Contents Task Task 1............................................. 1........................................................................ ...................................................... ............................................................. .................................. 1 ..................................................... ................................................................................ ...................................................... .......................................... ........................... ................. ..... 1 1.1...................................... 1.1................................................................. ...................................................... ................................................................. ...................................... 1 1.2....................................... 1.2.................................................................. ...................................................... ................................................................. ...................................... 3 1.3....................................... 1.3.................................................................. ...................................................... ................................................................. ...................................... 4 P 1.4....................................... 1.4................................................................... ....................................................... ...................................................... .................................. ....... 5 Task Task 2............................................. 2........................................................................ ...................................................... ............................................................. .................................. 5 ..................................................... ................................................................................ ...................................................... .......................................... ........................... ................. ..... 5 2.1....................................... 2.1.................................................................. ...................................................... ................................................................. ...................................... 5 2.2....................................... 2.2.................................................................. ...................................................... ................................................................. ...................................... 7 2.3....................................... 2.3.................................................................. ...................................................... ................................................................. ...................................... 8 2.4....................................... 2.4.................................................................. ...................................................... ................................................................. ...................................... 9 References..................... References................................................ ...................................................... ...................................................... ................................................ ..................... 17
Introduction The overall aim of this report is to introduce the fundamentals of management accounting which apply to the wider business environment and the organisations which operate within that environment.
The exploration of how management accounting uses financial data to aid planning decisions, and the monitoring and control of finance within organisations. On successful completion of this unit students will be in a position to present financial statements in a workplace context and be able to assist senior colleagues with financial business planning. In addition, we will have the fundamental knowledge and skills to progress onto a higher level of study.
Management accounting helps small business owners and managers monitor the company's performance and are prepared freuently throughout accounting periods as needed. !epending on the type of pro"ect and the time#sensitivity of the information, an owner or manager may reuest reports uarterly, monthly, weekly or even daily.
P1: Explain management accounting and give the essential requirements of different types of management accounting systems.
Management accounting Management accounting is the process of identifying, measuring, analy$ing, interpreting and communicating information for the pursuit of an organi$ation's goals. This branch of accounting is also known as cost accounting. The key difference between management and financial accounting is management accounting information is aimed at helping managers within the organi$ation make decisions, while financial accounting is aimed at providing information to parties outside the organi$ation. The process of preparing management reports and accounts are that provide accurate and timely financial and statistical information reuired by managers to make day#to#day and short#term decisions.
Essential requirements of different types of management accounting systems are: %ccording to the %merican %ccounting %ssociation, accounting is the &process of identifying, measuring and communicating economic information to permit informed "udgments and decisions by users of the information.& There are several types of management accounting systems among them essentially reuired these systems ost accounting system, Inventory management, "ob costing (ystem, )rice optimi$ation all with different accounting elements, ob"ectives and functions. *owever, these basic elements of all accounting systems establish a standardi$ed framework as to the purpose for the information that is identified, measured +analy$ed and communicated.
Cost Accounting ystem % cost accounting system +also called product costing system or costing system is a framework used by firms to estimate the cost of their products for profitability analysis, inventory valuation and cost control. -stimating the accurate cost of products is critical for profitable operations. ost accounting is a type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital euipment. ost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.
Inventory Management
Inventory management is the practice overseeing and controlling of the ordering, storage and use of components that a company uses in the production of the items it sells. Inventory management is also the practice of overseeing and controlling of uantities of finished products for sale. Inventory management is the practice overseeing and controlling of the ordering, storage and use of components that a company uses in the production of the items it sells. Inventory management is also the practice of overseeing and controlling of uantities of finished products for sale. % business's inventory is one of its ma"or assets and represents an investment that is tied up until the item sells.
!o" Costing ystem ob order costing or "ob costing is a system for assigning manufacturing costs to an individual product or batches of products. /enerally, the "ob order costing systemis used only when the products manufactured are sufficiently different from each other. % "ob costing system involves the process of accumulating information about the costs associated with a specific production or service "ob. This information may be reuired in order to submit the cost information to a customer under a contract where costs are reimbursed. The information is also useful for determining the accuracy of a company's estimating system, which should be able to uote prices that allow for a reasonable profit. The information can also be used to assign inventorial costs to manufactured goods. % "ob costing system needs to accumulate the following three types of information0 #irect materials. #irect la"or. $verhead.
