The line manager working with Tech (UK) Limited has asked to prepare a report on the functions which are carried out within Management accounting systems. The major sections which will be covered under this report.
- Explaining what is management accounting along with stating essential requirements of management accounting systems.
- Preparation of income statements for Tech (UK) Limited with the use of absorption and marginal costing methods.
- Explaining the use of budgets in planning and controlling purposes within Tech (UK) Limited.
- Determine how Balanced scorecard can be used to deal with financial challenges that are faced by business.
This project module is all about discussing various importance aspects which are related with management accounting system. Every organisation wants to get more reliable outcomes by recording their business transaction into various accounting books. This will be helpful in the way of preparing financial statements in more effective and efficient manner. The main objective of this particular module is to analyse various accounting systems and reporting methods that are use by Tech (UK) limited. Apart from this, use of different costing method in calculating net incomes generated by the company within an accounting period of time can be analyse effectively (Parker, 2012). Merits and demerit of several types of budget are also being discussed to control additional losses that are arises in an organisation. However, all those financial issues that are related with the company can be resolve by using management accounting systems are illustrated under this report.
P1: (I): Management accounting and their essential requirements
In current era, it has been seen that plenty of organisation are getting more reliable growth and stability by using their reliable resources. At the same time, managers of Tech UK want to use best accounting systems which will be effective enough for them to get future aims and objectives in more effective manner (Renz and Herman, 2016). for this purpose, they have decided to analyse their financial performance through appointing a well experiences accountant that would be capable enough to delivery more reliable outcomes in coming period of time.
Management accounting is one of the primary tools which will assist an organisation to record, summaries, communicate and evaluate various financial transactions that are done within an accounting period. While management used to provide all sorts of functions such as planning, organising, controlling and directing the managers to make use of resources in effective manner to get more reliable outcomes in near future.
It is held responsible for providing necessary rules and guidance to an accountant to prepared various financial statements of an organisation.
All the laws and policies that are made by upper level of the departments are needed to be followed in effective manner so that better results can be drawn in effective manner.
Management would not need to take any of permission to from other to make any specific decision.
While, financial managers need to take prior permission of top level management to make any kind of decision related with the reporting.
Importance of management accounting in decision making:
It has been found that any kinds of decision which are essential for the sake of an organisation are needed to be made without any doubt. By management must have all kind of information regarding their benefits and limitations. Some of them are:
- Increase productivity: It is considers that every decision made by the company is always reliable for maximising productivity of the company. It can only be possible in case they are able to use best resources in coming period of time.
- Help in future forecasting: The primary motive of a Tech UK company is to make decision in that ways in which they are able to estimate their cost and expenses for attaining maximum return in coming period of time. All investments are made by looking all financial position and reports of performance that are incur by the company in last couple of year.
Cost accounting system: This seems to be one of the main accounting systems that can aid an organisation to manage and regulate their cost and expenses that are making impacts on overall productivity of Tech UK within an accounting period. Some effective aspects those are related with cost accounting are required to be taken into consideration. Such as
- Normal costing: under this cost, Tech UK need to paid for those products which are produces by paying normal cost to direct material, labour and overheads.
- Actual costing: It is consider more accurate cost which is actually a company is going too incurred for the production of products and services during the time.
- Standard costing: It happens to be more reliable costing method which is based on set standards those are being set by the company during the time of production process.
Inventory management system: It refers to be one of the crucial accounting techniques which is held responsible for Tech UK company to control their ongoing stocks from the businesses (Soin and Collier, 2013). They need to make use of various tools to analyse their inventory position on a regular basis so that chances of mistakes can be reduced.
- FIFO: In this rules, a company need not to follow any kind of rules and norms on effective management of FIFO while reporting of financial information of the company.
- LIFO: This seems to be that stock which is kept for very long period of time with the company can be release first so that extra costs cannot be applicable for the company.
- AVCO: It relies one overall average cost of inventory charged by the company during the time of manufacturing process. It is calculated by considering AVCO period in which it is divided by cost of production kept within the warehouse of the company.
Job costing system: According to this costs which is associated with the production of every individual product or services that are produced during the period of time. It is consider more effective in case all products produces are relatively different from each other. Some crucial costs associated with these cost are mentioned underneath:
- Batch costing: It happens to be that specific costs which are taken into account as cluster during the time goods are produced in huge quantity. It is easier to determine each batch of products because of their number and date.
- Process costing: It one of the most reliable techniques which are associated with allocation of cost units during production of one products by the company.
P2: (B): Financial statements analysis
(I): Different types of reporting methods
It has been found that Tech UK limited is having various rules and regulations that are playing vital role in making effective reports for an organisation through collecting necessary information from various departments. For Tech UK company, types of reports are primary based of decision making for various investors and outside parties. It will lead to making future decisions to make resources in more reliable and accurate manner. It has been analyse that there are several types of accounting reporting methods which are responsible enough in providing crucial information about current position of the company (Christ and Burritt, 2013). some of them are mentioned below:
Performance report: It is known as one of the main report which is taken into account for evaluation of project coordination departments. It includes specific collection and communication of operating projects and proper utilization of resources in order to increase best performance in coming period of time. It is consider for examine actual and standard outcomes that are done in last period.
Account receivable report: This seems to be more valuable reports those are helpful for an organisation to determine lists of unpaid customer detail and their credit memo balances. This will be closely analysed by stakeholders before making any crucial decision of capital investments. By using this particular report, company would be able to get more effective outcomes those are effective responsible to attain accurate time period for recovery of their actual outstanding amount.
Inventory management report: According to this particular report, managers of Tech UK would easily determine their overall stock positions on the basis of opening and closing detail records. There are various techniques which are needed to be implemented to overcome misuse of stocks. It will also assist managers to determine their level of stock position and total ability of warehouse to store inventory (Wickramasinghe and Alawattage, 2012).
Job cost report: This seems to be more concern about account reporting which will be consider to tack and control additional costs which are invested for the production of one unit. By this managers will be able to determine total revenue they are able to earn from each job during the time. It is more simple and reliable report for investors for making their future investments.