Management Accounting System - Ryanair

TASK 1

P1 Definition of management accounting:

Management accounting is that branch of accounting which assist managers to make decision, devise companies strategies, help in making planning, and policies for the organisation. They also provide required and necessary financial information to the managers as when required.

The scope of Management Accounting is wide, as it includes both Cost Accounting and Financial Accounting in it, but it different in functioning as cost and financial accounting is generally done for the outsiders who are interested in the business but management accounting is completely used by internal management, moreover it is done regularly not as year end or at end of any financial accounting period. The methods for management accounting are; capital budgeting, ratio analysis, budgeting and working capital analysis, etc.

Management accounting caters the internal needs of the business and work upon it, the information collected by the managers are used by the managers internally to improve the working of the organisation, they help to make plans and policies for the organisation. It is an evolutionary subject and yet has scope of more to developed as profession so it is important to have a detailed and proper knowledge of the subject as a whole.

Essential requirement of different types of management accounting system:

The management accounting focuses on the proper functioning of the business so as there are some management accounting system they are: (Fullerton, Kennedy, and Widener, 2013)

• Cost accounting system: It means to assist managers to control it cost of product or operations in order to increase the profitability of the firm. The managers guides to take up a best course of action in order to achieve the maximum result out of it. The Ryanair has introduced Low Operation Cost, in regards to there customers, personal expenses, Aircraft equipment cost, which enables the company to earn more profit in low time.
• Inventory management: This means to properly handle the goods or inventory of the company from the manufacturing units to the point of it sales. The Ryanair has manage the inventory by introducing to purchase aircraft's from the same company so as it would be easy to manage the handling of aircraft's and training and accommodating there employee.(Zoni, Dossi, and Morelli, 2012)
• Job costing system: It analyses the profit of the company by the revenues earned from jobs. The Ryanair has able to earn from it reducing labour cost as the company tries to maintain it's highly competitive workforce, by increasing there wages and benefiting them with incentives.
• Price optimisation system: To adapt the best price for it products/ services which will be suitable for the company and the customer willingness to pay for it will help the company to gain profits. The company has introduced fair prices for the business travellers and the conscious leisures so that get to travel on the plane this will bring profits to the pocket of the company (Ward, 2012).

Users of Management Accounting Reports:

Management accounting is used by managers, employees and staff menbers who work in the Ryanair.

Difference between financial and management accounting:

P2 Method used for management accounting reporting:

Management accounting uses different methods to get necessary information internally and then frame it to use properly for internal managers which are:(Anandarajan, et. al 2012.)

Budgets: To make a report on various operations of the company the best technique used by the mangers is by preparing budgets. Managers prepare various types of budgets including all the activities like Sales, Production, Administrative expenses, Sale expenses and the financial budgets.