approach of the management accounting framework. It also explains the motives for
the difference between the earnings of those strategies with the help of the reconciliation
declaration. The in addition part of this file defines the principle of the management
accounting system and the function of management accounting in the organizations. It
defines the incorporation of the management accounting framework with the administration’s
current framework and offers the benefits of manipulating accounting within the business
enterprise. It also explains the methods and tactics which are used in managing accounting
with an instance showing the inconstant costs included inside the product.
3

Task 1
Part A
Information:
Selling price per unit 67.60
Direct material 10.40
Direct labor 18.20
Variable production overhead 7.80
Standard variable cost 36.40
Fixed production overhead 9,75,000
Budgeted Sales per month 1,60,000
Production 1,90,000
Closing Inventory 30,000
Opening Inventory Nil
(a)
Budgeted Profit as per Marginal Costing:
Particulars Amount
Sales Revenue 1,08,16,000
(-) Marginal Cost of Sales:
Opening stock -
Add: Cost of Production 69,16,000
Less: Closing stock 10,92,000 58,24,000
(-) Fixed Overhead 9,75,000
Profit as per Marginal costing 40,17,000
(b)
Budgeted Profit as per Absorption Costing:
Particulars Amount
Sales Revenue 1,08,16,000
(-) Absorption Cost of Sales:
Opening stock -
4

Add: Cost of Production 78,91,000
Less: Closing stock (2500 * 10) 12,45,947 66,45,053
Profit as per Marginal costing 41,70,947
Working Note:
Absorption rate per unit is calculated as:
Prime cost per unit 29
Variable production overhead per unit 8
Fixed overhead per unit 5
42
Reconciliation Statement:
Profit as per marginal approach
40,17,00
0
Add: Fixed cost element in closing stock
1,53,94
7
Less: Fixed cost element in opening stock -
Profit as per absorption costing
41,70,94
7
5

Part B
1.
Control Accounting Administrative Principles: The Doctrines of administrative accounting
have been installed so that the internal managerial techniques and functions of the
corporation can be served optimally and the enterprise can acquire its desires more
efficaciously and efficaciously (Gitman, et. al., 2015). The principles of management
accounting are defined as under:
Causality: The principle of Causality offers with the reason and response advanced by the
accounting management teams. This principle is beneficial to the control in better functioning
and to perform its obligations in a higher and truthful way. It enables the management to
discover the connection between various features and activities and decide their causes and
effects.
Analogy: The principle of Analogy allows the management in taking better and effective
choices (Gitman, et. al., 2015). The Principe of Causality is helpful to the principle of
analogy by providing the management with the purpose and impact relationships in taking the
decisions more precisely as based on the principle of analogy. In such a manner both the
principles of administrative accounting helps the company in performing its tasks and
functions in a better, effective and efficient manner.
6

2.
A part of management accounting and administration bookkeeping structures: Management
Bookkeeping performs a specific important element inside the association and allows it in
achieving its desires and targets in an effective and efficient way. It is a system evolved for
the inner control teams and the employer so that it could optimally attain its desires and
objectives. The control accounting framework has been designed so that the beneficial
records and facts with are required by means of the employer’s control to make diverse
managerial selections for the easy functioning of the business enterprise might be furnished
(Sunarni, 2013). The facts and statistics furnished with the aid of the control accounting
groups are descriptive in nature and thus facilitates the control team and corporation to take
higher decisions by means of improving the quantity and satisfactory of statistics. This
provides the collectively monetary and non-fiscal type of facts to the enterprise. Reputedly,
manipulate accounting sets the goals and the best plans to obtain the one's desires within the
organizations. It supports in developing the effectiveness and skill ability inside the business
enterprise and for this reason, plays a completely vital function in the affiliation (Sunarni,
2013).
7

