Management Accounting - Rowlinson Knitwear

The project report is all about various types accounting systems and reporting that are needed for making crucial decision making in near future time. While all types of costing method which are needed for calculating net profit for the company are discussed under this report. Examine advantage and disadvantage of using planning tools that are needed to control budget for the company. Lastly, comparison of various management accounting systems in respect to overcome all financial issues that are arises in an organization is discussed under this report.

TASK 1

P1: Concept of management accounting and their essential requirement in an organization

In the present scenario, it has been determining that companies are producing maximum number of products within an accounting period of time. During this process, they are incurring various amount of transactions, whether related with financial or non-financial at the same point of time. The role of managers is getting vaster as they have to make continuous planning for recording all those transactions that are incurred in a single day. They are held responsible for managing and controlling all vital aspects which are helpful for Rowlinson Knitwear company in order to attain their future aims and objectives in more effective manner. Management accounting plays a vital role in any business organization in current time and henceforth, they can make sufficient decision making in context of future growth of the company (Klemstine and Maher, 2014). It has been found that business in present time need to go with all kind of business wants through analyzing overall performance information that are goes beyond using management accounting system and other reporting methods those are valuable for the company for the longer period of time. The role of management is to provide all necessary services and standards those are crucial for an organization to increasing overall productivity of the department. While accounting deal with recording, summering and analyzing all financial information that are generated within a financial period of time. Mangers uses the provision of accounting data in respect to make better inform themselves before they make any decision within their organization. It is looks at those events that are going to be happen in and around a business while considering the needs of enterprises. By using this, data and predication gets emerged in proper manner.

Definition

: Management accounting is the one of the systematic process of analyzing business costs and data to formulate internal financial statements, records and account to assist managers to make decision more effective (JOSHI and et. al., 2011). This will help them to attain their aims and objectives in more crucial decision in coming future. In other words, this act of making sense with financial and costing information for management officers can be more reflex to get healthy return in near future period of time. There are certain important aspects which is needed to be taken into account. Some of them are discussed underneath:

For planning:

It is an important part of planning which is needed for the future estimation and budgeting process. It would make relevant contribution to the company’s cash forecasting and long term financial planning.

Controlling

: On of the major role of financial managers is to gather all vital information those are needed for planning. The management accounting system assist in setting standard performance of Rowlinson with the actual outcomes and make analysis all those variances out of them (Brewer, Sorensen and Stout, 2014).

Decision making:

The function of management accounting is to make valuable decision in order to get reliable outcomes in coming period of time. These are capable enough to make use of all resources those are crucial for the betterment of the company in near future.

Types of management accounting system:

Cost accounting system

: It is known as one of the effective system which is design by firm to estimate the cost of their product for making profitability analysis, stock valuation and control all those additions cost that are incurred by the company. The proper estimation of cost can be major aspects for attaining profitable operations. It is mainly used by produrcers to record all production related activities. The manager uses this system as internal reporting for an organizations own management for making future decision.

Inventory management system:

It is said to be one of the vital application uses by the company in order to track stock level, orders and sales or deliveries detail. It can also be helpful in the production units to formulate a work order, bill of goods and their manufacturing related documents (Bennett, Schaltegger and Zvezdov, 2013). It uses to track all product through the entire supply chain or portion of their business operation. There are certain aspects related with this system are mentioned underneath:

EOQ:

It is known as a specific number of units that Rowlinson company used to include to stock with each order to reduce the total cost of stock. Such as ordering cost, holding and shortage cost. It seems to be one of the oldest method of scheduling model use by the company’s

ABC costing

: It refers as accounting method that is used to categories cost to overhead activities and assign those cost to products. All those cost such as staff salaries and other vital expenses are few times hard to assign to a given product (Amoako, 2013).