Price $ptimi%ation )rice optimi$ation is the use of mathematical analysis by a company to determine how customers will respond to a different price for its products and services through different channels. It is also
used to determine the prices that the company determines will best meet its ob"ectives such as maximi$ing operating profit. 1inding an alternative with the most cost effective or highest achievable performance under the given constraints, by maximi$ing desired factors and minimi$ing undesired ones. In comparison, maximi$ation means trying to attain the highest or maximum result or outcome without regard to cost or expense. )ractice of optimi$ation is restricted by the lack of full information, and the lack of time to evaluate what information is available +see bounded reality for details. In computer simulation +modeling of business problems, optimi$ation is achieved usually by using linear programming techniues of operations research.
P&: Explain different methods used for management accounting reporting.
Managerial, also called management or cost accounting focuses internally on information received through financial accounting. Managerial accounting is used for planning, controlling and decision making. Management accountants rely on normal financial statements including the income statement, balance sheet and cash flow statement, but also use other types of accounting reports in analy$ing company information. These include product cost reports, budgets and performance reports.
Cost 'eports
Managerial accounting calculates costs of items produced. This is done by taking all raw product costs, overhead, labor and any additional costs into consideration. The totals are divided by amounts of products produced. %ll of this information is summari$ed in a cost report. This report allows managers the ability to see the cost prices of goods versus selling prices. It helps managers plan and control profit margins.
(udgets One main element of managerial accounting is the preparation of budgets. 2udgets are typically created by using prior years3 budgets and ad"usting to future pro"ections. % company3s budget lists all sources of revenues and expenses. % company tries to accomplish its goals and ob"ectives while staying within budgeted amounts. Managers often look into new vendors to use as suppliers of raw materials to save money. They also find ways to increase sales while decreasing expenses.
Performance 'eports Managerial accountants use budgets to compare actual expenditures and revenues to budgeted amounts. The differences calculated are analy$ed when determining new budgets and all information regarding these amounts is listed on a performance report. )erformance reports are calculated every year4 however, some companies create them monthly or uarterly. These reports help managers plan for future demand in production as well as cost increases.
$ther 'eports Other reports are also used and prepared by managerial accountants. Order information reports are used to compare orders placed to orders received. These reports indicate backlog information and if the orders placed were enough needed. These reports also summari$e if too many orders of specific products were ordered, therefore forcing the company to sit on unused products not needed at the time. 2usiness situation or opportunity reports are also created, which help managers make decisions regarding current and future business situations.
P): Calculate costs using appropriate techniques of cost analysis to prepare an income statement using marginal and a"sorption costs.
1. Income tatement *sing A"sorption Costing +eneral ports ,ear -or the year ended )th ep &1/
in &555 &6 (ales 0ess2 Cost of +oods old:
in &555 &6 78,955
ost of (ales 2eginning Inventory
:7,855 8,=>8
+as in (eptember 75:8 # 78; of 7<855 closing stock +ood Availa"le -or ale +?ess -nding Inventory +as in (eptember 75:9 # 78; of 78,955
134)56
9@55
closing stock Cost of +oods old +ross Margin +?ess -xpenses0 Total %dmin A (elling -xpenses 8et Profit
11756 1)/&6
9,955 5&6
1. Income tatement *sing Marginal Costing +eneral ports ,ear -or the year ended )th ep &1/
in &555 &6 (ales 0ess2 9aria"le Expenses: 0a2 9aria"le Product Cost: ost of /oods Manufacturing 2eginning Inventory +as in (eptember 75:8 # 78; of 7<855 closing stock +ood Availa"le -or ale +?ess -nding Inventory +as in (eptember 75:9 # 78; of 78,955 closing stock Cost of +oods old 0"2 9aria"le Period Cost:
:7855 8,=>8 13)56
9@55 11756
in &555 &6 78,955
%dministration -xpenses (elling -xpenses otal 9aria"le Expenses Contri"ution Margin 0ess2 -ixed Cost: Bent A Bates (alaries %dvertisements !epreciation otal -ixed Costs 8et Profit
955 <55 1&356 1&5&6
:,:55 7,:55 855 7,555 645 5&6
P;: Explain the advantages and disadvantages of different types of planning tools used for "udgetary control.
