Management Acounting

TASK 1

P1

Management accounting exists as a procedure and system that is essential for making effective decisions related to the internal management of an organization. In the present scenario, the management of KEF Ltd. is focused on formulating effective plans for the future by generating internal policies and strategies for the organization. This approach makes it easier for management to sustain the organization over the long term. For those seeking help with their studies, incorporating a do my assignment service can provide valuable support in understanding the complexities of management accounting. Some types of management accounting systems are as follows:

• Cost accounting system- The cost accounting system works as an effective system that is beneficial to analyse the cost of products and services developed by organisation. In order to analyse it properly variable as well as fixed cost both are included by cost accounting system. So the actual cost is identified and evaluated by management.
• Price optimization system- This system is used by organisation for developing an effective framework that is used to determine and decide the effective price of the products and services. It result this is easy for KEF to decide balanced price that is beneficial for customers and organisation at a similar level (Van der Meer-Kooistra and Vosselman, 2012).
• Job costing system- Job costing system is one of the most effective method by which KEF analysis the total cost by considering the prices of each unit on individual basis. As there are various products are offered by KEF so with job costing system management analysis the profits from each unit that is developed by management.
• Inventory management system- Inventory is the most essential part for organisation as it is sold by management in the market. With the development of job costing system it is easy for management to enhance the work area in possible manner through reducing the cost of storage and warehouses (Renz, 2016). Moreover, it also helps to track the actual state of their inventory that is present in the warehouses of organization.

Importance of management accounting system

• Price setting- It is one of the most important system that is used by market and production department to contribute effective price system in management. So the demand of products will be fulfilled in future as well as present time period.
• Budget- This is another method which is used to analyse the importance of management accounting. With an effective budget it is for management to control the expenses of organisation.
• Unregulated reporting- Management accounting is the another method which is used it make effective reports through generating operations, finance etc. are adopted by management to summaries all essential aspect for organisation.

Difference between financial accounting and management accounting

P2

All the reports related with monetary and financial aspect must be managed by the organisation for performing their work effectively in market. This determines with accurate reporting system it is easy for management to make effective decision and strategies. Some effective methods of management reporting are as follow:

Performance report- In simple terms performance report is used to measure the actual performance of the organisation from all perspectives. Within the context of KEF Ltd. it is used by management to monitor the performance of organisation and its employee’s in appropriate manner. So the actual performance from each activity is managed (Shah, Malik and Malik, 2011).

Budget report- Most of the functions of an organisation are performed by management under the budget activity. This determines with the proper budget it is easy for organisation to complete there in proper manner at minimum cost. So the strategies related with future perspective are formulated in proper manner.

Account receivable aging report- The sale of organisational products is done on cash basis and credit basis. This all transactions are recorded by the management. So in order to acknowledge all credit sales management of KEF utilize the account receivable method. This result the organisation is able to collect all necessary funds from the market.

Cost managerial accounting report- The cost report are generated with the motive of developing the framework that enhances profit for organisation from various perspective. To utilise cost managerial report accurately. KEF analyzes all the cost for analyzing the expenses of organisation due to which price of products are decided with profit margin with them.

M1

Merits of cost accounting system

• This is beneficial for making an accurate estimation about the price of product and service that is offered by organisation.
• It is used to find the actual cause due to which cost of the products is increases in the market.

Merits of price optimisation system

• With price optimisation system the products and money are exchanged at mutual consent between customers and parties.
• This system helps the management to decide the price of products for all segments.

Merits of inventory management system

• It helps an organisation to analyse the actual track of their products.
• This is beneficial to save the cost and time of their inventory.

D1

Management accounting and reporting works as a crucial part for organisation as they are related with each other. It governs that if the management wants to develop an accurate report then it is essential for management to utilise all the important data.

For example- with the implement of inventory management system the actual requirement of raw-material is evaluated by the corporations (Suomala and Lyly-Yrjänäinen, 2012).

