This assessment will cover following questions:
- Corus Company is a global steel manufacturing company in UK. Explain management accounting systems.
- Define range of management accounting techniques used by Corus Company
- Explain the use of planning tools used in management accounting.
Management accounting refers to setting and preparing the financial report so that accurate information is to be provided to company regarding taking risk in growing business perspective. Usually this report is prepared by the manger regarding examining day to day activities which is undertaking in business to make planning for longer term growth (Malina, 2018). Present report is based upon the Corus UK Ltd. Which is acquired by Tata Group in April 2007. Corus company mainly deal in steel related products. This report will include the matter relating to understanding the concept of management accounting and also its techniques which they are dealing in. It also includes the factors relating to planning tool which is used in managing the accounting. Lastly it carries with the ways which is used in resolving the financial problems.
P1 & M1 Meaning of Management accounting
Management accounting is the internal process which the managers adapted to evaluated and examined the day to day operation to make the financial report (Hiebl, 2018). Through these aspects, it helps company to deal in accurate planning and also initiate with business strategies to overcome from the risk which is associated in future perspective. It carries various types of management accounting as:
- Inventory management systems:In this management is to be undertaken regarding managing the inventories regarding inflow and outflow of goods or also the stock which is kept in warehousing (Hopper and Bui, 2016). In respect of Corus, this is one of the necessary management which is to be implemented by the managers regarding examining the raw material or the quantity of the goods which is needed to manage the goods in better way.
- Cost accounting systems:Management is to be required managing the cost in respect of estimating the actual cost incurred with the actual cost spend (Cost Accounting Systems,2019).
- Job costing systems:In these aspects, management of accounting is initiated regarding estimating the actual expenses incurred from the job (Scapens, 2018). As the salaries or also necessities which is to be provided to employees is to be managed or recorded in the accounting.
- Pricing systems:Pricing reflects the economic factors which raise through buying or selling of goods or services. Thus, managers had to initiate this procedure regarding managing the pricing system in better way, so that it helps companies to take right decisions.
Benefits of management accounting systems:
It is necessary the management accounting is to be needed in business so that they can examine the overall performance of the company through making the accurate budgets or also manage the inventories in right manner (Hyndman, 2016). Thus, it carries various benefits in Corus company regarding managing the accounting as:
- It helps in increasing the efficiency in business, as through getting accurate information from the report, it helps company to take right decision.
- It maximizes the profits in the business through dealing in getting accurate record regarding budgeting or inventory management (Hasyim and Jabid, 2019).
- Through these aspects, it helps in controlling the cash flows of the company.
P2 Different methods used for managing accounting reporting
In context of managing accounting, various methods are used in respect of managing accounting as:
- Budgets:It is mainly undertaken regarding helping company to plan for future activities. In this the comparison is to be undertaken regarding comparing company past performances with the actual one happening in business (Yahaya, 2019). Budget reflects the tool which is prepared by coordinating with all the department needs and requirement which they need in future to attain the task. In relation to Corus, it is useful in examining the revenues and expense which the company incurred in the future.
- Cost scheduling:In this report is to be prepared which reflect the cost incurred in respect of producing the goods or dealing in raw materials or equipment used to produce such goods. Cost is also used in providing salaries to the staff and other employees which are engaged with the business (Clemente, 2019). This is necessary regarding managing the cost, as it helps company to prepare for future risk which may arises regarding dealing in any activity or expanding the business in different countries. In case of Corus, this is useful regarding carrying adequate planning to reduce the cost expenses through dealing in multiple direction to save cost of the business.
- Variances in performance:In this the performances report is to be undertaken regarding examining the actual performances with the set performances. As in this the performances of the employees is judged through setting the accurate goal within the particular time limit (Shahzadi and et.al., 2018). In this, variances arises regarding facing complexity or difficulty in attaining the task which resulting in facing losses in undertaking particular activity by the employees. In respect of Corus, they deal in manufacturing steel products which resulting in requiring performance report regarding examining the capacity of individual employees to attain the task within the set time period (Grossi and et.al., 2019).
- Marginal costing:It refers to the variances in the actual cost which reflect the changes in the actual cost through adding more unit in the budgets of the actual production cost Dierynck and Labro, 2018). It helps the Corus company to add more cost in their budgets regarding adding more production benefits in their units. The disadvantages of this tool is that it is more complex in nature and requires more management to manage the cost as it carries for shorter time duration.
Thus, theses are the various methods which is used in managing accounting reporting in better perspective for Corus company.
