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UNIT 5 MANAGEMENT ACCOUNTING WITH TYPES OF ACCOUNTING SYSTEM

University: Regent college

  • Unit No: 5
  • Level: High school
  • Pages: 22 / Words 5460
  • Paper Type: Assignment
  • Course Code:
  • Downloads: 28
Question :

This assessment will provide:

1. Give the concept of management in accounting system.

2. Give all the reporting techniques implied in business.

3. What is the fruitfulness of management accounting system

Answer :

INTRODUCTION

The accounting influences in the work practice is comprised on various concepts, rules and regulation which have been making adequate records of transactions. In the present report there will be discussion made on the managerial accounting system and reporting techniques which will be beneficial to the Network Critical Solutions. There will be discussion based on various reporting, costing and accounting techniques which will articulate the valid information among the accounting professionals in decision making.

This report also consisting of various information and details based on management accounting methods in collecting information, recording in books and then communicating such information among the organisational personnel. Moreover, there will be calculation relevant with preparing the income statement by considering the marginal and absorption costing techniques. Along with this, break even analysis will be based to determine the level of supply and demand required in the operational practices.

TASK 1

A. Explaining concept of management accounting along with types of accounting system

Management accounting:

To records the generated information in the various books of accounts there will be use of various techniques and accounting methods. Accounting is itself denoted as the method of recording transaction based on monetary influences. The income, expenditures as well as assets and liabilities had been recorded in the various accounts to have a summarised information regarding the financial stability and ability of a firm in meeting the financial challenges. On the other side, management is relevant with executing and directing the tasks in a manner which will enable the firm in attaining the targeted goals before deadline.

However, in relation with the management accounting, there is management of overall accounts which are being operated in the business in means of recording the reliable information and summarizing it to have valid outcomes (Shah, Malik and Malik, 2011). Thus, such results and outputs help the professionals in decisions making and planning for the future operational practices. On the basis of such detailed analysis there will be formulation of adequate framework and policies to reduce the costs implied in each activity as well as for the future gains. However, there have been various benefits and profitability through implication of management accounting practices in business activities of Network Critical Solutions.

Management accounting system:

This system consisting of accounting details relevant with all the units and areas of operations had been done in Network Critical Solutions. It helps the managerial professionals in articulating the business efficiency and encourage them to make innovative as well as accurate decisions for the future operations. However, management accounting system is costs of various elements which are to be considered by the accounting professionals such as:

Job costing:

This is a specific accounting methodology which is consisted of information relevant with activities performed by the organisation. Therefore, there will be analysis over the costs implicated in each operational activities of the firm. Mostly in the manufacturing units there have been use of costing techniques which is consists of the information such as cost of material, labour and overheads implied in producing a unit (Job costing, 2017). Thus, such ascertainment of costs will define the charges to be levied on the products it also articulates the prices which are to be charged from consumers. Along with this, it will also help the business in internal planning and policy making for reducing such costs. It can be through changing the suppliers, reducing the labour force as well as replacing them with robotic arms etc.

Batch costing:

By considering the concept of job costing technique where batch costing is somehow similar to them. Therefore, there will ascertainment of costs such as indirect and indirect costs which are implied in producing the product in the business (Bebbington and Thomson, 2013). Network Critical Solutions will have effective operational practices as if the professionals analyse the costs implied in a batch of production. It defines the total expenses which have been made in such process as well as motivate the professionals for making relevant changes in the practices.

Inventory management:

In this system there will be use of various techniques and operational analysis over managing the inventories as per the demands arises in the market. Therefore, there will be proper records of information such as total number of sales made in a period as well as efficiency of business in producing the units which will meet the consumer demands in the market. Network Critical Solutions will have accurate ascertainment of the demands and efficiency as they manage the accounts for inventory (Gupta, Pevzner and Seethamraju, 2010). Along aside, it will also highlight the innovative ideas and policies to be made by the professionals in terms of developing the techniques to enhance the business sales as well as improving the productivity.

