Analysis of Management Accounting - Jupiter PLC

This report pertains the knowledge about the management accounting its objectives and techniques of management accounting, also it pertains the comparison of two entities in context of management accounting tools and their use in solving the financial issues etc. these all contexts are examined with the illustrative example of Jupiter PLC for the better understanding of the management accounting and systems.

TASK 1

Explanation regarding management accounting, its importance and management accounting systems

Management accounting is that branch of accounting that is engaged in the preparation of managerial or business operations reports. It means the management accounting pertain the knowledge process of preparing and maintaining the statistical and financial reports of the business operational transactions and mainly engages in the costing of the business operational transactions. Under the management accounting, several techniques are involved for the purpose of proper analysing, summarising and ascertaining the effectiveness and the efficiency of the business transactions and also for the purpose of preparing the managerial or business performance record in appropriate form of informational report, which is to be communicable for with the business heads and other users(Watts and McNair-Connolly, 2012). Mainly the management accounting report provides information regarding the product, plant, operational projects. There are different methodology used under the process of management accounting such as Inventory management, cost accounting, Job costing system and price optimising system etc. used by the business entities like Jupiter PLC for the proper analysation and ascertainment of these managerial operations in appropriate useful format or report.

There are some objectives of the management accounting system are as follows.

• Beneficial in proper planning and formulation of future policies.
• Facilitates better interpretation of the financial information.
• Ensuring effective controls over the performance.
• Helpful in better coordination.
• Facilitates effective motivation to employees.
• Acts as the solution of the strategic business problems.
• Ensuring the evaluation of effectiveness and efficiency of business policies.

Explanation about the methodology and reporting of the management accounting

The managerial accounting pertain the tasks such as planning, controlling and decision making, these tasks are performed on the basis of the managerial reports prepared by using the management accounting techniques and planning tools. These techniques and tools are used by the organisation like Jupiter PLC in order to proper categorized the business transaction and costs and revenues occurs from the operations of the business. These all relevant business information are recorded in several books of managerial reports for the proper evaluation. Some of the managerial books or reports are as follows.

Cost Reports: The cost reports are used to record all the relevant costs incurred in operating the business activities. Such as in production various costs are incurred by the business like labour, fuel, raw materials etc. these costs are record, classified and analyse in costs reports according to their nature that is fixed or variable(Suomala and Lyly-Yrjänäinen, 2012)

Budget reports: Budgets are set of several costs and revenues which may be incurred or earned by the future operations of the business entity like Jupiter PLC. The budgets are prepared on the basis of past recorded data and use for estimating the future projections. Each and every business entity prepares budgets for the projects.

Execution report: The main purpose of this method is to execute the business operations which is crucial to identifying the errors existing in it. Reporting by using this method provide a strength to management to face future uncertain demand and additional expense which may occur(Welford, 2016).

Describing the advantages of the management accounting system and their applications

There are some advantages enjoys by the business entities like Jupiter PLC, by using the management accounting system. Also the applications of management accounting are described below.

Increment in abilities: No doubt the management accounting system ensures the increment in the ability of management to perform the organisation's management in performing future operations. By improving the effective and efficiency in performing operations and recording analysing and reporting of operational information in form of several managerial reports(Tiron Tudor and Mutiu, 2012)

Increase the profitability: By maintaining proper record of each business operation in form of managerial reports and by using various management accounting techniques for analysing and ascertaining the profits form the business operations helps in accomplishing the business entity's goals of profit maximisation.

Quick Decision making process: management accounting system ensures the proper maintenance of the record of business transactions. It is beneficial in making better analysis and comparison for the future operations also for making quick decisions regarding the future operations of the business.

Effective Controlling: The organisation like Jupiter PLC management accounting system maintain the proper record of the business operations and pertain the report of every transaction this ensures the effective control over the business activities by eliminating the errors and frauds. So the management accounting ensures the direct and effective control over the business operations of the entity.

Forecasting from past results: The management accounting system records and maintain the past years records of the business operations which are beneficial in quantifying and identifying the growth rate and the progress of the organisation.

Achievement of objectives: by ensuring proper analysis along with the quite well maintenance of business transactions and by reducing the cases of delays in decision making and with profit maximising the management accounting techniques help the business entity like Jupiter PLC in accomplishment of desired objectives(Coronel and Morris, 2016)

Description regarding the management accounting system and management accounting reporting integrated in organisational processes

It is true that the management accounting techniques and the management accounting reporting both are crucial for the processing of the managerial accounting. On one side, the management accounting techniques performs the function of analysing and ascertaining the transactions of the business operations for the preparation of several managerial accounting reports and on the other side the management reporting is also essential for the proper reporting and communicating the channel for the flow of information from the managerial level to the administrative level(Myers, 2013). As the several accounting reports maintained after the brief analysation by management accounting techniques, these reports are transferable by the managerial level to the top level or administrative level for the effective decision making regarding the current or future business operation. Thus, the management accounting system and management accounting reporting integrated in organisational process.

TASK 2

Quantification of Net profit by using absorption and marginal costing techniques of Management accounting

Absorption costing: Absorption costing means the analysation of all costs that are related to the manufacturing and which are absorbed by the units produced. The costs of the output in the inventory stock record includes the direct material, direct labour etc. moreover, fixed and variable costs that are associated with the production activity of goods and services of the organisation.