Price optimization system:

This happens to be the process of determine that pricing spot or increasing cost against the customer perception to pay. It is mainly considering as mathematical evaluation done by company to examine how customer would react to various prices for their product and services from various channel. This is also used to analyses the prices that the company used to consider will be more effectively assess them to attain maximum profit in coming period of time.

Job costing system

: It is simply used to accumulate cost at very minimum unit level. It is appropriate system that is allotted to an individual product or group of product. Basically, the job order costing is reliable to make use of only those products that are produces will be sufficiently different from one another. There various techniques used in this process are batch costing, process costing etc.

Benefits of using

management accounting system

: In order to attain more reliable profit in coming period of time, managers need to make use of various accounting systems that are profitable for the company. Looking into the facts, all the above mentioned accounting systems are equally beneficial for an organization. Such as cost accounting systems is use by company to control all additional costs that are incurred during production process. While, inventory management systems are essential to manager and regulate their stock position in more effective manner. Likewise, job costing and price optimization is more reliable for increase better outcomes in coming period of time (Gond and et. al., 2012).

P2: Various types of accounting reporting method

Business reporting is one of the crucial reporting of operating and make financial data by a business enterprises and regular provision of data to make appropriate decision making within an organization to get more reliable outcomes near future time. By the help of report, a company would be able to detect all essential aspects those are affecting the business can easily be determining. It is considering more reliable aspect for investors to make proper analysis of reports and financial position of the company. There are various sources from which data can be collected those are considering for making future decision (Abdel-Kader, 2011). The reporting to administration is a valuable process of providing data to various level of the department so as to enable in budgeting the effectiveness of their role and responsibility centers and become a valuable base for taking necessary steps in case any urgency arises in the department. It would be well planned or organized so that better opportunities chances can be arises for the company for longer period of time. All the reports prepared is for attaining more reliable outcomes in near future. There are various sources of reporting systems which will be consider for analyzing performance of the company. Some of them are discussed underneath:

Performance report:

It is known as one of the effective report which is being prepared for the determine overall aims and objective of actual and standard performance of an organization. These are needed to be taken into account which will be essential enough to attain more reliable outcomes in coming period of time. It consists of specific evaluation of communicating project progress, disseminating project development and estimating future progress of the management plan.

Investment management report:

It is known as one of the vital report that is being prepared for the purpose of managing and regulation which stocks that are being kept by the company with them. There are various types of stock valuation methods which are needed to be taken into account while analyzing the position of stock. All the opening and closing information about the companies inventories are recorded into their respective statements.

Account receivable report

: As per this particular report which is being prepared in respect to determine total list of unpaid customers invoices and credit amount memo as per the memo data. These are more reliable in respect to analyze total time period of retain all outstanding amounts which are needed to collect from various debtors (Hiebl and et. al., 2015).

Job cost report

: It seems to be more profitable for the company to make formulation this reports which provide information about each individual products that are going to be prepare by an organization during the period of time. All costs that are incurred during that period of time are taken into account to make proper balances among each another cost that are incurred for attaining operations gains for the company.

Analysis of various accounting reporting method

All the above mentioned reports are equally responsible for attaining more benefits in coming period of time. The role of accountant is to prepare report by taking information from various departments that are operating in an organization for attaining future aims and objectives. Performance report is prepared to analyze financial position of the company by using budgeted and actual outcomes of the company. While account receivable report is formulate in order to determine total outstanding amount that is collected from debtors. Job cost report is considered for attaining maximum return from each job is examined effectively.

