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Management Accounting System and Their Types

University: NA

  • Unit No: NA
  • Level: High school
  • Pages: 20 / Words 4978
  • Paper Type: Assignment
  • Course Code:
  • Downloads: 36
Question :
  • Evaluate the management tools which are effective in accounting.
  • Define meaning of management accounting system.
  • Provide range of management accounting techniques appropriately.
Answer :
Organization Selected : Jupiter PLC

INTRODUCTION

Accounting system is the system that are using for the revenues, expenses and also for other financial activities of a business. It is helping to track the business financial transactions such as purchases, liabilities, sales etc. it is capable for generating comprehensive statistical reports are providing to management and also to interesting parties to support decision making process (Wickramasinghe, and Alawattage, 2012). In this report taking company Jupiter PLC, it is a medium sized manufacturing company.

In this report covers different tasks and in task first explain of management accounting system and their types. In task 2, calculate of budget with the help of marginal and absorption costing. In task 3, using planning tools regarding to management accounting and in task 4, Jupiter PLC compared to other organisations to solve financial issues.

TASK 1

Management accounting and their types

Management accounting is a tool used to prepare and provide statistical and financial data on time. It also present accounting information which helps management to formulate adopted policies and also to make short term and long term decisions. It is internal system used by junior management accountant of Jupiter PLC so that they measure and evaluate their management process effectively. The various management accounting system which is used by them are mentioned below:

Job Costing System:

Job costing system is process of collecting data related to costs of manufacture and job service. It also record the job cost of all products that are manufacture in company. This system is used by Junior management accountant of Jupiter PLC so that they determine quality of estimating system from accumulated information (Van der Stede, 2011). And also help to quote cost of product which is acceptable to gain profit by collecting information about direct material, direct labor and overheads.

Price Optimisation:

Price optimisation is process of discovering the structures of price which optimise goals like revenues or acquiring customer targets. Junior management accountant of Jupiter PLC use this system so that their products will sale rapidly in market with a sufficient profit. This system is used by company which is based on their competition level, manufacturing cost of products and demand of each product. This helps them to balance the amount and profit of all product.

Inventory Management System:

Inventory management system is accumulation of technology with methods and operations which manage and handle the maintenance of furnished stocks such as finished products or raw materials and supplies. Junior management accountant of Jupiter PLC using this system so that they monitor stocks regularly and optimise the management process by investing in cloud based software. This will helps them to increase productivity, sales and get higher return on investments (Lavia López, and Hiebl, 2014). It also helps accountant of company to compute the raw materials closing value, progress of work and total expenses which is incurred during business operation so that they prepare accurate financial statements.

Cost System System:

Cost accounting system is the method used by firm to record product cost activities through different production process. It is important accounting system applied by Junior management accountant of Jupiter PLC to ascertain their product cost so that they analyse the profit, control the cost and examine the inventory. By adopting this system company gain some benefits that are valuation of inventory, decisions related to acquisitions and so on.

Methods of management accounting reporting

Management accounting is also known as managerial and cost accounting, which shows internal data obtain from financial accounting. This accounting make the internal reports which are used by Junior management accountant of Jupiter PLC to plan, regulate and measure the performance (Haustein, Luther, and Schuster, 2014). Accountant analyse the management accounting reports to highlights definite activity and convert them into useful data which helps in organisational growth. The different types of management accounting report used by the company are explained below:

Performance Report:

Performance report is maintained to analyse the whole company performance including employees. By using this report Junior management accountant of Jupiter PLC appraise the performance and work of their employees also make strategical decisions for company growth. And also by using it organisation to set criteria to improve performance level, to demonstrate compliances and so on.

Inventory Management Report:

Inventory Management report is created to maintain inventory and make production process more effective. Junior management accountant of Jupiter PLC prepare this report to get all information about materials and stocks. This report also give the accurate data of company opening and closing stock. Some techniques which used by organisation is turnover ratio and EOQ. It is pertain to foe appropriate methods for the analysing and evaluating financial transaction of the company. For prepare of this report using methods are LIFO ( Last in first out ) , FIFO ( First in first out ) and weighted average cost method for proper analysation.

