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Introduction of Management Account
Management accounting plays a vital role in the decision-making process by the firm's manager so, they can effectively able to operate function in most desired way. It is totally different from the financial accounting as they always look forward for the future due to which they can able to control functions (Ax, and Greve, , 2017). Thereafter, accountant apply its knowledge as well as skills to prepare management reports. It helps them to effectively formulate the policies and strategy within the organisation that directly impact on the future. The management reports is produced on weekly and monthly basis that shows the sales revenue, accounts payable, account receivable, variance analysis and other statistics. The assignment is based upon Pearson in which there is a discussion on the types of absorption and marginal costing techniques. Further, it also described the management accounting and how it varied from the financial accounting. There is also study on type of management accounting system and also discuss pros as well as cons. Furthermore, it also described the various type of budgets and its methods. There is a study on type of pricing strategies and various factor of demand and supply. There is an also identification of management accounting system that respond financial problems.
1.1 Introduction to management Accounting
Accounting system can be defined as statistic data related to business records. It contain details about any firm which are recorded in the books are are necessary for operating the financial related operation like purchase, sales, etc. Accounting is necessary for firms are they are required for the analysis, maintaining and keeping financial information like transaction of the organization. Moreover, it provides the details about the financial status of firm. Accounting done to serve the specific demands of management is termed as management accounting (Bodie, 2013).
Management accounting cab be defined as the procedure in which managers and employees are supplied to the organization. Details regarding the allocating resources, decision making, evaluation, monitoring and rewarding the performance by relevant details about financial and non financial. For illustration, details about the expense of assemble department in operating department of any auto mobile plant is part of management accounting information. Details like measurement of consumer satisfactions, their loyalty, employee motivation, innovation, quality and timelines of the allocated process are terms which are included in non financial management accounting. Pearson management accounting system is required for management of employees, manager, and details related to the financial and non financial terms.
Comparison between the Management accounting and financial accounting.
Details in management accounting and financial accounting are almost similar which is related to the financial details along with various quantitative details related to business operation. The role and activities of manager is to plan, direct and control ( Chenhall, and Moers, 2015). the But there are certain differences which needs to be considered are mentioned below:
|Features||Management Accounting||Financial Accounting|
|Reports of User||Internal: Manager and employees||External: Creditors, regulators, stakeholders and shareholder|
|Report types and frequency||Reports are frequently needed and is part of internal reports||Quarterly or annually and financial information are required.|
|Aim||For making decision||General purpose|
|Content||Business sub unit details
reports need to be in details.
Extended more than double entry and relevant for making decision.
|Used for decision making. More condensed or aggregated.
Limited to double entry and related to cost data which are mostly considered in accounting principles
|Process of verification||Survey by manager and no independent survey||
Survey through CP
Details about mentioning unit cost of manufacturing goods comes under Management accounting while total cost for the manufacturing products and its purchase by consumer comes under financial accounting.
Reason for integrating management accounting system.
Integrating management accounting system is performed in order to combine the standard financial details regarding financial accounting purpose. Details are needed for firm's success and to have the financial and non-financial details. The main framework for the integrating system consists of Pre-integration which includes the details about the training needed by management accounting, budget required for the employee development, organizing meeting, interviews with other staff members. The goals for integrating is combine the organisation and collaborating all the departments (Cooper, Ezzamel, and Qu, 2017). Building trust and understanding in employees along with providing motivation to them. Them comes the Integration planning which includes the details about the generating plans, identifying the firm performance, coordination, integration, allocating the roles and responsibilities, etc. for this phase the main goal is defining the integration goals, providing training staff, providing validate information and decision making process. All the details are used for making further action plan. Third comes the implementation option which includes providing training to the employees, integrating complete system. For this phase the main goal is to achieve the speed in integration and adequacy in newly generated system. At last, all the details and process of implementation are send for review and evaluation in order to get feedback and options which requires changes.
1.2 Range of management Accounting Techniques.
Various types of Management accounting system are defined as follow:
The cost analysis in the system is done in real time. In this accounting, the structure and definition are provided in starting. It is used for reviewing the benefits and cost of value chain which provides the accurate image of cost and product to the customer. They are used for the large production of the product. In asset the product capacity is considered and inventory is considered to be waste but if they are found more (inventory) they must be stored, maintained and monitored. In Pearson, this is used to record the data base related to number of publication made in that particular year.
Traditional accounting can be defined as the productive capacity is considered as the idle production lines ( Figge, and Hahn, 2013). In assets, inventory is considered. Moreover, it contain the details which are needed for the large interval of time. Traditional accounting focuses on the cost of product sold.
Mostly used in the management accounting. It is recognized for recording the data related to interdependence of modern product procedure. Throughput accounting is to measure the contribution / Unit of constrained resources. It provides the details for decision which provide the supportive details about enterprise profitability improvement to managers. It is considered to be new management a