Management Accounting and Systems: A Case Study of Rowlinson Knitwear

MANAGEMENT
ACCOUNTING

Table of Contents

INTRODUCTION
Management accounting is referred as an accounts management system which is linked to
the analysis, interpreting and monitoring of financial data so that internal decisions related with a
company can be taken in a proper manner. This accounting system is essential for a firm as data
stored in these systems helps manager of a company to formulate appropriate plans and polices
(Adler, 2018). This allow a firms to gain competitive advantage over rivals. This report is written
in context with Rowlinson Knitwear which is a UK based clothing manufacturing company,
situated in Stockport, England. Company earns revenues of around 11.8 million pounds and
employ 30 employees. This assignment is going to discuss about different types of management
accounting report and systems along with costs so that an appropriate income statement can be
formulated. Also, benefits and drawbacks associated with planning tools to control budget is
mentioned.
TASK 1
P1 Mention about management accounting and provide basic requirement for various kind of
management account systems
Management accounting is the procedure in which business operations and costs are
analysed so that income & financial reports related with company can be formulated in a proper
manner. This will allow the manager of firm to take right decisions so that high business
advantage can be gained without any compromise. It benefits the concerned company in gaining
long term benefits against rival firms. This system is mainly used by manufacturing companies
so that information related with inventory, textile, spendings and earnings can be managed in a
systematic manner (Ahmad and Mohamed Zabri, 2015).
Role of management accounting
 Planning: With the help of management accounting, a manager can acknowledge the
accurate information about accounts of a company. This will help them in formulating a
plan so that efficient business strategies can be formed and high advantage can be gained.
 Control: By using management accounting and associated aspects, manager in
Rowlinson Knitwear can compare their actual performance by expected performance so
that required modifications in organisational work can be carried out.
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 Decision-making: This is another important role of management accounting. With the
help of identified facts and figures about accounts, the accounts manager of a company
can take right decisions so that concerned business can earn high revenues.
Differences in management accounting and financial accounting
Management accounting Financial accounting
 It reports about the aspects which are
causing problem in company along
with measures to resolve them.
 It is related with formation of
operational reports that are distributed
within workplace only.
 It reports upon the profitability and
efficiency of a business.
 It is concerned with preparation of
financial statements that are distributed
in and outside organisation.
In relation with Rowlinson Knitwear, management accounting will benefits the firm in
manage their costs and productivity so that high level of profit margins can be acquired. Below
are mentioned different kinds of management accounting systems along with their role in
organisational work:
Price optimisation system: Main purpose associated with this system is to identify all
the costs which takes place while manufacturing a product. Different costs in this context are
selling costs, promotion cost, production costs etc. This system of management accounting
acknowledge about product life cycle, goal level, price strategy etc. which helps a firm in
formulating right business strategies. This system will benefits Rowlinson Knitwear in shaping
demand and reaction of their clients at different price levels. As product demand is linked with
cost, hence this system will benefits Rowlinson Knitwear in adjusting their price moderately so
that a proper balance between profits and sales can be maintained. By this, customer base of
company can be retained for maximum time.
Inventory management system: This system of management accounting is used by
manufacturing companies to keep a track on their inventory. By using this system, a business
firm can check if it has needed material to carry out their production process in an efficient
manner or not. Appropriate management of inventory will ensure Rowlinson Knitwear about
manufacturing of products without wasting any material (Alsharari, Dixon and Youssef, 2015).
There exist varied kind of inventory management systems which are stated below:
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