The scenario of this report determines that director of finance in TECH (UK) LTD has asked Trainee accountant manager to construct a written report that determine all the financial activities within an appropriate format.
- Describe what is management accounting system as well as its requirement within an organisation.
- Construct an income statement by considering marginal and absorption cost for TECH (UK) LTD.
- Discuss different types of budget by determining its advantages and disadvantages within TECH (UK) LTD.
- Analyze how management accounting could be used to resolve organizational financial issues.
INTRODUCTION
Effective and useful management accounting methods assist the management to make the various plans for the various departments so that they achieve their targets on a prescribed time. There is little bit description about the company which is name as TECH (UK) LTD (Weygandt, Kimmel and Kieso, 2015). This report states the major useful discussion about the management accounting and their important methods which are used to planning and controlling the activities within the organization. With help of the management accounting, the internal management evaluates the performance of the employees and also the working of the departments This company produces the special charger for the mobile and also carries on gadgets for retail outlets in the UNITED KINGDOM. In this report, there is some guidance to the management who faces the complaint from the department managers about the lack of financial information which affects their department decision making process. TECH (UK) LTD. use various management accounting reporting system and methods to improve their departments working process and with the help of these tools and techniques the company can achieve their targets and objectives within the time frame.
TASK 1
P1:
The management accounting covers all important methods by which the departments whether it is production, sales and other departments can formulate the policy, the control of its execution and appreciation of its effectiveness (Lavia López and Hiebl, 2014). The management accounting is the presentation of useful information related to the accounting in such a way as it assist the management in making the plans, polices and other day to day activities of an organization. (Broad and Carmichael).
Essential requirements
It evaluates the performance of the entire organization.
It is also helps the management by providing information for efficient business operations.
It assists the management to communicate the data i.e. reporting within reasonable time for quick and timely action.
It also makes arrangement for internal control by establishing internal audit which covers all the departments.
The office routine is controlled by management accountant.
(I): Key differences in between management accounting and financial accounting
Basis of comparison
Management accounting
Financial accounting
Meaning
It gives relevant and useful information to the managers to prepare the plans and strategies for the business in most effective manner.
Its main focus to prepare the financial statement for the company which provides the financial information to the external parties.
Information type
Monetary and non-monetary type.
Monetary only.
Objective
The main objective of it is to provide relevant and important information to the internal management for making plans and decision making process on various matters of the company.
To records business transactions in an appropriate way and assess the business outcomes and financial position of the company
Scope
Wide scope covers all the important parts of the accounting techniques.
Not wide scope as compared to the management accounting.
User of accounting
Internal management.
Internal as well as external users.
(II): The importance of management accounting information as a decision making tool for the department managers are discussed below:
The management accounting information assists the management in buying decisions, whether the company purchases from the external suppliers or will make it. For making such type of decisions the management collects data and considers all the relevant factors like cost and profits aspects (Modell, 2014).
The management accounting information provides the relevant information to the department managers which they use for preparing the strategies and apply in their business operations.
With the help of management accounting information department managers can measures their performance level.
The company can achieve their targets by utilizing the resources with the help of accurate allocation of resources to the various departments within the company.
Management accounting also helps the department managers to identify and also assess the risk factors within the company which can be reduced by using this information.
(III): Cost accounting systems (Actual, Normal and Standard Costing)
This is the cost accounting device which is utilized by the association with a specific end goal to bring down the expenses of the item. Be that as it may, the primary point of the cost accounting framework is to streamline the product costs and get the upper hand of different opponents. Cost Accounting System is utilized for the most part by the assembling units. This brings down the per unit item costs which eventually improves the deals.
The cost accounting system is an essential part of an organization’s system and refers to the internal cost tracking and allocation systems to track the costs and expenses.
A well-defined cost accounting system helps the TECH (UK) LTD. management in the planning and also controlling of the business activities as well as in investigation profitability of the product (Wickramasinghe and Alawattage, 2012).
Advantages of having a well-defined costing system in an organization which helps the management for making the decisions related to the product, supplying the information for internal control and detailed analysis of costs.
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