Account Receivable Report:

The account receivable report using as a important tool for managing cash flow when customer credit to customers. It is prepare to find out the number of unpaid invoices that are collecting to during to specific period and also find out to total numbers of debtors of the company in the case of Jupiter PLC. These reports are prepare on periodic basis to find out of non-paying invoices or debtors of the company (Lavia López, and Hiebl, 2014). With the help of this report prepare financial statement that are helping to know actual financial position of the company. In financial statement including balance sheet, profit and loss account. In this also including cash flow statement, changes in equity.

Budget report:

This report mostly prepared by the small business to analysis of business performance as well as also manager analysis of their department's performance and control costs. Budgets reports are prepared on the basis of last years expenses and incomes because it helps to understand where to business spend and where earn. It is related to actual revenues and losses on the behalf of prior years. If the small businesses was considerably in the budget in last years and methods can not find to clean-cut costs. So it will help to estimate of future budgets may need to raise to a more faithful level. But in the report can not mention incentives provides to companies. It is including bonus fund that are giving to achieve selected financial goals (Accounting management reports. 2018).

Benefits of management accounting system

When company applying management system so accomplish many benefits. Every things have two sides so as well as management accounting system have merits and demerits. It important to proper recording, smooth functioning and analysing of data and overall critical for business growth. The Jupiter PLC are UK based are adopted to management accounting system and related techniques in order to present business report in systematic way to ascertain it properly. There are several benefits related to accounting system and their types -

Types of accounting system

Benefits of accounting system

Cost accounting system

This system using by companies to maintain proper record of the company because it helps to measurable to cost that are incurred related to specific items and helpful for determine and find out the profit of the company.

Inventory management system

This system helping to maintain proper inventories or stock in accurate way. With the help of this know opening and closing stock. These are basis of the company because on the basis this know inventories.

Job costing system

With the help of this system know that particular cost and generate income are related to specific job. That helping to determinant the profit from the job or operation. In this system mainly identify direct material, direct labour and overhead of the company.

Price optimization

It helps to determinant the actual price of each product of the company. By the particular job also determine the profit as well as operations also.

Evaluation of accounting system integration and reporting method

It is true that in the organisation to conduct business activities applied management accounting systems and management reports. These are useful for recording and transferring the operational information of the business (Banerjee, 2012). The company of Jupiter PLC used two tasks relating to management accounting that are help to fill gap between the formulation, combination and movement of performance information of the business. In the business are presents operational information are that are showing by the methods and these are reports of the management according to their nature. One of the type of reporting system is that performance report are based on the overall performance of the company. In this including business operations and performance of employees are working in the organization in a direction of achieving objectives and goals. Accounting receivable report is also useful for the company because mostly information are provide by this report. In this report showing information related to unpaid invoices, debtors and creditors. For showing overall performance related to this prepare financial accounts of the company that are financial situation. For preparing this including balance sheet, profit and loss account.

TASK 2

Marginal costing

It is a costing technique that is using for charged to cost units on related to variable cost and fixed cost. It is written off to related period for the against of contribution. It is applied on the relationship of the volume and profit output to clearly brought out (Bouten, and Hoozée, 2013).

Absorption costing

It is a method that are apply to all of the manufacturing costs are en-wrapped by the units produced. In different words, cost of finished goods including inventory and in this involve direct materials, direct labour and both are divided in variable and fixed. As a output, absorption costing is also mention as full costing.