What is Budgetary Control? (udgetary control is the process by which budgets are prepared for the future period and are
compared with the actual performance for finding out variances, if any. The comparison of budgeted figures with actual figures will help the management to find out variances and take corrective actions without any delay.
Objectives of Budgetary Control
The main ob"ectives of budgetary control are given below0
1. !efining the ob"ectives of the enterprise. &. )roviding plans for achieving the ob"ectives so defined. ). oordinating the activities of various departments.
;. Operating various departments and cost centers econ omically and efficiently. 6. Increasing the profitability by eliminating waste. /. entrali$ing the control system. 5. orrecting variances from sit standards. 3. 1ixing the responsibility of various individuals in the enterprise.
Advantages of Budgetary Control
2udgetary control has become an important tool of an organi$ation to control costs and to maximi$e profits. (ome of the advantages of budgetary control are0
1. It defines the goals, plans and policies of the enterprise. If there is no definite aim then the
efforts will be wasted in achieving some other aims. &. 2udgetary control fixes targets. -ach and every department is forced to work efficiently to
reach the target. Thus, it is an effective method of controlling the activities of various departments of a business unit. ). It secures better co#ordination among various departments. ;. In case the performance is below expectation, budgetary control helps the management in
finding up the responsibility.
6. It helps in reducing the cost of production by eliminating the wasteful expenditure. /. 2y promoting cost consciousness among the employees, budgetary control brings in
efficiency and economy. 5. 2udgetary control facilitates centrali$ed control with decentrali$ed activity. 3. %s everything is planned and provided in advance, it helps in smooth running of business
enterprise. 7. It tells the management as to where action is reuired for solving problems without delay.
Disadvantages or Limitations of Budgetary Control
The following are the disadvantages of budgetary control0
1. It is really difficult to prepare the budgets accurately under inflationary conditions. &. 2udget involves a heavy expenditure which small business concerns cannot afford.
). 2udgets are prepared for the future period which is always uncertain. In future, conditions
may change which will upset the budgets. Thus, future uncertainties minimi$e the utility of budgetary control system. ;. 2udgetary control is only a management tool. It cannot replace management in decision#
making because it is not a substitute for management. 6. The success of budgetary control depends upon the support of the top management. If there is
lack of support from top management, then this will fail.
P6: Compare ho< organi%ations are adapting management accounting systems to respond to financial pro"lems.
Organi$ations today face the uestion of how to adapt their strategies, business models, and practices to respond to social and environmental challenges while creating financial success and value for their shareholders. The report suggests a number of ways management accountants can guide their organi$ation3s towards sustainable business success0
Identify the environmental and social trends that will impact on the company3s ability to create value over time. ?ink sustainable business challenges to the company3s strategy, business model, performance outlook, and license to operate. -xplain the impact of these sustainability issues in robust business terms, including how and when they could affect the business. !evelop C)Is that support strategic and sustainable goals. %pply management accounting tools and techniues, such as scenario planning of natural resource availability, lifecycle costing, and carbon foot#printing, to help integrate sustainability matters into the decision#making process. )roduce reports that include data on sustainability impacts in order to inform budgeting and pricing decisions, investment appraisals, and strategic planning. !evelop a reporting strategy that integrates sustainability issues to ensure that relevant financial and non#financial information is disclosed. The International Integrated Beporting 1ramework created by the International Integrated Beporting ouncil is one example.
Conclusion
%s this management accounting assignment help us lucidly explained, most of us have already reali$ed by now that when it comes to accounting paper writing, professors do not tolerate any blooper. The reason is accountancy is considered to be the backbone of every business and thus reuires accuracy. )roviding comprehensible financial accounting chart and tables is the most common problem that accounting students experience in assignment writing. This is a reason why
people
need management
accounting
assignment
help and managerial
accounting
homework help. %ccounting is a comprehensive yet methodological discipline that details the financial transactions relating to business or organi$ations. De who are students have to analy$e thousands of transactions that the company may have carried out throughout a certain time span. It becomes very tough for us to accumulate that information and incorporate them.
'eferences
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