Introduction
Management accounting is an important function which are wholly liable to support an organization by providing valuable information regarding financial or non-financial transactions happened on daily basis. As there are various departments in an organisation who are performed with an objective of achieving organisational goals thus they need to provide support from accounting management in terms of providing them relevant data in order to make profitable decision and suitable plans for the betterment of an organisation. The present assignment report is based on Tech (UK) Ltd. which is exist in market to provide special mobile telephone charger and other gadgets for retail outlets in the United Kingdom. The project explains about the comparison between management and financial accounting along with the essential need to management accounting in an organisation. The project also includes various accounting and reporting systems along with advantages and disadvantages of different types of budget. In addition with this, various financial tools to resolve financial issues of company has been also discussed under this report (Abdel-Maksoud, 2011).
Task 1
P1: Management accounting system and its essential requirements in Tech (UK) Ltd.
Management accounting
It is form of management which is liable to provide valuable information to different departments of an organization so as to make suitable decision and plans in order to achieve desired goals and objectives within pre-determined time frame. They are helps responsible to maintain financial reports which give true and fair information about financial position of company to their shareholder and other interest parties.
Importance of management accounting
Management accounting are wholly responsible to record all financial as well as non-financial transaction occurred on daily basis and prepare financial accounts on annual basis so as to identify the actual financial position of company in market. Along with this, there are other benefits as well which are received by Tech (UK) Ltd. such as:
Forecasting cash flows: With the help of different management accounting system, the accounting managers are able to prepare different types of reports which help them in estimating the inflow and outflow of cash within specified period of time. This will provide an opportunity to management to execute business operations without fearing any shortage of funds.
Appraisal of performances: Management accounting set standard for the employees which are compulsorily required to achieve by the them after identifying their roles and responsibilities. Analysing the performance of employees through comparing their actual performance level with standard will bring motivation among employees to work hard and achieve performance goals set by an organisation (Cheng, 2012).
Determination of rate of return: Management accounting recorded all business transactions thus it help company in getting knowledge about the return they received in near future on the amount they invested in particular business projects.
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Comparison between Management and financial accounting
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Management accounting |
Financial accounting |
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It helps in providing appraisal on the basis of performance of different departments. |
It helps in communicating the financial performance of company. |
|
It is more useful to make profitable decision and polices in order to give advantage to company. |
It helps management in making corrective decisions after finding out any deviations in financial reports. |
|
Various forms of budgets are prepared in order to execute future project activities in well manner. |
Only focused on preparing financial budgets to ensure having sufficient amount of financial resources. |
Different types of management accounting systems
Cost accounting system: The aim of using such accounting system by Tech (UK) Ltd. is to identify the actual cost which will required to produce special mobile phone chargers and other gadgets so that the management are able to arrange and manage financial resources from different sources. Such accounting systems has classified into three types which are given as below:
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Actual costing |
Standard costing |
Normal costing |
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It includes overall cost incurred in manufacturing process. Such cost includes material, labour and overhead. |
It refers to setting target of cost under which future business activities are profitability executed. It is done by management with an objective to earn huge profits. |
It refers to the process through which company identifying the amount incurred in future production activities. |
Inventory management system: It refers to such accounting system which are essential for Tech (UK) Ltd. to adopt with a motive of identifying the level inventory which forecast management to place order if they found that available inventory are not enough to meet customer’s needs and requirements. Thus, it helps in allocating resources to various departments after identifying the shortage (Cinquini and Tenucci, 2010). It has different method to valuate inventory which are given as below:
LIFO: It is used to value the cost of good which are acquired last but sold for first.
FIFO: It is used to value the cost of goods which are acquired first and also sold in market at first.
AVCO: Such type of costing method is used to value the cost of goods through finding average of opening and closing inventory.
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