Price Optimisation:

This is the techniques which helps organisational professionals in analysing the consumer responses towards the products and services they are offering among them. It will be based on past records and the sales growth over the period. Thus, professionals at Network Critical Solutions will have appropriate information regarding the preferences and popularity of the products and services in the market (Saeidi and Othman, 2017). It will bound them in redesigning the products as well as making innovative changes in the operational practices which will help them in governing the business tasks.

B. Defining some management accounting reporting techniques to be used in business

By considering the past transactional records and the outcomes which will be planned for the future operational management. Therefore, the costs implied in the past activities as well as revenue retained by business will be discussed to have further planning. However, there are various reporting techniques which are needed to be implicated by professionals such as:

Budget reporting:

This is the most fundamental techniques of analysing the past records and planning for the upcoming costs implied in the business activities. Therefore, this report will help the manager professionals in making accurate analysis over the costs required in the activities on which they can develop policies and find alternatives to reduce the costs. This will also help the business in allocating the funds in each task and the surety also attached to it that there will be proper utilisation of funds (Managerial Accounting Reports, 2014). Thus, the chances of having manipulation of funds as well as imbalanced expenses will be reduced. Network Critical Solutions will have better financial control as they make budgets periodically.

Accounts receivable aging:

This is the report which is consists of information regarding debtor collection period of the organisation. Thus, it determines that the time on which debtors will be recovered by the business. Network Critical Solutions will have effective operational management as if the duration of collecting accounts receivables will be shorter (Cooper, Ezzamel and Qu, 2017). Therefore, it is also a source of revenue on which the firm will have gains based on sold products among the individuals in the market. Thus, this reporting will help in analysing the potential debtors of the industry on which the firm could relay and make discounts. It will also help them in analysing efficiency of business in making qualitative changes in the operational practices.

Inventory and manufacturing report:

To get the adequate information based on demands and the level of supplied made by the firm relation with meeting the targets. Therefore, this report will help the manufacturer in terms of analysing the costs implied in the production process such as material, labour and overhead costs which will centralize data and summarize is for having the adequate control over the operational practices and administration of activities (Nitzl, 2018). Network Critical Solutions can have information regarding opportunities stated in the market which will help them in making innovative changes in the products as well as redesigning the practices to have appropriate ascertainment of operations.

Job cost report:

Implication of costs in the activities on which leaders have evaluated the profitability and specific types for managing the job activities. Therefore, there are analysis based on the costs such as material, labour and overheads used in the manufacturing or processing period (Ax and Greve, 2017). To analyse the costs required in such operations as well as the policies of the professionals in making drastic changes in the operational ascertainment will enable professionals in decision making and changing the plans for operations. Network Critical Solutions have to implicate this reporting technique which will bring the appropriate details regarding expenses and income generated in a unit.

C. Ascertaining the fruitfulness of management accounting system in operational activities

In consideration with the management accounting techniques which have been analysed to be implicated in Network Critical Solutions, are associated with several benefits. Therefore, there can be various gains in the business as well as growth in this process. Along with this, the importance and fruitfulness of management accounting system can be analysed as:

  • It consisting of all information based on income, expenditures, direct or indirect costs implied in the activities which enables the professionals in accurately analysing it and decision making.
  • The alternative solution and innovative changes will be made the professionals which affect positively in raising the efficiency of organisation.
  • Analysis over the costs implied in tasks will be controlled and administered properly which will result in increasing the profitability in the firm (Bui and De Villiers, 2017).
  • It brings the overall details regarding the industrial efficiency which will be articulating and simplifies the decisions making process in the financial statement of the business.
  • There will be transparency in the accounting reports which is consists of proper information and details relevant gains and spending.
  • There have been fluctuations and changes in the business monetary funds which will articulate the operational practices as per reaching to the objectives quickly.

