Managerial Accounting Theory
Part A: DIFFERENCES BETWEEN MANAGEMENT ACCOUNTING & FINANCIAL ACCOUNT
1. Managerial Accounting: The activity involves ‘decision making’ whether to purchase parts already assembled or individual parts.
2. Financial Accounting: It shows that the President is reminding Aminah to prepare a presentation stating an income statement and balance sheet information for last year, which the information already exist.
3. Managerial Accounting: Planning, controlling, evaluating and continuous improvement , as to expand the company’s expansion, to provide depreciation information for budgeting purpose. It is use to plan and control the budget of their office
4. Financial Accounting: The information required is from the past. Cash flow, depreciation and expenses of the company.
5. Managerial Accounting: budget spending on material were higher than expected, so they had to set up a meeting to discuss the result and make some planning, controlling, evaluate on how to improve the company’s spending. Eg, simply order on what material is needed rather than storing excess stock.
Part B: Activity Based Accounting
a. The introduction of an activity based costing (ABC) as a basis for a company’s management accounting information is to provide accurate product/service cost information. Explain
An ABC systems assigns costs to product based on the product’s use of activities, not the quantity produced. It first traces costs to activities then to products. What make it different from traditional method are the cost drivers that are used. The approach splits overhead costs into over head cost pool, where every cost pools associated with different cost driver. Then a predetermined overhead rate is computed for each cost pool and each cost driver.
Benefit;
* Improve product or service cost data
* Decision in pricing, service mixes and product strategies based on more accurate cost information
* By eliminating the non-value added
1. Managerial Accounting: The activity involves ‘decision making’ whether to purchase parts already assembled or individual parts.
2. Financial Accounting: It shows that the President is reminding Aminah to prepare a presentation stating an income statement and balance sheet information for last year, which the information already exist.
3. Managerial Accounting: Planning, controlling, evaluating and continuous improvement , as to expand the company’s expansion, to provide depreciation information for budgeting purpose. It is use to plan and control the budget of their office
4. Financial Accounting: The information required is from the past. Cash flow, depreciation and expenses of the company.
5. Managerial Accounting: budget spending on material were higher than expected, so they had to set up a meeting to discuss the result and make some planning, controlling, evaluate on how to improve the company’s spending. Eg, simply order on what material is needed rather than storing excess stock.
Part B: Activity Based Accounting
a. The introduction of an activity based costing (ABC) as a basis for a company’s management accounting information is to provide accurate product/service cost information. Explain
An ABC systems assigns costs to product based on the product’s use of activities, not the quantity produced. It first traces costs to activities then to products. What make it different from traditional method are the cost drivers that are used. The approach splits overhead costs into over head cost pool, where every cost pools associated with different cost driver. Then a predetermined overhead rate is computed for each cost pool and each cost driver.
Benefit;
* Improve product or service cost data
* Decision in pricing, service mixes and product strategies based on more accurate cost information
* By eliminating the non-value added