TASK 2

P3

Cost- In the present scenario, all the needs of the functions and operations are performed by the organisation for earning high amount of profits. Along with this all the functions are performed by management through paying some amount. Like the purchase of raw-materials and to convert into finished goods and then sale them into market to earn sufficient profits from them.

Absorption costing- It is a method that is used by organisation to calculate the cost on all perspective which represent the cost by undertaking fixed and variable cost. This determines that it works as the full costing method for KEF.

Marginal costing- The marginal costing method consider the variable cost for organisation by determining the cost for the organisation through determining all units. This results all cost related with period and the time for each unit is included.

Statement of profit or loss using Absorption costing for June

When the production is 22000 units and Closing inventory is 2000 units

M2

Management accounting techniques are essential part for organisation which is used to generate effective reports as well as statement. In the present scenario, it is essential for organisation to develop all financial documents such as cash and fund flow statement, profit & loss account etc. as it helps the management to generate financial reports. It represents the existing conditions of the KEF to its stakeholders (Ward, 2012).

D2

Financial reports reflects various business activity in a proper manner by which it is easy for management to understand all financial aspects of organisation. Moreover, with the implement of financial statements it is easy to check actual position of organisation. As all the reports and accounting are linked with each other due to which its business activities are performed in effective manner. Like with the report it is easy for management to represent their financial performance to its stakeholders. 

TASK 3

P4

Budgetary control serves as an effective technique used to shape the financial performance of an organization by analyzing past budgets. The primary purpose of utilizing budgetary control is to monitor and manage the financial transactions of a business. It highlights the need to manage various tasks effectively, as it controls and oversees functions that increase the likelihood of generating higher profits. For those looking to refine their understanding or present their findings clearly, using a paraphrasing tool can help reframe complex ideas while maintaining accuracy. Some tools of budgetary control are as follows

Contingency planning- Contingency planning works as an effective tool that is used to manage the risk related with unexpected situations that arises during the operations of a firm. This tool is used by management of KEF to overcome from various issues that are related with workplace and environment of organisation. Further, this tool also helps the management to formulate pre-planned plans and strategies to deal with unfavourable situation in the market.

Advantages

• With the already plans it is easy for management to reduce the risk and probability of loss in the industry.
• This is used to generate corrective action against the problems that boost profits for organisation.

Dis-advantage

• It is complex to predict the future perspective and contingency plans are formulated for upcoming period. So it is hard to understand future contingencies.
• The cost of contingency plans is too high due to which managers face challenges to deal with situation.

Flexible budgeting- This is one of the essential tool that helps to make changes in the monetary plans as per the needs of organisation. Along with this it also leads management to establish and formulate the budget according to the market conditions (Otley and Emmanuel, 2013). The main motive to develop this plans is to make plans and changes according to the revenue and profits of organisation.

Advantages

• Flexible budget generate coordination among all activities of organisation through considering needs of all departments.
• These budgets generate proper results through considering the range of all activities effectively.

Dis-advantages

• This is difficult to generate flexible budgets for long term as market conditions are very dynamic.
• It is also complex for manager to understand and develop period for longer period.

Forecasting tool- It helps the management to predict the future through analysing the existing and past budgets for the organisation. The main motive to utilise this tool is used to predict the outcome as per the future plans. In context of KEF Ltd. forecasting tool utilise by management to generate better financial statements and ratio for the organisation.

Advantages

• This is used by management to enhance customer’s loyalty by offering them discount and new offers.
• Forecasting tool helps the manager to understand market in appropriate manner.

Dis-advantages

• It is complex for managers of KEF to predict right plans and design them as per future needs.

All the information collected by managers relates with different departments so it is complex to coordinate all the work for uncertain future (Nitzl, 2016).

M3

Budgetary controls describe the transparent and clear image of the organisation through providing better tools and techniques that enhances financial performance for the upcoming periods of the organisation. Further, to implement this effectively management analysis the past budget, data and information that is recorded in organisation. For contingency plan forecasting tool and flexible budget are essential part for management. Forecasting tool also utilise by the organisation to provide better guidance among the employee’s and managers of organisation.

