Management Accounting and Planning Tools

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management Accounting with its essential Requirement and types:....................................1
P2. Methods for management accounting reporting....................................................................3
TASK 2............................................................................................................................................4
P3: Calculations of cost by utilising appropriates techniques for cost analysis for preparing
income statement by using absorption as well as marginal costs:...............................................4
TASK 3............................................................................................................................................7
P4: Explanation of planning tools which is utilised in management accounting:.......................7
TASK 4..........................................................................................................................................11
P5: Comparison of ways in which organizations adapt management accounting system as a
response to financial problems:.................................................................................................11
CONCLUSION.............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting can be elaborated as a procedure of identification, measurement,
analysis, interpretation and communication of financial information or data to managers of an
organization for the purpose of pursuing goals of business. Purpose of applying management
accounting is to assist internal users of a firm for making decisions that are well-informed.
Hence, it encompasses all financial information which is assessed by internal users of a company
(Agrawal, 2018). This report is based on analysis of management accounting in Prime Furniture.
Entity is based in London. It is a private limited company which was started in the year 2019.
This report covers demonstration of management accounting systems and reports.
Further, techniques of management accounting are applied. Apart from it, different planning
tools that are utilised in management accounting are applied. And lastly, comparative ways in
which business management accounting as a respond for financial problems.
TASK 1
P1: Management Accounting with its essential Requirement and types:
Management Accounting:
Management accounting is the process of measuring, assessing and communicating the
information to the manager. Prime furniture use management accounting for the purpose of
getting information about their organization, for better decision making and for planning,
controlling organizational activity (Aouni, McGillis and Abdulkarim, 2017).
Management Accounting System:
Management accounting system is the process of implementing management accounting
in organization is called Management Accounting. This helps the manger for the assessment of
organization purpose and help them to ensure better control over the financial activity. There are
different type of management accounting system which are used by Prime Furniture to carry out
operations for goal attainment.
Origin, role and principles of management accounting:
Management accounting was originated in early 1800s with the objective of use the
information in policy formulation and decision making. Role of management accounting in
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Prime furniture is to provide essential information to the manager that help the manager in
management of strategy and risk (Endenich, Trapp, and Brandau, 2017). Principle of
management accounting is as follows:
Principle of Causality: Principle of causality defines the relationship between input and
output resources contributed in the process of production. Strong causality relationship helps
business such as Prime Furniture to achieve its goals where weaker causality relationship
increase the cost of the firm.
Principle of Analogy: Principle of analogy states how the user of accounting information
apply the learning and knowledge to the operation to utilize the resources.
Distinction between management and financial accounting
Financial accounting Management accounting
Financial accounting is the practice of
recording, reporting transaction of business in
the financial statement like balance sheet, cash
flow etc.
Management accounting refers to identifying,
assessing and communicating financial
information to the company in order to attain
organizational goal.
In prime furniture, it is prepared for the
external users of the company like shareholder,
customer, regulatory authority etc.
It is prepared for the internal users like
manager of the company.
Financial accounting is mandatory for the
company.
It is optional for the company.
Essential requirements of management accounting systems
 Cost-accounting system: Cost accounting is a system used to approximate the cost of
product by evaluating fixed and variable cost to identify the profitability and cost control
of the firm (Guinea,2016). Company like Prime furniture require cost accounting to
estimate the cost of the product.
 Inventory Management System: Inventory management is the procedure to track the
goods of company start from purchase to the sale of the goods. Essential requirement of
the system in Prime Furniture is to guide managers in managing situations of over stock
and under stock.
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