(a) Marginal costing

Calculation of net profit by using marginal costing method

Particulars

 

Amount

Sales revenue = ( No. of goods sold * selling price = 50 * 16000)

 

800000

Marginal Cost of goods sold:

 

560000

Production = ( Marginal cost per unit * Produced units= 35*18000)

630000

 

closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000)

70000

 

Contribution

 

240000

Fixed cost

 

100000

Net profit

 

140000

Absorption costing

Computation of net income by using absorption costing method

 

Particulars

 

Amount

Sales = (Price of selling * no. of units sold = 16000 * 50)

 

800000

Cost of goods sold-

 

560000

Production = ( Marginal cost per unit * Produced units= 35*18000)

630000

 

closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 2000)

70000

 

Gross profit

 

240000

Less – under absorb fixed production cost

 

10000

Net profit/ operating income

 

230000

(b) In the end of September actual production unit – 19000

Closing stock - 3000

Calculation of net profit by using marginal costing method

Particulars

 

Amount

Sales revenue = ( No. of goods sold * selling price = 50 * 16000)

 

800000

Marginal Cost of goods sold:

 

560000

Production = ( Marginal cost per unit * Produced units= 35*19000)

665000

 

closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000)

105000

 

Contribution

 

240000

Fixed cost

 

100000

Net profit

 

140000

 

Computation of net income by using absorption costing method

Particulars

 

Amount

Sales = (Price of selling * no. of units sold = 16000 * 50)

 

800000

Cost of goods sold-

 

560000

Production = ( Marginal cost per unit * Produced units= 35*19000)

665000

 

closing stock = ( Marginal cost per unit * Closing Stock Units = 35 * 3000)

105000

 

Gross profit

 

240000

Less – under absorb fixed production cost

 

5000

Net profit/ operating income

 

235000

After the calculation of budgeted and actual Profit and loss accounts profit are same by using marginal and absorption costing method. In marginal costing Profit are same but in absorption costing coming change of 500.

TASK 3

Budget

It is a estimation of the company that basis of prepare budget to forecasting of revenues, expense, resources and cost of the company. It is prepare for the particular time to on the behalf of future conditions (Maas, Schaltegger, and Crutzen, 2016).

Budgetary control

It is the process to controlling of management system because according to this when company conduct business activities. So these activities are compare to related budget because in this process compare to standard output with actual output for the future period.

Advantages and disadvantages of planning tools

Planning tools are important part of the organisation that are using to for future period and they are as follows -

Contingency tool –

It is the tool are used for assessing to those market changes that are suddenly changes or business delay might on a situations. These tools are describe to those factors are helping to timely ans accurately areas are effective for humanistic. It is planned to help Jupiter PLC to related different types of risks to moving from performance (Cuganesan, Dunford, and Palmer, 2012).

Advantages

It is designed in effective way to reduce all types issues that are suddenly origin in the market. So this planning tool help to create strategies according to risks and also for that difficulties are happen in future.

Disadvantages

This approach of contingency is good in practical but it is very complex related to some situations. It is avoid the dangers of simplistic or liner thinking.

Scenario tool –

It is focuses of the Jupiter PLC according to future outlook. It is using as a method of the organization that are using to predicate future possibilities in the future like as budgets that is effected to strategic objectives. It is not easy to predicate future possibilities of the organization that's why create variety of future scenario would be possible.

Advantages

The scenario tool will have to work closely together to scenario of the business. But in this tool found many strategies that are helping to make effective decision for up coming period.

Disadvantages

It is critical to estimate accurate occasion related to any situation. Regarding to future growth found several problems that are not implemented.

Forecasting tool –

In this planning tools are using internal and external factors that are for estimate of future trends of Jupiter PLC (Chenhall, Kallunki, and Silvola, 2011). For growing of the business are using strategies to analysis of existent data. Mostly this tool using regarding to budgetary control that is helping to deciding allocation of budgets for up coming expenses in future. At the end of in this tool actual outcomes are compare with estimate results.

Advantages

With the help of this tool estimated future financial information of the company. It is helping to management for taking long term and effective decision on the basis of future predication.

Disadvantages

In this tool apply only on qualitative approach that are any time change according to situation. So easily no believe on that for future trends and not taken properly.

Analysis of various planning tools and their application

In Jupiter Plc using different methods of controlling of the budget using by manager are using various types of planning tools. There are specific planning are using by company is first one is contingency tool for controlling those risks are growing in business. It is identified that total expenses and costs are receive by the company (Lachmann, Trapp, and Trapp, 2017). In scenario tool predicate future risks that are rising when activities happen. In forecasting tool prepare strategies for internal or external factors are changes according to future trends. For the effective budget process using different type equipment that are already examined.

