Question : '
The purpose of this report is to determine fundamental of management accounting and its application in a business organisation. These practices will determine that how financial data can assist in business planning and decision making.
- Provide a clear understanding over system of management accounting within Rowlinson Knitwear.
- Discuss application of management accounting techniques for Rowlinson Knitwear.
- Determine how planning tools can be used in management accounting.
- Determine the effectiveness of management accounting in terms of resolving financial issues of firm.
Accounting is a systematic process of identify, recording, summarising and interpreting financial data in effective manner. While management is held responsible for provide all necessary requirements or support to financial accountants in respect to make better report during an accounting period of time. The major objectives of doing so is to attain more benefits through proper utilisation of resources of an organisation. It reveals profit or loss for providing specific value of nature of firms assets, liabilities and companies owners. This consists of at least two recording entries for all essential transaction that are done in a financial period of time.
This particular report is providing crucial information about accounting and reporting methods those are useful for evaluating financial transactions in proper manner. Calculation of net profit through using various costing method. Merits and demerits of various planning tools helpful for budgets control. However, analysis of financial issues those are being arises in an organisations are done by making comparison among other companies. Further, some financial tools are used to deal with all issues that are present at internal level (Wickramasinghe and Alawattage, 2012).
P1: Discussion about management accounting and their essential requirements
Nowadays, it has been determine the management of every companies are always looking to have a well effective accounting systems that are assist them to record their every day financial transactions that occur during the period of time. The main aim of finance managers is to attain organisation aims and objectives that are always be helpful to make future planning to increase growth and profitability for longer period. There are various sources from which data can be collected that are always helpful for companies like Rowlinson Knitwear (Lavia López and Hiebl, 2014).
Management accounting is said to be continuous improvement process which is aid to planning, formulating, measuring and operating both financial and non-financial data of an organisation. It used to motivate behaviour and support or create cultural values which is necessary to attain an organisations strategies and operational objectives within financial departments. The main trust of this term is towards crucial policy and developing plan to attain desired objectives of management. It assist administration in planning and analysing the performance of an organisation in respect to follow right directions of regular improvements. It would utilises the principles and practices of financial accounting in addition to other modern management tools for effective operations of an organisation's.
Definition: According to the “IMA”, Management accounting is said to be an important profession that consists of pertaining in management decision-making, planning and performance management system and providing valuable reporting and assistance to management in near future time (Akbar, 2010).
Role and principles of management accounting system:
- Designing and compiling: It is known as accounting information, record and other evidences of past that should be designed and complied to meet the requirements of specific business and financial issues.
- Management by exception: This principles of administration through exceptions which is being followed in presenting information to an organisation. The unfavourable deviations that alone are informed precisely to management.
- Control at sources accounting: Cost are said to be an essential controlled at the point at which they incurred during the period of time. The performances of individual workers, details of material issues and proper utilisation of various resources of Rowlinson Knitwear (Leitner, 2013).
It used to provides information to an individual within an organisation.
It is mainly for external parties such as investors and shareholder.
In this case there is no need to follow any kind of rules and laws.
While preparing any kind of reporting accountant need to follow certain kind of laws.
It occurs with particular products and costs centres during an accounting perio
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