Management Accounting: Systems, Techniques & Control - Good Clothing

This report provides a detailed analysis of management accounting systems and techniques applicable to Good Clothing Ltd, a manufacturing company based in London. It differentiates between financial and management accounting, elaborating on cost accounting, inventory management, job costing, and cost optimization systems. The report explains various management accounting reporting methods, including cost accounting, inventory management, and job cost reports, emphasizing their role in enhancing organizational performance. It also assesses marginal and absorption costing techniques for cost calculation, highlighting their advantages and disadvantages. Furthermore, the report discusses the benefits and drawbacks of budgetary control, detailing different types of budgets and planning tools used by Good Clothing Ltd to manage financial problems. The analysis aims to provide insights into how effective management accounting practices can contribute to achieving the company's future goals and objectives.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management accounting systems..........................................................................................1
P2: Explanation of various methods used for management accounting reporting ......................3
TASK 2............................................................................................................................................5
P3: Calculation of costs...............................................................................................................5
TASK 3............................................................................................................................................6
P4: Advantages as well as Disadvantages of Budgetary Control................................................6
TASK 4............................................................................................................................................8
P5: Differentiation of organizations.............................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
APPENDICES..............................................................................................................................12

INTRODUCTION
Management Accounting is considered to the utilise of broad term of approaches as well
as techniques by which the right and appropriate use of the financial information could be made
in a systematic manner which will therefore help in taking the right decisions quite effectively as
well as efficiently in a right way (Alabdullah and Ahmed, 2020). Thus, it is quite important as
well as essential for the managers of the organization to make the use of financial resources in
quite an appropriate manner. For this report, Good Clothing Ltdhas been selected. It is a
manufacturing company based in London, United Kingdom. It manufactures different types of
clothes and fabrics and helps in providing them to the consumers in market. In this report, a
elaborated and particular discussion will be developed on the manner in which the use of
Management Accounting that can be made by which the attainment of the future goals as well as
objectives might be done in a right way.
TASK 1
P1: Management accounting systems
Management accounting defines to implementation of a broad term of methods and
techniques by which the management of the financial information could be made quite
appropriately that will supports in the accomplishment of the targets and aims (Frick, Birt and
Waters, 2020). Therefore, it is quite important for the managers of Good Clothing Ltdto make
sure that it can be used for the motive of managing out the needs along with requirements quite
appropriately.
Difference between Financial Accounting and Management Accounting
Point of difference Financial Accounting Management accounting
1. Users External stakeholders who
make financial decisions.
Managers who plan for and
control an organisation.
2. Time Focus Historical Futuristic
3. Verifiability vs relevance Emphasis on objectivity and
source document
Emphasis on satisfying
management needs
4. Subject Primary focus is on company- Primary focus is on segment
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wide reports reports.
5. Rules Must follow GAAP/IFRS and
in prescribed formats.
Not bound by outside rules
6.Requirements Mandatory for external reports Not mandatory
There are several sort of Management accounting systems that can be implemented
within the management. Hence, it is an essential term to ensure that the appropriate utilisation of
these specific systems could be made that will carry towards the management of the wide range
of needs as well as requirements. The Management accounting systems that can be implemented
are as follows-
Cost accounting system- It is a sort of scheme in which the correct classification of the
types of costs could be carried out (Geddes, 2020). Therefore, for an organization like Good
Clothing Ltdit is essential that it uses this system quite appropriately for the attainment of the
future goals as well as objectives. The main advantage of this system is that it helps the
businesses ascertain their costs effectively and accurately.
Essential needs-
 In this scheme the proper and appropriate determination of the different types of price can
be done for the purpose of deriving conclusions and recommendations.
 This system should be helpful in identifying the way in which the business of the costing-
related desires and needs that can be done.
Inventory management system- In this particular system, the right and appropriate use
of the stock items can be ensured so that business management of the inventory could be done
quite effectively as well as efficiently (Hutahayan, 2020). This system provides better inventory
accuracy to the businesses. For Good Clothing Ltd, it is an essential that the utilisation of this
specific system might be made so that the conclusions and recommendations will be followed -
Essential requirements-
 In this section, the appropriate classification of the several sort of inventory items could
be done by which the efficiency as well as effectiveness level can be maintained in a
suitable way.
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 This system might be helpful in keeping a track record of the inventory items which will
thus be beneficial in ensuring that the achievement of the targets or aims can be finished
in an effective manner.
Job costing system- In this particular system, the organisation of the diverse sort of job
costs can be performed out so that the reason as well as recommendations can be drawn quite
suitably (Johnstone, 2020). it provides the detailed analysis of the cost of material, labour and
overheads for each job as and when required. In terms of Good Clothing Ltd, it is highly
essential that the right utilisation of this specific term could be develop so that the achievement
of the future targets can be facilitated.
Essential requirements-
 In this division, management of the job costs could be done quite appropriately by which
the overall term can be drawn.
 This system must be helpful in ensuring that the appropriate implementation of this
specific system can lead towards the attainment of the goals and objectives.
Cost optimization system- In this specific division, the utilisation of models and
techniques might be made for the purpose of forecasts so that the right prices are set that will
therefore supports a lot in make sure that the management of the pricing-related needs and
requirements can be done in a proper manner (Kinnunen, 2019). It increases the competitive
strength of the industry. For a company like Good Clothing Ltd, it is necessary that the usage of
this system could be made for the better management of the prices.
Essential requirements-
 In this system, the better management of the prices is required to be done so as to select a
particular price for the purpose of effectively and efficiently derive the conclusions and
recommendations.
 This system should be helpful in ensuring that the use of the statistical and mathematical
models can be made so that the conclusions as well as recommendations can be drawn in
an appropriate manner which will be quite helpful and useful.