Evaluation of planning tools for responding to financial issues

It has been identified that Jupiter PLC faces many inner problems that are relating to develop. In order to control several evince are connected to to the budgets of the company. For solving to financial issues in the company using planning tools are contingency tool, scenario tool and forecasting tool. Contingency tool is applied for the one of the reliable tool which are using to control to business risk for moving over all performance of the company. In forecasting tool is using for predicate to future issues that are effected to performance and for this solution using key performance indicator. Scenario tool predict to future trends that are suddenly changes and creating problem to conduct business activities so for this using KPI.

TASK 4

Comparison with other organisation financial issues

In Jupiter PLC regarding to management accounting have many financial problems that are simple found. When its rise up that time business face to critical situations, so has to manage financial resources. In this system including several types of financial issues such as increase in cost, customer satisfaction and decrease in income. These issues can resolved by using following tool are as -

KPI ( Key Performance Indicator )

It is a technical tool that are using to measure the value that are establish to know how effectively a company is achieving key business objectives. It is using by Jupiter PLC on the various levels to evaluate their success to reaching targets (Baird, Jia Hu, and Reeve, 2011) . It will be divides in to two parts, first one is high level that is related to the overall performance of the company and second one is low level, that is focus on employees process related to different departments. It is helping to Jupiter PLC for taking effective decision making. Because of in organisation have complex nature of the structure that is helping to reduce it and cover over all performance of the company.

Bench marking

It is the process of measuring performance of company's processes, services and products compared with those industry are considered as best in the country. It is using to Jupiter Plc for identifying the internal possibility for improvement (Wanderley, and Cullen, 2013). The objective of bench marking are – (1) to determine where and what improvement are called (2) Analysis of other leading organization to achieve higher performance level (3) after analysis getting information are using in organization for improve performance.

Comparison between Jupiter PLC and

Jupiter PLC

Cornmill limited

In this organisation based on medium sized manufacturing. It is adopted job costing system to manufacturing process to evaluate direct material, direct labour and overhead. It will applied after that improve efficiency of the company and calculate cost of each job and project will be ascertained and allocated properly. With the help of this system identified profitable and non profitable areas in the company.

This is a small sized manufacturing company that adopted management accounting system. In this system taking inventory management system that are using for the minimum expected result. So solving problem relating to this using benchmarking. It is help to company to achieve set targets and achieve to best practices. In this system using many technologies for evaluate the objectives. In the benchmarking taking leading company to compare so Cornmill limited taking leading company and compare with them. With this compare bring effectiveness in working.

Jupiter Plc is using Key performance indicator but it is divided in to two parts first one is financial and second one non financial so they are mostly prefer to financial indicator. Because job costing system mainly related to cost that are major by these indicators. It is helping to solve financial problems.

Financial issues when origin in organisation that time faces many inner problem. So for the solution prepare budgets and according to this follow business activities. This will helping to keeping track record of revenues and expenses. And after analysis compare standard and actual outputs.

Management accounting leads organizations to achieve sustainable success

Even, if an organization is conducting all the business activities properly so financial problems are origin due to uncertainties in the organisation. For solving these problems are using management accounting system in the organisation for conducting properly business activities. In management accounting, there are many systems are there along with reporting system which helps in constant judgement of financial performance (Busco, and Scapens, 2011). Here, sustainable success refers to total growth of all the departments in Jupiter PLC. This can be achieved as management accounting is practical in every division whether finance or human resource. In management accounting define Success that are directly related to proper decision making and reports are equipped to performance analyse. Decisions are taking on the basis performance that are need to evaluate.

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CONCLUSION

From the above report management accounting is important part of the organization that are using in Jupiter PLC for improve to financial condition and also for effective management. It is not necessary to acquire by all organisations but internal stakeholders want to proper information of the company that are providing by the analysis of overall performance of the company. It is using to prepare managing report that are shows activities of the business and with the help of costing techniques prepare budget. For know financial issues that are related to the company that are compare with other organisation and identify that other company how to solve these problems.

 

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