3.
The numerous strategies and techniques applied in managing accounting framework are
named as follows:
Balance Scorecard, Cost-Benefit Analysis ,Total quality management (TQM), Standard
costing, Activity-based Costing (ABC), Analysis of Financial Statement (Financial Scrutiny
Process Costing, Job order costing, Transfer Pricing, Cost-Effectiveness Analysis, Cost
Volume Profit (CVP) Analysis, Fund Flow Analysis, Budgeting, Cash Flow Analysis,
Analysis of Financial Statement (Financial Scrutiny), Management Information
System(MIS), etc.
Budgeting: Budgeting is the process of estimation of future earning and expenses. It helps
within the easy functioning of the company (Keong Choong, 2013). It allows the company in
forecasting the need for finance and assets which can be required by way of the organization
in acting its activities with the aid of considering the past values and data of earnings and
expenditure of the enterprise.
An illustrative instance is as follows:
Budgeted Statement:
Sales 150000
(-) Direct material 35000
(-) Direct labor 24000
(-) Variable overhead 12000
(-) Fixed production overhead 45000
Profit 34000
ABC analysis: ABC analysis allows the agency to classify its product in step with its value
and offering safety to it in the required manner. It facilitates in higher management of the
inventory by the organization.
Total excellencesupervision: Normal quality supervision is a sort of control wherein the focal
point is laid extra at the exceptional of the output produced by means of the business
enterprise than the quantity (Keong Choong, 2013). It helps in turning in a better great
product to the customers of the business enterprise and hence results in a growth in call for
the product. Therefore ultimately it helps the business enterprise in its growth process.
8

4.
Control accounting is incorporated inside the workings of organization: Control accounting
allows the organization for setting up its targets and higher control of assets. The several
techniques and systems used in control accounting helps the affiliation in better functioning
and achieving its goals and goals (Belfo, and Trigo, 2013). From the facts and statistics
delivered from the control accounting, the business enterprise and former managerial our
bodies are capable of working correctly and efficaciously. Manage to account additionally
enables the business enterprise in dealing with its cash flows and therefore results in effective
coins management in the company. It decided as in keeping with the statistics acquired from
the manipulated accounting group that how a whole lot and while the funds and resources are
been required by means of the enterprise. Control accounting is not only the handiest
contracts within the input or manufacturing process but it also takes into attention the safety
levels of the prevailing protection with the business enterprise. Manage accounting supplied
very beneficial statistics and information to the organization and its internal management
teams and our bodies which is beneficial for their effective and clean functioning.
Consequently, this thing is quite comprehensible from the discussion made above that
manipulate accounting is in every manner integrated inside the organization (Belfo, and
Trigo, 2013). An organization works on the basis of the statistics and data been supplied from
the management accounting body.
9

5.
Benefits of the workings of Control accounting to the affiliation: There are numerous
advantages that is available to the association because of the functioning of the control
accounting (Kanellou, and Spathis, 2013). The number of the profits of the control
accounting to the commercial enterprise affiliation is defined underneath:
It allows better management of the inventories.
It helps in improving the valuation of the product and at the also consider its utmost quality
standards.
It aids in setting up the goals and objectives of the organizations.
It helps in better control of the cash flow in the organization.
It also provides very useful information and data to the company and other managerial
bodies.
It helps in providing the appropriate plans to achieve those goals and objectives of the
organization (Kanellou, and Spathis, 2013).
It supports forecasting the needs and requirements of the various fiscal and non-fiscal
resources in the association at a particular period of time.
It helps the managerial bodies in taking optimal decisions for the smooth functioning of the
organization. Thus, helps in bettering the process of decision making.
10

Conclusion:
This report has proven the calculation of profits beneath the absorption technique and
marginal technique to control accounting structures. It additionally explains the reasons for
the difference a few of the income of these strategies with the help of the reconciliation
assertion. The, in addition, a part of this file defines the precept of control accounting and the
characteristic of management accounting in the companies. It also explains the techniques
and strategies which may be used in the control accounting with an instance showing the
variable expenses protected inside the product. It defines the amalgamation of the control
accounting device inside the alternate agency’s present framework and provides the blessings
of management accounting in the enterprise.
11

References:
 Belfo, F. and Trigo, A., 2013. Accounting information systems: Tradition and future
directions. Procedia Technology, 9, pp.536-546.
 Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance.
Pearson Higher Education AU.
 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.
 Keong Choong, K., 2013. Understanding the features of performance measurement
system: a literature review. Measuring Business Excellence, 17(4), pp.102-121.
 Ruiz-de-Arbulo-Lopez, P., Fortuny-Santos, J. and Cuatrecasas-Arbós, L., 2013. Lean
manufacturing: costing the value stream. Industrial Management & Data Systems,
113(5), pp.647-668.
 Shcherbakov, O., 2016. Measuring consumer switching costs in the television
industry. The RAND Journal of Economics, 47(2), pp.366-393.
 Sunarni, C.W., 2013. Management accounting practices and the role of management
accountant: Evidence from manufacturing companies throughout Yogyakarta,
Indonesia. Review of Integrative Business and Economics Research, 2(2), p.616.
12