Question :
As per the scenario of this report, line manager of Tech UK limited has asked to manage a written report of organizational financial activities that will assist to make improvements in business decision making. The report will consider:
- Evaluate the system of management accounting as well as discuss its requirement in Tech UK.
- Discuss absorption and marginal costing methods in the context of income statement.
- Analyze different types of budget as well as determine its advantages and disadvantages in work related context.
- Discuss how management accounting can assist to deal with financial issues of firm.
Answer :
INTRODUCTION
Presently, Management accounting has been that full company are overview for an efficient system which could help out to record diverse accounting transaction in their concerned format. The main objective of the firm is to gain their longer period of time which are being fixed by the organisation for meeting their long and short term objectives which are being framed by the organisation for betterment of the future. The key role of the managers is to record their financial transactions in a highly effective manner (Hilton and Platt, 2013). This project main aim is to render diverse kinds of information about the diverse kinds of accounting systems which are assisting in recording of the data in a highly efficient manner. in addition to this, this report will implement diverse costing tools which are efficiently accountable for assessing net profits of the cited organisation. Diverse kinds of planning tools are used under this reports which are ultimately help out to form budgetary control for making the sustainability. Assessment of the specific kinds of financial issues and their efficient calculation in order to overcomes those problems which are elaborated in this report.
TASK 1 A). Explanation of management accounting and its essential needs of management accounting systems:
Difference between management accounting and financial accounting:
|
Basis |
Financial accounting |
Management accounting |
|
Objective |
The objective of financial accounting is to manage the financial translations of the company and maintaining the financial health of the company. |
The objective of management accounting is to report the management decisions so that the management can take the decisions appropriately. |
|
Purpose |
Financial accounting is useful for both the insiders as well as the stakeholders of the company to provide the financial information about the company. |
Management accounting information is generally useful for the company insiders or management to make certain decisions such as preparation of budgets etc. |
|
Reporting format |
Financial accounting is done in certain pre specified format set by the regulatory and legal bodies. |
There is no reporting format in the management accounting as it is useful only for the internal management. |
|
Compliance |
There is a statutory compliance in financial management which is required. |
There is no such compliance procedure required in management accounting. |
|
Focus |
Finance reports are formed with help of historical data and these reports are made for a certain fixed period. |
Management accounting focuses on current data and helps in forecasting. |
|
Courses certified |
Chartered accountant, certified public accountant |
Chartered institute of management accountant, cost management accountant. |
II: Importance of management accounting as decision making tool for department managers:
The present business organisations are very complex which is why there is massive importance of management accounting. Management accounting helps and advises the internal management at every step (Management Accounting, 2017). It not only increases the efficiency of the working of the organisations but it also increases the efficiency of the employees of the organisations. The importance of the management accounting in a organisation are discussed below:
- Determination of aims: Management accounting helps the internal management of the company to determine the aims and helps in finding the route to achieve those objectives.
- Helps in preparing the plans: Management accounting aims at planning through defining the objectives that are to be achieved by the organisation (Wickramasinghe and Alawattage, 2012). Those producers are considered most successful who makes products according to the plans and needs of the customers.
- Provides better services to customers: The cost control function of the management accounting helps in reducing the prices of the products. The producers are made cost and quality conscious which provides better and cheap products to the customers.
- Performance measurement: Management accounting ensures performance measurement by setting the standards through standard costing and measuring those standards by the actual performance thereby determining the efficiency of the employees.
- Increased business efficiency: Management accounting helps in increasing the efficiency of the business by setting the targets for different departments and achievement of these targets are taken as the tools for measuring the efficiency of the workers.
- Maximisation of profits: Many efforts are made in management accounting to remove the control all kinds of unnecessary expenses. All types of inefficiency are removed so that the maximum profits are earned out of the capital that is invested in the business.
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