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Importance of Management Accounting in an Organization

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Management Accounting

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Introduction

Management accounting exercise in the administration of the organisation is not an elementary job. Nevertheless there are some professional accountants who are particularly disciplined for assembly the management exercise in command to achieve the main non subjective and future goals in the firm Imda Tech limited management accountants does the management accounting exercise for the reporting to the internal management for impressive operation(Zimmerman, and Yahya-Zadeh,2011). Now, there has been some drastic changes emerged in the management accounting since this concept was come. Now the management accounting does not only reports to the internal management but also assist the firm in command to achieve the property development. efficacious application of management accounting practices helps the firm to run the operational management smoothly. Imda Tech Limited is running so efficiently due to expeditious and effectual management accounting practices attainment of the objectives. Management accounting is more peculiarly known fro the combining of operations , strategic planning and administrations. Management accounting practices support the higher level authority for framing the strategical plan for smooth running the operational process.

Task 1

a) Management accounting

Management accounting is a method in which we use judgement applicable fiscal and non fiscal complacent to domain and create the value of administration by origin, investigating and communicating. It is a accumulation of finance, accounting and management with the enterprise skills and methods. It is for addition the value in an organisation(aldvinsdottir, Mitchell, and Nørreklit,2010). The accountants those who are working in an organisation and they are suitable to work across the counsel managers on the fiscal express of determination, not just in finance, activity across the enterprise the observation risk and enterprise strategies is more crunching than numbers of the data which had given. In this mangers needed data to make daily bases decision. It is assorted from fiscal accounting because in that we have to make annually statements for the stakeholders and the weekly statement is done by chief executive officer and section manager. In this statement we can display the available money and the revenue is generated, raw material, divergence analysis,The entire sum of debt and obligations on a organisation's balance sheet that remains unpaid consider short term expenses, outstanding payables, and accumulated interest(Lukka,and Modell, 2010).

Scope of Management

Progression in information technology the client will get the information with the help of technology before 10 to 20 years client will don't know about the scope of management accounting. Management accounting is all about better management of companies. In this we can include amended marketing scheme, feasibleness studies,better valuation of trade good and services through capable cost management strategies. If we motivate the employees they will advantage to the organisation(Garrison, and et. al., 2010). By the help of technology we can take better management risk,leverage on opportunities,protective covering of organisation possession and investing through crime prevention function of management accounting,Managing environmental modification we can easily deal with the politics and by the law.

Characteristic of Management accounting system
  • Cost reduction information processing capacity- Management accounting helps in cost reduction by the help of information system. We can scrutinize that how to reduce our cost from the marketplace.
  • Ability to collecting broad range of information- It has ability to collect the wide range information through the world.
  • A explanation instrument is not to be used- It is not necessary to explain the management accounting by the justification instrument.

b) Types of management accounting

Management accounting can be categorized below antithetic heads. This system render aid to the administration by supporting the administrator to take various judgement with the help of various statements conferred under various accounting system. These statements help in conformation the precursory year statements which help in doing the process of comparison. It helps in taking the corrective measures by the managers which gave less results in the previous time period. various types of accounting systems can be studied under various heads which give long and short benefit to the organisation.

Cost accounting

This accounting system is concerned with the various cost of the trade goods. With the help of this system managers take various decisions regarding the finance allotment. After analysing the various options available with the managers they choose the best suitable one by comparing it with the past year statements. Cost accounting also help in keeping control over the various cost of production by keeping proper check on the various factor of the production process. With the help of this system organisation can take the decision of future enlargement also.

Inventory Management

inventory refers to the raw material kept in the enterprise which will be converted into final goods by processing them(Cinquini and Tenucci, 2010). It is essential to have good inventory management system so that situation of non accessibility of raw material can be avoided as this will lead to wastage of time and also loss of potential customers. It is also essential to avoid the situation of excess in the organisation in order to avoid the cost of storage and maintenance which further is added to the total cost of the trade good.

Job costing system

In an organisation various jobs has there various cost which is ultimately added to the trade good. As much deviation in the cost of the trade good can not be done keeping in mind the cost sensitivity in the marketplace. All the customers before buying any trade good do the comparison of all the trade goods available in the marketplace. Therefore high cost can not charged from the buyers.

cost optimising system

Earlier fixing the cost of the trade good it is essential to scrutinize the cost of the other related goods also so that the cost get acceptable by other client in the marketplace. At first it is essential to keep the cost relatively low so that more customers get attracted towards it. Only if the client find the trade good worth of the cost they will try the new trade good otherwise it is challenging to give position to the trade good in the competition external.

Task 2

(a) various types of budgets and pros and cons and relevance of valuation in budget formation

Budgets play an essential role in any organisation. It helps in efficacious allocation of the of the organisation so that maximum returns can be achieved. Through budgeting process the mangers keep control on the total cost of the various projects. Each administrative section is given their budgets and this way they check that they do not transcend the given budget line as than actions are taken in that case. There are various types of budgets which can be used by the cited organisation to have efficacious working environment in the organisation. These budgets can be long term or short term budgets depending upon the need of the project.

Master budget

It is the main budget of the organisation. Under this budget all the resources are allocated in various administrative sections like the sales administrative section, administrative section etc. each administrative section is given their goals and resources are also rendered to them which may be needed during the project working. This budget has its own positive and negatives(Van Helden. And et. al., 2010).

stockholder of master budget
  • It gives the summary of all the other small budgets that are prepared. Also the other budgets are prepared after the master budget is prepared.
  • These budgets helps in getting the estimation of the total profit earned in a particular time period.