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D. Determining the integration of management accounting and system in industrial aspect

Network Critical Solutions will have implication of management accounting reporting techniques which will be assistive and helpful in terms of masking adequate operational increment and ascertainment of various business operations. However, as per the general principles and concepts have been awarded by international boards such as International Accounting Standard Board (IASB), International Financial Reporting standards (IFRS) and Generally, accepted accounting Principles (GAAP). Howe veer, these are the integrators or origins through which the concept of complicating the accounting techniques in the business practices have been determined.

TASK 2

A.1 defining the concept of marginal and absorption costing techniques

The impact of costing system is for analysing the adequate and accurate outcomes which will be helpful in developing the strategies and making qualified changes in the operations. However, there have been use of two techniques of analysing profitability of the firm such as:

Marginal costing:

The marginal costing techniques is being used for analysing the outcomes which determined as per bifurcating the fixed and variable costs (Shah, Malik and Malik, 2011). Therefore, there will be use of only variable costs in the operations while fixed costs are excluded from it and are not being considered in analysing the profit and loss for the period.

Absorption costing:

This technique is known as the all cost system which analysis the profitability through implicating all costs in the process. Thus, there will be consideration of fixed and variable costs which have been denoted as the product cost.

2. Preparing the income statement based on costing techniques such as marginal and absorption

Marginal Costing-:

Particulars

Details

Amount

(in £)

Selling Price

55

Units in numbers

600

Total Revenue

55*600

33000

Total Overheads

Units in numbers

600

Material Per Unit

7

Labour Per Unit

6

Variable manufacturing Overheads

2

Variable revenue Overhead

1

Total Overhead cost

16

Total Cost of Production

9600

Measurement of Contribution

Contribution

23400

Total fixed Costs analysis

Production Overheads

3200

Administration Overheads

1200

Selling Costs

1500

Total Fixed Costs

5900

Net profit

17500

Interpretation: On the basis of above measured analysis and income statement which have been prepared with consuming the marginal costing technique which will be adequate and helpful in terms of meeting the goals at the right time. However, in this technique there have been use of variable costs in the costs of product while fixed costs were not included in it. Thus, as per such influences the net profit has been retained by considering such technique is £17500.

Absorption Costing

Particulars

Details

Amount

(in £)

Selling Price

55

Units in numbers

600

Total Revenue

55*600

33000

Total Overheads

Units in numbers

600

Material Per Unit

7

Labour Per Unit

6

Variable manufacturing Overheads

2

Variable revenue Overhead

1

Total Overhead cost

16

Cost of Production

9600

Less Closing Inventory Sales Variable Overheads (200*1)

200

Total Cost of Production

9400

Measurement of Contribution

Contribution

23600

Calculation of Total fixed Costs

Production Overheads

3200

Administration Overheads

1200

Selling Costs

1500

Total F C

5900

Net profit

17700

Interpretation: By considering the above listed analysis of the income stamen through influences of absorption costing technique on there have been use of all the costs which are implied the in business. Therefore, this technique consisting of using all the costs to be analysed and charge and which have brought the net profit as £17700.

B. Break even analysis

This is the technique which will be helpful in analysing the efficiency of the business in terms of enhancing the sales or production to meet the profitable level (Bebbington and Thomson, 2013). Therefore, this indicates a point where the number of units will be produced by the business which will help them in meeting the official targets at the right time.

  1. 1. Break Even Analysis

Particulars

Details

Amount

(in £)

Selling Price

40

V C

13

Contribution

Sales – v c

27

Break Even Point

F C/

Contribution per unit

6000/27

Break Even Sales

(in units)

`

222.22

Interpretation: In relation with analyzing the break-even analysis over the analyzed outcomes on which there have been influences of the fixed and variable costs in the practices. The selling price is as £40, variable cost as £13 contribution have been analyzed through this as £27. However, the fixed costs of 6000 have been considered in analyzing the BEP pointy which is absorbed as 222.22 units.