Through the adequate planning regarding managing the accounting, report play the effective role as it carries with proper planning, regulating the business polices and also adapting the changes to make the effective changes. As company report are mainly adapted by the stakeholder such as customer, government or other shareholder to whom company gets investment to attain business for long term growth. Thus, the positive aspects in respect of managing the accounting system through reports is that it helps Corus to take right decision and also plan future activities to retain business in market for longer way.
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P3 Cost calculations using costing techniques.
It is a costing technique used for calculating the cost of product. This technique only consider variable cost associated with product. Fixed costs are considered as periodical costs under this technique therefore it is not added to cost of product.
Absorption costing is the techniques which considers both variable and fixed cost in the production of units. It includes variable and fixed cost for calculating the cost of product. As it includes both cost it is considered more accurate and reliable (Järvenpää and Länsiluoto, 2016).
M2 Use of MA approaches and development of financial reporting documents.
MA techniques helps company in formulating documents related to financial reports. It enable management in keeping the cost within control. Marginal & absorption techniques states cost of product and the profits available to company.
D2 Producing financial reports accurately applying and interpreting data.
Financial reports are used with the motive of analysing the net results from a business. Objective of management accounting reports is to utilise effectively the financial reports for efficient performance of activities. The income states differ as both the techniques follow separate concepts for fixed and variable costs.
P4 Advantages and disadvantage of planning tools used in budgetary control.
Budgets are defined as spending plans of enterprise. The budgets provide direction to the company to follow for achieving its desired goals & objectives. Budgets helps company to keep its expenditures within control. This prevents company from overspending and effective allocation of resources. There are various planning tools in budgetary control.
Operating budgets can be defined as forecast for expenses and revenues which are expected for specified periods. Operating budgets are formulated typically by management before the year begins and shows the budgeted activity levels for the period budget is supported by various subsidiary schedules containing more detailed information. Company may prepare separately budgets for COGS, payroll and the inventory. Variances are calculated by comparing the actual results with budgeted level (Van der Stede, 2017). Operating budgets are required to be updated regularly for business efficiency. These budgets are prepared by the top level management.
- It helps the business in managing its current expenditures for the year and to plan for its future expenditures within the budgeted level.
- Forecasting about the costs and expenditures help in effective allocation of resources to different activities.
- Operational budget provides flexibility in preparing the budgets and for spendings over unanticipated costs
- Extensive research is required for long term budgets and updates are to be made for the efficiency.
- Proper allocation of resources is a difficult task in operating budget.
All the details about the cash inflow and outflow are detailed in cash budget for specified period. Cash budgets are prepared for allocating the funds to all the activities and operation of business. Cash budget ensures that sufficient funds are available with company for carrying out the operations. Companies may prepare short term or long term cash budget as per its requirement (Alawattage and et.al., 2017). Cash budget keeps the costs within control, so that company can achieve its desired goals and objectives.
- It helps the company to prepared for the financial fluctuations that can occur over time.
- Cash budget helps to arrange for sufficient funds if enough funds are not available within the company.
- It enables company to allocate funds to different departments and activities.
- Financial forecasts helps the company to keep its expenditures within control.
- Cash budget is time consuming and may prove accurate many of times.
- Cash budgets helps in preventing excessive spendings.
- Inaccuracy in cash budgets may cause the company to go out of cash in between the activities.
Flexible budget refers to budget that can be adjusted with the change in activity or volume. Flexible budgets are more useful and sophisticated than the static budget. It is flexible as it include variable cost of units. The budget helps the management to make adjustments without changing the whole budget and other expenses. Flexible budgets are useful in measuring the efficiency of management.
- Flexible budget helps company in preparing budgets for seasonal expenses.
- It helps in comparing the actual and budgeted outputs and costs (Oboh and Ajibolade, 2017).
- It is very useful tool in adverse situations as instant changes can be made to it.
- It helps the company to prepare for irregular earnings for the year.
- Flexible budgets are confusing as amendments may be made by the management at times.
- The forecasts for this budgets requires detailed planning so that variances are least.
M3 Use of different planning tools and application for preparing budgets & forecasts
Planning tools helps the management in keeping the cost of product within control and to maintain profitability by reducing the variances to minimum. Management of the company can evaluate the performance by comparing the actual and budgeted outcomes. Company through these budgets makes proper allocation of resources among activities and departments.
P5 Comparing the organisations using the management accounting systems.
Financial issues are problems affecting the business performance and are required to be resolved using appropriate planning tools. There are various tools that can be used by enterprise for resolving the financial