TASK 2

P3: Various types of costs that are used to calculate net income

Cost is considering one of the valuable aspects for the company. It is required for the purpose of attaining future aims of the company that is charged for the production of product and services. The manager of Rowlinson Knitwear need to make future planning for increasing maximum sale for the company and increase profitability of the company. Costing is an essential process which is being used to determine total cost is incurred during the process of producing one additional unit. There are various types of direct costs which will be applicable during production process. Such as direct cost of material, labor and other overhead costs that are needed to be taken into account (Al and McLellan, 2011). It is more reliable process of recording, categorizing, summering and evaluating total cost those are related with formulating different course of action to manager all costs that are incurred within an accounting period of time. The recording of every cost incurred in a business in the manner that can be used to improve management systems of the company. There are various types of cost which are needed to be taken into account for the purpose of calculating net incomes of the company. Some of them are discussed underneath:

Absorption costing:

It refers as all those cost which are incurred during with all production cost that are use by manager. It consists of both variable and fixed cost in order to calculate manufacturing of products. Because of this, it is known as full costing method. In spite of having all the crucial benefits to an organization it is not taken into account for future decision making.

Marginal costing:

It is known as one of the effective costing methods which is being used by an organization is order to determine all those costs which are incurred with the production of one additional units (Laine, Paranko and Suomala, 2012). It used to consider only variable cost and fixed cost generated during the manufacturing process gets written off. The major benefits to this company is that managers used to consider this costing more effective in terms of making decision making in coming period of time.

Comparison:

Analysis of various management information techniques

There are various types of accounting techniques which are essential enough for attaining more reliable outcomes in coming period of time. This will assist them to manage and regulate all data or resources that are incurred within an accounting period of time. Marginal costing tools are more accurately used to evaluate net income of the company. Standard costing techniques is used to analyze actual performance that are related with financial stability of an organization within financial period. All of these are more suitable enough to reach at their aims and objectives those are set by the company for coming next year.

Computation of Net profit by using absorption

costing

Income statements

Calculation through using Marginal costing Income statements

Interpretation of data collected from the income statements

There are mainly two important methods of costing selected for the purpose of calculating net profit during an accounting period of time on the basis of collected information. One is absorption and another one is marginal costing. The result is fluctuating for either of them. In case company goes on to use absorption costing they are able to get 7500 of net income. While in case they are using marginal costing they are getting 8000 of total gain. The major fluctuation of determine because of fixed cost valuation. Instead of all the factors, manager needs to select the one which is more profitable for longer period of time.

TASK 3

P4: Various types of planning tools that are used to control budget

Planning is an essential part of every business. It will assist an organization to attain their aim and objectives in more reliable and effective manner. In this process, budget of the company plays a vital role in regulating and controlling their cost and expense that are going to be incurred in near future period (Klemstine and Maher, 2014). The effective procedure of planning events in an organize manner so that they are effectively or happen on the decided timeframe. The main objective of the company requires investment and planning, but it is possible that proper arrangement of resources can be done in accurately. It is a kind of route map which is being used to manage and plan their future activities through using certain tools and techniques.

Budget

: It is known as one of the accurate financial plan which used for the period of time, usually an accounting period of time. It can also consist of planned sales and earnings, cost and expenses as well as cash flows. This seems to be estimation of profit and loss for a definite period of time. It is an estimation of incomes for attaining overall growth for the company in near future time. There are various planning tools which will be helpful to meet the goals, managers that can develop plans like business plan or marketing planning. There are various types of planning tools which will be effectively reliable for attaining more reliable results in near future time. Some of them are discussed underneath:

Forecasting tools

: These are known for historic data to determine the overall direction of future trends. Business can make utilization of forecasting to estimate about total allocation of their budget or plan for anticipating expenses for coming period of time. This would assist management to cop up with the uncertainty of coming event and issues those are related with the business.

Advantage:

A company like Rowlinson knitwear which is using a wide range of forecasting techniques to assess best possible results for the company. These method is being used by an individual that are depend on data those are present in an organization’s

Disadvantage

: The main limitation of using forecasting tools is that it is not eventually possible to predict future. This can be happening because of qualitative nature of estimation (Soin and Collier, 2013).

Scenario planning tools

: As per this aim of planning tools is to generate forecasts based on certain specific kind of situation. In accordance with Delphi and forecasting methods in which outcomes is intended to be more likely. In this planning process they are having a low probability of happening. It is the structure based for an organization to think regarding the coming future. A team of executive sets out formulation plans about future issue that can be arises in an organization.

