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Management Accounting

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Sample Report on Management Accounting

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Introduction

In present day scenario, each and every organisation utilises accounting as a tool for assessing the business activities undertaken by them in order to make informed strategic decisions. For this purpose, it is important for the top management authorities to have a holistic view of such activities so as to facilitate their accurate analysis. In this context, managers utilise different functions, techniques and systems of Managerial Accounting in order to plan, forecast and report important accounting information to their superiors. This project report aims to provide a comprehensive account on how different management accounting systems enable decision-making as well as reporting. For this purpose, Oshodi PLC has been taken into consideration which is a manufacturing entity that is dealing in the production and distribution of fruit juice named 'JOJO' across all age brackets. Additionally, a critical analysis of how such systems help in resolving various financial problems has also been taken into account in order to analyse their role in achieving sustainable success by the organisation.

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TASK 1

P1. Discussing Management Accounting and the essential requirements for different types of such accounting systems (MAS)

Managerial Accounting can be defined as the presentation of accounting information that specifically relates to a stipulated time-period and enables the internal management authorities to make informed decisions in regards to the achievement of company's strategic goals or objectives. Most of the accounting information is financial in nature, however, its presentation plays a key role in determining how well it is able to cater to the needs of different departments and authorities across various organisational levels. Thus, there are different types of management accounting systems which are relevant to various organisations based upon their requirements, nature, size and complexity of the business. Essentially, a Management Accounting System (MAS) can be referred to as those internal systems which are utilised by organisations in order to measure and evaluate various business processes in order to facilitate overall decision-making by the company managers.

In the context of given case scenario, Oshodi PLC has a wide variety of management accounting systems which have been enlisted and discussed in the following manner:

  • Inventory Management System: This system relates to the effective analysis of stock levels, product history and other related specifications for inventory that are generally related to raw material, work-in-progress as well as finished goods manufactured by a particular business. For businesses such as Oshodi Plc, one of the most crucial requirement for the successful implementation of such MAS is to have proper alignment between the inventory policy and the production processes. Through the integration of comprehensive tracking inventory systems along with a detailed characterization of both supply and demand of each product in terms of material, labour and expenses Oshodi Plc can achieve effective management of stock. Thus, resulting in cost savings and resource optimization for Oshodi which can eventually provide the company with a competitive edge over other industry players.
  • Cost Accounting System: This system assists the managers to analyse past, present and future data which mainly relates to the established as well as forecasted budgets, standard costs and actual costs. A cost accounting system would enable a manufacturing entity such as Oshodi Plc to fix a reasonable sales price of the products that are manufactured by the company. In order to be effective, such a system must be economical in nature, easy to understand and operate. Since a business manager is required to maintain an impressive corporate performance as well as profitability over the course of its life, such a system would enhance the analytical abilities of Oshodi's manager in regards to individual product and classes, operations as well as departments.
  • Price Optimization System: This system is one which uses mathematical algorithms in order to recommend prices in order to improve profitability which is specifically based upon different level of product demand and supply in combination of cost and inventory data. In order to remain competitive, an organisation may be required to undertake various strategies. One such strategy relates to Product Pricing which enables the business to gain maximum value from the sale of one unit of product. Thus, for a price optimization system to be effective, it is important for companies including Oshodi Plc to critically analyse their pricing strategies, value of product to both buyers and sellers and factors impacting overall profitability of the company as well as the related product.
  • Job Costing Systems: This type of management accounting system includes the aggregation of data relating to various costs incurred specifically in relation to different production or service jobs undertaken by the business. In order to be effective, a job costing system is required to obtain information on Direct Materials, Labour and Overheads. Wherein, the job costing system must be able to successfully track the cost of raw materials, labour and assigned overhead including depreciation for Oshodi Plc.

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Conclusion

From the above report, it can be concluded that Management Accounting Systems play a crucial role in enabling the internal management to make informed decisions. Apart from this, different managerial reporting frameworks also help in the effective utilisation of accounting information so as to enhance such decision-making activities and enable the businesses to focus upon the successful attainment of their goals, specifically in relation to corporate performance as well as profitability. Apart from this, different costing techniques must also be evaluated in order to provide a wholesome and genuine view of company's financial position as well as health. Thus, asserting the fact that it is highly important for the business managers to understand and present accounting information in a manner which is not only useful for the authorities but also to the various stakeholders of the company.

References

  • Alsharari, N. M., Dixon, R. and Youssef, M. A. E. A., 2015. Management accounting change: critical review and a new contextual framework. Journal of Accounting & Organizational Change. 11(4). pp.476-502.
  • Bedford, D.S., Malmi, T. and Sandelin, M., 2016. Management control effectiveness and strategy: An empirical analysis of packages and systems. Accounting, Organizations and Society. 51. pp.12-28.
  • Bromwich, M. and Scapens, R. W., 2016. Management accounting research: 25 years on. Management Accounting Research. 31. pp.1-9.
  • Chenhall, R. H. and Moers, F., 2015. The role of innovation in the evolution of management accounting and its integration into management control. Accounting, organizations and society. 47. pp.1-13.
  • DRURY, C. M., 2013. Management and cost accounting. Springer.
  • Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic business environment. McGraw-Hill Education.
  • Hopper, T. and Bui, B., 2016. Has management accounting research been critical?. Management Accounting Research. 31. pp.10-30.
  • Kaplan, R. S. and Atkinson, A. A., 2015. Advanced management accounting. PHI Learning.
  • Kastberg, G. and Siverbo, S., 2016. The role of management accounting and control in making professional organizations horizontal. Accounting, Auditing & Accountability Journal. 29(3). pp.428-451.
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