ASSIGNMENT 3

Assignment 3

Assignment 3

Introduction

Every business needs to be managed by using different management tools. The different management tools for organization owners are accounting, finance, marketing, production and etc. These tools help the owners to manage each part of the business properly and ensure that all the departments of an organization are working according to the plan and goals lay down by an organization. In order to control the activities of an organization it is very important for the firm to understand the difference between the financial and the management accounting so that the firm is controlled internally and externally. The difference between the two accounting methods will enable the owner to separately monitor the activities within an organization and outside the organization. In order to run a transport business it will be necessary to manage the finances, resources of the business, develop cost estimation by determining the cost involved in a transport business and on the basis of the cost estimation determine the pricing of the services provided by the business. The report will enable the owners of the organization to understand the differences between financial and management accounting, different costs involved in transport business and how the firms determine their prices of the products and services by considering the cost involved in a business.

Discussion

Accounting is a process of recording, collecting, recognizing and summarizing all the financial activities or transactions occurring in an organization. There are several different fields of accounting like cost accounting, financial accounting, management accounting and etc. Management and financial accounting have enabled the management of the organization to divide the business activities in to two branches; one is the financial side of the business and the second is the management side of the organization. It enables the decision makers to design a separate financial policy and a management policy so that all the activities externally and internally can be controlled. The understanding of the financial and management accounting will enable the organization to ensure that all the activities are performed according to the goals of an organization. According to Stolowy and Lebas (2006, pp.27) management or managerial accounting is mostly used by internal users and it helps the decision makers in gathering information inside the organization. Management accounting deals with different complicating issues like dealing with the business processes, estimating cost of the process, maintain the flow of information inside the organization in order to keep the employees motivated and ensuring that each department is performing according to the roles assigned and within the resources available. It is the responsibility of the managerial accountants to monitor and control activities from cost evaluation to the performance of the management. It needs to provide reports to the decision makers regarding the variations in the plans, reasons for the variations and how to control the variations so that targets of the organization are achieved according to the plans.

On the other hand financial accounting is mainly useful for the external users like investors, suppliers, auditors, creditors and ...