Marginal costing: Marginal Costing refers to technique of costing where the variable cost is chargeable to units cost and the fixed costs for the period is chargeable form the contribution. Besides this, Marginal costing is the process of ascertaining the marginal cost and the changes in volume of profit or type of output by differentiating between fixed costs and variable cost.

The illustrative example of these two costing techniques are as follows.

TASK 3

Advantages and disadvantages of different types of planning tools used in budgetary control

Under management accounting, there are only three types of planning tools for controlling the budgetary process of the business entity like Jupiter PLC. There are some advantages and disadvantages of different types of the planning tools.

Forecasting planning tool: The forecasting planning tools help the management in the process of forecasting the budgets or expenditure incurred while performing the business operations with a motive to generate the revenues (Siverbo, 2014). Forecasting is divided into two types of methods are Judgement forecasting and Quantitative forecasting. The advantages and disadvantages of forecasting are as follows.

Scenario planning tool: The scenario planning tools for budgetary control is known as Scenario thinking and scenario analysis. This tool is used by the business entity like Jupiter PLC for the purpose of knowing the facts that about the future like social, technical, economical, environmental and political future trends that are necessary to analyse or predict in order to make effective decisions for future operations(Zoni, Dossi and Morelli, 2012). Some of advantages and disadvantages of the using of Scenario planning tool for budgetary control.

Contingency planning tool: The third, is the contingency planning tools which is prepared with the motive to minimise the effects of contingencies and uncertainties occurred with the business entity and its operations(Quinn and Jackson, 2014). There are some advantages and disadvantages of the contingency planing tool used for budgetary control are as follows.

Analysation of the different planning tools used for the purpose of preparation and forecasts the budgets

There are mainly three types of the budgets used for the purpose of the preparing and forecasting the budget for the future business operations. The planning tool along with their applications are as follows.

Forecasting planning tool: Forecasting planning tool is used for the purpose of making future projections. There are two methods of future projections under the forecasting tool and the two methods are Judgement forecast and quantitative forecasts. Mainly the quantitative forecast is used by the business entity like the Jupiter PLC (Bovens, Goodin and Schillemans, 2014). The applications of forecasting planning tools are as follows.

• Mainly used in forecasting or planning regarding the production target as it is beneficial for effectiveness in production schedule, inventory management etc.
• Quantitative forecasts is usually applicable to forecast the performance of the organisation and appraisal of the organisation like Jupiter PLC on the basis of past, present and future performance of the entity.

Scenario planning: This tool is used by the business entity like Jupiter PLC for the purpose of prognosticate the information about future like social, technical, economical, environmental and political future trends that are essential to examine or foretell in order to make effective decisions for future operations. This tool is applicable in following cases.

• The scenarios are applied for the better understanding of the different issues important for the future of the entity, assist in fixing the plans for the future issues.
• The scenario planning applied by the business entity like Jupiter PLC, for multiple intentions of increasing the knowledge of future of business environment and eliminating the influencing factors also it helps in removing the several issues of several departments(Weigand and Elsas, 2012).

Contingency planning tool: it is also known as the back-up plan of uncertainty, it means the contingency plans are beneficial in facing the unforeseen future liability or unfavourable event. This contingency plan is applicable in following situations.

• It is usually applied for the continuous functioning of the business operations without affecting by unforeseen events like natural disasters and any other contingent event.
• It is rarely applied in case of failure of executed plan due to any reason, in this case for the effective functioning contingency plan is used.

Analysing various budgetary planning tools essential for responding the financial issues

The main three budgetary control tools that are forecasting, scenario, contingency tools used by the entity like Jupiter PLC in order to make the proper analysation of the future issues which can influences the financial performance and also helps in reducing the affects of financial issues by by applying the identities like Benchmarking, and Key performance indicator.

TASK 4

Comparing the Jupiter PLC with other business entity on the basis of solving issues of financial problem by budgetary planning tools

There are various techniques under the budgetary controlling tools, which are useful for solving the financial problem in an organisation like Jupiter PLC. The commonly used techniques are as follows.

Key performance indicators: KPI refers to the technique used for the purpose of evaluating the performance of the employee. This technique is also used for the purpose of comparison of past and present performance of the business. The KPI method ensures performance appraisal of employees helps in better productions as well as better outcomes this reduces the chances of the financial shortage(Flamholtz, 2012).

Benchmarking: It is also an effective method used with the motive of measuring the performance of products and services in market, by the organisation like Jupiter PLC. The techniques focuses on the improving the efficiency and effectiveness in operations ensures the better quality of products as well as the better performance of the organisation. Thus, reduces the cases of financial issue.

The comparison of the Jupiter PLC with the EveryJoy enterprise in context of responding the financial issues.

Describing the contribution of management accounting in accomplishment of organisational sustainable success

Management accounting engages in analysing and performing the managerial tasks for the proper analysation and the evaluation of the business operations and also for the motive of reporting the managerial operational information which is very crucial for the management and administration for making the business decisions. On the basis of these reports the top level or administrative level becomes able for effective decision making regarding the current or future business operation.

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CONCLUSION

From the above report, it has been concluded that the management accounting and systemare inevitable for the proper recording and analysing the business operational information and the techniques used under the management accounting system are crucial for the proper evaluation of the business information. Thus, the managerial reports are prepared after the long procedure of recording and analysing. These managerial reports are transferred to the administration and to other internal users within the organisation for the motive of making useful decisions for more betterment.