Advantage

: They need to be able to formulate scenario for market to enable them to consider their implication for future as it remains unfolds. It is considering as fundamental exercise and crucial for management planning (Scenario Planning, 2018).

Disadvantage

: As it has been used for facing any kind of situation which are affecting the decision making of the department. The main drawback of using this tool is that it does not assist them to make proper planning.

Contingency plan

: It is known as one of the crucial plan which is devised for results other than the usual strategies. This seems to be often used for risk management. It is operating in that condition in which any unconditional risk those are affecting the profitability position of the company can be removing by following these planning tools.

Advantages

: This will provide all the limitation and formulating to deal with all things that cannot be avoided. Such as natural disasters, terrorism and other events. All the business risk those are affecting the productivity of the company can be remove by using this kind of planning tools.

Disadvantage

: There are various kind of limitation of using contingency tools such as inadequate literature available with the company. It is also more complex and hard for empirical testing.

Analysis of various planning tools

There are various effective ways that can make company more profitable for longer period of time. All the above mentioned planning tools are sufficient enough for controlling various budgets that are being prepared by the company within an accounting period of time. Forecasting tools is liable to make estimation or control additional cost those are going to be incurred by the company during the time. While contingency tools are helpful for removing all financial risks those are affecting overall business of the company. All of them are equally profitable for Rowlinson Company to manage their internal and external department (Christ and Burritt, 2013).

TASK 4

P5: Various ways to overcome all financial issues

Finance is seen as most indispensable aspect for company success because it act as a lifeblood for overall organization as business activities are managed with the use of funds. In fact, selected firm is adopting modern method of managing all the business activities for resolving the problem in suitable manner. However, it has been assessed that while managing financial activities managers are encountering numerous of major issues and problems due to which profit of an association is getting affected. Some of the major financial issue that is identified is discussed as follows:-

Inappropriate cash inflow 

According to this element an organization is facing a major problem of funds and issues at workplace while flowing the cash while entering into contracts. Sometime, cash get increased and decreased due to fluctuation in several other factors. As a result company is encountering major issue of capital and not able to perform any business activities (Wickramasinghe and Alawattage, 2012).

Quality of products and services

As per this element if an enterprise is facing an obstacle of goods quality then it might create problem by increasing the funds of manufacturing department. As requirement of additional expense is getting requisite as company get failed in fulfilling the client’s needs and demands.

Hence, all these above three financial problem is affecting an organization in various manner but at the same time company is having number of factors that helps in overcoming this problems in a defined time frame. Some of the major factor that is used by company for reducing financial issue is discussed as follows:-

Benchmarking

It’s all about the company needs to set an organizational target for assisting all the company members towards their job role as well as enforce staff members to gain maximum benefits. Additionally, it aids in directing staff towards set targets in a defined time frame.

KPI

: - It stands for key performance indicators which will be consider for analyzing performance of the company by using past and present year finance data.

Comparison

Critical analysis of financial problems

It has been determine that there are various aspects which will be affecting the growth and stability of the company. Some of the financial issues those are related with cash flow of the company, product and service quality that are related with financial position. These are helpful for an organization to completive with all other competitors those are operating their business at large scale.

Analysis of financial issues

There are various important aspects those are affecting overall growth and sustainability within an organization. There are various financial tools that can help the company to overcome financial issues those are arises in an organization. Some of them are key performance indicators, benchmarking and financial governance that are more reliable for future enhancement.

CONCLUSION

From this particular project report, it has been concluded that management accounting is an essential part of an organization which will be helpful for the company to manage their financial situations which are arises in the department. For this purpose, various accounting and reporting systems is being taken into account those are discussed in the above. With the help of costing methods a company would be able to calculate net profit for the company. In order to control their budgets some planning tools will be more desirable in coming time. All analysis is done to attain more reliable outcomes for the company in near future.

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