2. Sales Revenue

Break Even Units * Selling Price

= £40*222.22

= £8888.88

3. Desired revenue to retain profit of £10000

Desired Profit

= (Fixed Cost + Desired Profits) / Contribution per unit

Particulars

Details

Amount

(in £)

Amount

(in £)

Fixed Expenses

6000

Desired Profits

10000

Contribution per unit

27

No of Units that are required to achieve desired profits

(6000+10000)/27

592.60 units

4. Margin of Safety if 800 units were sold

Margin of Safety

= (Actual Sales- Break Even Point)/Actual Sales

= (800-222.22)/800

= 0.7223

C. Application of management accounting techniques in accurately producing financial reports

In relation with analysing the application of the management accounting techniques which will be assistive and adequate in terms of making effective decision and changes in the operational tasks and planning in the organisation (Gupta, Pevzner and Seethamraju, 2010). However, in an approach towards it can be said that there are various accounting techniques which are required to be implicated by the professionals at Network Critical Solutions. In preparing reports there are various financial reports which are to be prepared by the professionals in relation with meeting the gains. It includes:

Just in time:

This is the reporting techniques which will be used under managing the inventories of the organisation which is comprised of managing the inflow and outflow of the inventories from the stores as well as managing the level of stock as per the demand generated in the market. It helps in reducing the all kinds of inventory costs such as material, WIP as well as finished goods costs. Therefore, Network Critical Solutions will produce the number of units which are being demanded in the market. Moreover, it will help the organisation in having proper allocation of resources as well as utilization.

Total quality management:

This method considers techniques to improve the quality of the product and services which are being offered by the firm among consumers (Saeidi and Othman, 2017). Therefore, the motive of firm is for retaining the consumers for the longer period as well as they are must conscious regarding the brand image. Network Critical Solutions has to make implication of such techniques which will help them in managing the quality level of the products and services which are being used by them in manufacturing the products.

D. Accurate interpretation of financial reports which is reflecting the appropriate business reports.

There have been implication two methods of costing in analysing the profitability of Network Critical Solutions. Therefore, accuracy of methods has been determined as per the variations in the outcomes of marginal and absorption cost. On the basis of above measured analysis and income statement which have been prepared with consuming the marginal costing technique which will be adequate and helpful in terms of meeting the goals at the right time. However, in this technique there have been use of variable costs in the costs of product while fixed costs were not included in it (Cooper, Ezzamel and Qu, 2017). Thus, as per such influences the net profit has been retained by considering such technique is £17500. By considering the above listed analysis of the income stamen through influences of absorption costing technique on there have been use of all the costs which are implied the in business. Therefore, this technique is consisting of using all the costs to be analysed and charge and which have brought the net profit as £17700.

TASK 3

A. Ascertaining the advantages and disadvantages of several kids of planning tools for budgetary control techniques

Activity based budgeting:

This is the technique of measuring costs implied in each activity on which professionals make plans with respect to make alteration and changes in expenses incurred in each business activities. There have been operational enhancement and increment in the goals of entity. However, it consists of considering the past records and the costs implemented in each activity which helps the professionals in governing the adequate tasks (Nitzl, 2018). Therefore, professionals at Network Critical Solutions have to make implication of such techniques which will assist them in allocating the accurate amount of funds in each business activity.

Advantages:

  • Proper information regarding the costs implicated in each task of business.
  • It suggests the professionals in making alternative changes to reduce the costs and making proper quality management.

Disadvantages:

  • It requires time and effort by accounting professionals in analysing the costs.
  • There have been changes in the volume of activities which are the cost drivers in the business.

Zero based budgeting:

These are the budgets which starts from zero base. There will be no consideration of past records which would affect the operations. therefore, due to such impacts all the budgets have been start from the zero base on which each activity in the business will have appropriate amount of funds.

Advantages:

  • It does not consist of past records each account has been budgeted from the zero level.
  • There has been accuracy in analysing the outcomes which have been based on operating costs and cash flows of the business.

Disadvantages:

  • There will be higher chances of manipulating the accounting professionals as they can meet their personal motives.
  • There will be lack of expertise in determining the budgets at the end of period to articulate the costs implied in each business tasks.