Operating budget

These budgets are related to the daily operations of the enterprise it helps by providing budgets for various operations of the enterprise. various operations needs to be budget variously as operations has their own priority in the organisation.

pros of operating budget
  • Operating budgeting helps in maintaining adequate amount of liquidity for the operations of the enterprise which can not be avoided by the organisation like buying of raw material, wages to employees rent etc.
  • It helps the organisation in increasing the total reserves by providing the best alternatives for the purpose of investment. For making the investment it is essential to have the adequate amount of reserve with the organisation.
cons of operating budget
  • It require a separate body to maintain the operation budgets which leads to the increase in the total cost of the organisation.

Financial budget

In this budgets for various functions are prepared under various headings. It is adopted in all the organisation as it is essential to set the budgets so that if in case finance is needed in the organisation arrangements can be done in advance.

pros and cons of financial budgets
  • Maintain efficaciousness in various functions of the organisation.
  • Timely availability of the finance is done through the process of financial budgeting.
  • As this budgeting system is involved with finance which is very difficult to manage therefore it becomes a problem to maintain these budgets and to make the efficacious budget for a specific function.

b) Process of budget preparation

The first step is to to roll up all the needed data. In this information regarding the need of budget is discovered. It is an essential part and need to be done by giving full efforts.

Database of various expenses are made so that they can be categorised into various heads depending upon their urgencies. Planning is done how the total finance of the organisation can be utilised so that it can full fill the necessitate of each administrative sections. After the need of each administrative section is recognised budgets are allotted to them which the administrative section has to follow to complete their given project. administrative sections are rendered with all the needed resources so that they can complete their project with the given budget. After this the budget is reviewed before doing the declaration. At this stage the possibilities of achieving the target with the given budget is examined again. Lastly, the budget is declared to the concerned administrative sections.

c)Pricing strategies

Adopting the pricing strategies help the enterprise to keep the efficacious control on the cost of the enterprise and also to achieve the best price for its good. enterprise can use various pricing strategies like:

Penetration Pricing

This is the process of price taking. Manufacturer has to keep their price relatively low in comparison to other goods in order to cover more market and than gradually can increase the price once it is recognised by all.

Premium pricing

In this the Manufacturer can set the price according to himself as they are providing with the good quality(Luft, and Shields, 2010). Customer is also willing to pay high price due to the difference in the good type and quality.

Skimming pricing strategies

goods for high class society are produced in this pricing. They charge high price from the customer at the starting and customer find it as a status symbol to buy expensive goods. Though the price fall after a certain time period.

All these strategies need to be consider while making the budget to make it more efficacious and approved by all.

Task 3

Importance of scorecard in organisation

Scorecard has become a famous instrument nowadays. It helps in maintaining the record of an individual performance in a particular period of time. Also with the help of this instrument comparison between various employees over a period of time has become more easy. It is essential to have the environment of comparison in the organisation so that everyone work towards giving their best. This help the organisation to get the work done in time and also in the best manner. Balanced scorecards help the management to overcome the external factors by doing the efficacious planning in advance. As the organisation is suffering loss it can utilise this instrument for efficacious planning and take better actions. Balance scorecard is the procedure of keep up vital arrangement and administration framework which helps them in keep up an appropriate vision and system of an association and furthermore helps them in recover from all the outer and inward variables.

This is for the most part used by the organisation to break down their execution and aides in keep up key administration framework. This strategy is one of the viable way.

Imda tech endures lost £1.5 million and from recuperating from that they ought to need to use this method since it helps them in keep up their execution alongside their workers execution. Likewise it helps them in making method in this way, that they can examine every one of the elements and actualize the procedures as indicated by manner(Renz, 2016. The Jossey-Bass).

An organisation can distinguish its money related issue with help of this approach on the grounds that in this method they incorporate all their main goal and dreams. It demonstrates the rundown of blend monetary and non monetary related things. Like by utilizing this approach it ask a question that what stockholders look like by the firm. This inquiries answer is by utilizing income and so on. This helps them in understanding out their monetary problem.

This scorecard demonstrates the methods which are detail by the referred to association. It helps in recollecting all elements on consistent schedule by the administration in this way, that they need to chip away at such element and execute every single such procedure through which they can recuperate their loss of £1.5 million. By showing the balanced score cards to the employees they can be motivated to improve their performance. As the details of financial and non financial items are also given on the score cards it can be utilised by the external users of the organisation to get the idea about the present position of the firm. Also with the help of these cards various financial problems can be resolved by taking these information as a ground.

Conclusion

From the above report it can be concluded that management accounting helps the Imda tech to take various essential decisions. These decisions can be financial and non financial in nature. Through efficacious financial management the organisation can save its maximum cost which can be further utilised in the enlargement of the enterprise. various methods of cost accounting is used to make the financial statements. These statements give the numerical data about the total change in the profit of various time period. Though some financial and management accounting serve the organisation with various benefit they are various from each other which is clear above by doing comparison between some of them.

References

  • Zimmerman, J.L. and Yahya-Zadeh, M., 2011. Accounting for decision making and control. Issues in Accounting Education.
  • Baldvinsdottir, G., Mitchell, F. and Nørreklit, H., 2010. Issues in the relationship between theory and practice in management accounting. Management Accounting Research.
  • Ward, K., 2012. Strategic management accounting. Rout ledge.
  • Lukka, K. and Modell, S., 2010. Validation in interpretive management accounting research. Accounting, Organizations and Society. 35(4).
  • Garrison, R.H. and et. al., 2010. Managerial accounting. Issues in Accounting Education.
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