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Management Accounting

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Task 1

LO1 Demonstrate an understanding of management accounting systems

Management accounting system (P1)

 

The management accounting system is also termed as managerial or cost accounting that analyses the business operations and costs to prepare records, internal financial reports and also account to aid the managerial people's decision making process to achieve business goals. In these terms, it can be defined as the act of making sense of costing and financial data and translate it into useful information for the use of management and organization.

Andre et al. (2016, p.150) has defined accounting management as the presentation of accounting the available information, that in terms assist the management to create policies for day to day operation in an organization. The associated cost accounting and financial accounting phenomenon help the organization to formulate the policies, control, planning and decision-making process in the organization.

Major functions of management accounting

There is four basic functions of management accounting system are listed below.

1. Planning:

Though this function, formulation of long term and short term plans and proper actions in this regard will be taken. In the budget, the financial planning has been done showing that the resources are used and acquired over a specified period of time interval (Anelli and Puglisi, 2015, p. 409). Management accounting is helpful in this case for planning activity as it provides information to the decision making process. This technique also helps in estimating alternative actions to be taken for achieving the desired financial goals.

2. Organising:

Organising is a process of assigning responsibility to the worker and establishing the organizational framework in the organization. This in term helps in achieving the business objectives and goals (Avenali et al. 2017, p. 130). Management accounting system helps the managerial people to organize necessary information by providing reports.

3. Controlling:

Control is a process of evaluating, measuring, monitoring and correcting the actual results of business plans. Management accounting system helps in producing control reports and performance reports and this highlights the variance between the actual performance and expected performance.    

4. Decision making:

Management accounting system contains valuable information of various courses of actions and predicts the results required to achieve business goals.

Benefits of management accounting systems

 

 

This technique helps the Tata Motors to formally structure the decision problems and to place alternative consequences. Management accounting system also provides production report, sales report by the managers of Tata Motors through taking suitable actions about the production position (Cooper et al. 2017, p.995). Using this technique the managers of Tata motors will be able to decide whether to eliminate or add the product line and the production report. In Tata Motors the accounting management system helps the managers to identify more profitable products as well developed data for it (jaguar.in, 2018). Accounting management system helps to prepare budgeted financial statements.

Critically evaluation of integration of management accounting report and management accounting system within organizational process (D1)

 

Integration of management accounting reports and the management accounting system within the organization process deliveries the desired success for the targeted organization. The management accounting reports help the organisation to identify a social and environmental trend which impacts the ability of the companies to create value over the time period. Sustainable business challenges can be linked to the company's strategy, performance outlook and business model through this integration.

Essential requirements of different types of management accounting systems used by Tata Motors

Management accounting system extracts internal information from the various sources and makes this information available to the managers of Tata Motors. In order to apply the accounting method in the organization the managers must focus on fulfilling the following three requirements.

I. Organisation structure:

It defines the range of information needed for the organisation and this can also be classified into two further type’s namely functional structure and Flat Structured (Flannery, 2016, p. 200). In the functional structured managers use the information to the extent their own function whereas in Flat structure managers deliveries wide range of information to based on the made critical decisions.

II. Management style:

Management style directly affects the accounting management system. It defines how and whom the information needs to be processed in order to yield expected results (fool.com, 2017). Autocratic style of accounting management is handled by the top level manager’s decision-making process whereas Democratic style includes individuals and lower level management.

III. Information:

The requirement of the information in the accounting management method helps the Tata motors manager to decide what information needed to be used for the organisation. The source of information will be recorded and listed either it is an external or internal source. Reliability, accuracy, and relevance of the information will be gathered (Fürst et al. 2014, p. 1440).

Different methods used for management accounting reporting in relevant to the Tata Motors (P2)

Three of the management accounting report has been listed in relevant to the Tata Motors.

I. Budget report:

This management accounting report analyses the Tata Motors performance and controls cost.

II. Job Cost reports:

This report shows specific projects expenses of Tata Motors. The company will be able to evaluate the job profitability.  

III. Inventory and manufacturing:

Using this report the Tata Motors evaluates the inventory wastes, per unit overhead costs and hourly labour costs.   

Task 2

LO2: Apply a range of management accounting techniques

Income Statement

 

 

 

 

 

Absorption costing method

 

Absorption costing method is under GAA accounting standard system and also termed as full costing method. As per the comment of (Hackett and Hand, 2016, p. 368), the absorption costing method includes detailed costing of variable cost, fixed cost, production cost and operating expenses.

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