Incremental budgeting:

This is the budget which is consist of analysing the past records on the basis of which the accounting professionals will make further planning (Bui and De Villiers, 2017). They estimate the cost of each activities will be more than the past records.

Advantages:

  • This is the easiest and simple techniques in determining the further costs in the operations.
  • It encourages the stability in funding on which professionals have strong planning and policy making tactics which will be assistive and helpful to make future plans.

Disadvantages:

  • It required time and efforts of accounting professionals.
  • There will be lack of accuracy in estimating the costs for the future time. Therefore, it does not mean that there will be regular increment in the costs of each tasks.

Cash Budget:

To analyse the inflows and outflows of the cash on which there had been ascertainment of effective cash balance (Shah, Malik and Malik, 2011). Therefore, these are the budget which have been made on the basis of consisting the budget made in each period.

Advantages:

  • Proper estimation of the costs in each operating activity which have been analysed to have appropriate future expenses.
  • It guides the managerial professional in making appropriate estimation over the required amount of funds for the operation.

Disadvantages:

  • There have been lack of flexibility which involves in making effective planning for budgets.
  • It requires time to analyse the transactional costs incorporated in each activity.

B. Application of planning tools in analyzing the budgets, preparing and forecasting them

There have been implication of various plans and policies which will be helpful in defining the adequate targets and managing the operations of firm (Bebbington and Thomson, 2013). Professionals st Network Critical Solutions must make implication of the planning tools such as cash budget, sales and production which will help them in analysing the costs as well as efficiency of firm in meeting the targets in the required time.

Cash Budget: It will be the best source and budgeting techniques which will help the professionals in developing policies and making changes in the plans of the organisation(Gupta, Pevzner and Seethamraju, 2010). Professionals at Network Critical Solutions will have reliable information based on costs such as fixed, variables and overheads which will be analysed and necessary changes have been made to improve the efficiency of the firm.

Example:

Particulars

January

February

March

April

May

June

Cash inflows

Opening balance of cash inflow

4000

7300

10488

13764.8

17131.2

20587.9

Sales

8000

8160

8323.2

8490

8659

8833

Other sources of income

1500

1500

1500

1500

1500

1500

Total cash inflows

13500

16960

20311.2

23754.5

27290.6

30920.5

Cash outflows 

Direct Material

1000

1224

1248.48

1273.45

1298.92

1324.9

Direct Labour 

1000

1000

1000

1000

1000

1000

Other expenses

1200

1248

1298

1350

1404

1460

Administration expenses

3000

3000

3000

3000

3000

3000

Total cash outflows

6200

6472

6546.4

6623.29

6702.75

6784.88

Cash deficit / surplus or closing cash balance

7300

10488

13765

17131

20588

24136

C. Comparing the organisation with others in context with meeting the financial obstacles

Particulars

Network Critical Solutions

Freestyle IT

Financial governance

It has been helpful in managing the costs implied in each activity

Proper allocation of funds in each department

Variance analysis

It has been analysed through determining the gap between actual and budgeted costs

Variance between actual and budgeted costs will be used for decision making and further ascertainment of costs

Key performance indicators

It helps in motivating the workforce in encouraging them to make qualitative efforts in the operational practices.

It helps in attaining the business targets on the right time.

D. Analysing the management accounting techniques will respond to meet the financial obstacles

To manage the operational activities which will be assistive in making appropriate planning for meeting the financial obstacles at the right time. Professionals at Network Critical Solutions will have proper detail relevant with the costs in each activity such as cash, sales and productivity budgets.

E. Ascertaining the impacts of planning tools in meeting the organisational gains

The planning tools will be helpful in making strong decisions which will bring innovative changes in the operational gains of the firm.

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CONCLUSION

On the basis of above report, it can be concluded that, management accounting will be helpful in making records of all the transactions in summarized way. Network Critical Solutions have been suggested various budgeting technique planning tools and the methods of making development in the policies of organisation.

You may also like to read: Quality Management

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