TASK 4

P5

Financial problems- The major impact of the financial problem on KEF is that it impacts on organisation to achieve their goals and objectives. Along with this the profitability is also affected due to changes in the operations and functions of organisation. Similarly, on the other side it is mandatory for KEF Ltd. to generate strategies through which it is easy for them to tackle the problems that is reducing profits of organisation. Some financial problems that are faced by KEF are mention as follow:

• Cash flow problem- This problem enhances when the organisation is not able to pay the cash against their liabilities. Cash is one of crucial factor for management as it required to performs and manage all types of functions. KEF faces the cash related problem because of the high expenditure which is done to enhance the business size of organisation. Along with this incentive, bonus, advertising and other many more expenses impact on organisational profitability.
• Risk management- This is one of a another factor that is essential to analyse by the management. It governs that there are various challenges are faced by management due to which their performance is impacted. On other side, there are various challenges such as uncertain dynamic environmental condition, creditors and debtors forfeiture etc. are some of the issue by which management is get impacted (Hartmann, Perego and Young, 2013). Therefore, it is essential to monitor all the risk perspective of organisation.
• Working capital- This refers to the amount that is available in the organisation and beneficial to manage daily operations of KEF. With the good and effective financial governance, it is easy for management to generate future needs which results to enhance the accuracy of financial statement of organisation.

Financial governance- This system define the way by which organisation defines the way through which manager, monitor and control to generate financial information. With the proper financial governance it is easy for KEF management to overcome form the challenges and to make better decisions for the future. In the last, top authority enhances performance of organisation in minimum time period.

KPI - Key performance indicator leads the organisation to compare their performance in effective and efficient manner with the other companies. This refers that there are various task are performed by management in order to achieve there long term as well as short term goals. With the effective KPI it is easy for organisation to focus on the whole process of the organisation through determining all of its process and functions. With the KEF Ltd. it is easy for management to make changes as per the progress which leads to achieve their objectives effectively (Gibassier and Schaltegger, 2015).

Benchmarking- It is one of the most essential technique that is used by organisation for measuring their performance with competitors in market. Strategy, policy, results, program are some of the bases which are used by management to associate its performance with others. With the approach of benchmarking KEF Ltd. identifies all those aspects which is used to maintain the quality of their work.

KEF is performing their business at medium sized level so the major problem faced by them is relates with the ineffective utilisation of money. It results the work of organisation is negatively impacted like the lack of working capital. On other side, other manufacturing units such as M&S face the issue of risk cash flow and ineffective strategies creates problems to manage proper working capital. Therefore, the KEF Ltd. implements the KPI approach in the organisation. Whereas, M&S manage improves quality of its goods with the benchmarking technique.

M4

KPI implement both the approaches to achieve top position in market as it helps the management to reduce financial issue. Example- By formulating effective strategy it is easy for management to enhance their operations better than the competitive firms. Benchmarking approach helps the organisation to perform their work by reducing the competitiveness from market and to boost performance of organisation on constant basis. This helps management to sustain for longer period as well as to increase the market area (DRURY, 2013).

D3

Planning helps the organisation to formulate strategy which enhances the future growth of management by completing their work in a smooth flow. According to the present market conditions, all the environmental aspects of management are too dynamic. Flexible budgeting, Contingency planning, forecasting tools are some of the major tools that improves profitability of organisation and reduces the financial problems of organisation in accurate manner. Along with this with the implement of these tools it is easy for KEF to deal with the unexpected financial problems and complex market conditions by utilising their pre-planned plans.

CONCLUSION

From the above summarised report, it is concluded that management accounting play an essential role for the organisation which assist management to accomplish their goals in minimum time period. Various accounting system such as price optimisation, job costing leads the business to enhance its performance in appropriate manner. Further, benefits of this system are evaluated by organisation through improving their results. KPI, Benchmarking are some of the tools which is used by management to analysis the cost and to maintain the quality of their products. Moreover, planning tools such as flexible budgeting, forecasting tools are also covered with their merits and demerits that defines success factor for organisation in accurate manner.

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