P2: Explanation of various methods used for management accounting reporting
Management is the provision of financial and non-financial decision making process which
is used by management to take right actions. This is important for organization to understand the
needs of their business and make efforts to provide properly. Good Clothing Ltd. is the company
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that sales different types of products and services. Different types of accounting reports in
relation to management are defined as:
Cost Accounting Report – This can be explained as reporting of company’s cost
structure which states how much cost will be incur while running a business. This is important
for management to prepare the cost accounting report by tracking the cost of each items and
services which is produced by organization. In relation to Good Clothing Ltd., management
prepare the cost accounting reports by considering all raw material costs, labour, and overhead
which supports to develop the business productivity. This report is mainly prepared by
management to analysis the cost of each item and activities that needs to be done for the purpose
of management business (Ratnaningrum, and et.al, 2018).
Inventory management report – This is the summary of all inventory which is available
in organization and supports to develop the business productivity. Inventory management report
is the physical and electronic document with numbers representing product that supports to
complete the task. In relation to Good Clothing Ltd. stock management is playing the important
role such as it keeps record and track the material which can help to fill the customers demand by
keeping available stock at all time. Tracking of inventory is useful for all companies as it helps to
maintain a balance between demand and supply by influencing customers. For each organization
it is important to use the inventory management system, that states the how much raw material is
available at the organization and how to manage each function (Ostaev, and et.al, 2019).
Job cost report – This can be explained as detailed documentation of expenses that
incurred for the completion of project and receive the payment. This is important for
management to divide the section of activities in relation to organization which can help to
manage the higher organizational performance. Job cost report is valuable for business
organization as it provides crucial information regarding current status of a job and estimate how
each individual will finish each job from the perspectives of cost and revenues. In relation to
Good Clothing Ltd. management prepare the job cost reports by knowing current status of job
and complete each task. This can supports in maximising the managerial presentation and higher
term of the productivity in the changing environment (Kinnunen, 2019).
From the above it has analysed that Good Clothing Ltd. is preparing the cost accounting
reports, inventory management, and job cost reports which can helps to develop the
organizational performance and maintain higher productivity. The management is having
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important role who conduct the analysis and prepare the report accordingly which can help to
accomplish the business goals and increase the profitability.
TASK 2
P3: Calculation of costs
There is an importance of ensuring that a proper and detailed assessment of the costs can
be made within the company so that the right conclusions along with recommendations are
drawn (Krutova and et.al., 2020). The use of the following techniques could be made for this
specific purpose-
Marginal costing- This is a particular technique which could be implemented for the
motive of ensuring that the assessment of the Break-Even Point can be done (Naranjo Tuesta,
Crespo Soler and Ripoll Feliu, 2021). It is a element where there are either profits nor losses for
a particular organization and therefore in this section this can be quite assistive in ensuring that
the right business of the needs and requirements can be performed. For an organization like
Good Clothing Ltdit is quite crucial that the usage of this technique could be made so that the
management of the work could be done in an proper way.
Advantages-
 This is a technique which is quite easy to use and understand. Therefore, in this way this
leads towards ensuring that the staff members of the organization can use it quite
appropriately.
 This technique is beneficial in ensuring that the calculation of the Break-Even Point can
be carried out in quite an appropriate manner.
Disadvantages-
 This section is not useful for the aim of assessment of the overheads and moreover in this
manner this this could develop a specific section of impact on the organization.
 In this technique the complete information is not given which can therefore create a
specific level of impact on the organization and thus can affect it.
Absorption costing- It is a costing method in which a detailed and proper assessment of the
various types of costs and overheads can be made which will therefore benefit a lot in ensuring
that the management of the needs and requirements can be made quite effectively and efficiently
(Ostaev and et.al, 2019). For an organization like Good Clothing Ltdit is quite important that this
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technique should be used for the particular purpose of ascertainment of overheads which will
therefore help a lot in properly managing the costs of the organization in a right way.
Advantages-
 The determination of the total cost of production can be done when the use of this
particular technique is made.
 This section has a higher term of acceptability and hence in this way it will be helpful in
make sure that the business of the needs and requirements can be performed.
Disadvantages-
 This section is not helpful for the motive of Cost Share and therefore this can create a
disadvantage for the business.
 This method is not useful for the aim of Decision-Making and therefore this can affect
the organization.
Therefore, it can be concluded that the use of the Marginal as well as Absorption costing
techniques can be made for the aim of ensuring that the financial position of the organization
remains strong. Therefore, for an organization like Good Clothing Ltdit is quite necessary that
the management of the appropriate level of needs and requirements can be done. Thus, it is
highly necessary for the managers of the business that they are capable to sort the utilisation of
both of the techniques for the particular purpose of better management of the funds which are
available with them.
TASK 3
P4: Advantages as well as Disadvantages of Budgetary Control
It is a significant term that the utilisation of the Budgetary Control technique is developed
so that the Budgets can be prepared for the purpose of carrying out the appropriate forecasts in
the right way as effectively and efficiently (Ostaev and et.al., 2020).
Advantages of Budgetary control:
 It provides an first-class record of organisational tasks
 It improves resource allocation
 It improves communication with employees
 It translates strategic plans into action
Therefore, it can be stated that the following Budgets are used within the organization-
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Sales Budget- It is a Budget that will relates to the forecasting of the sales that can be
done and also the comparing of the data related with sales can be performed so that the reason
and recommendations will be drawn as effectively as well as efficiently in a suitable way
(Ratnaningrum and et.al, 2018). For an organization like Good Clothing Ltdit is highly essential
that the use of this Sales Budget can be made for the purpose of achievement of the goals and
objectives in the future in a right manner.
Advantages-
 This Budget can be highly useful and helpful for the particular purpose of forecasting of
the sales-related data. Therefore, in this way the organizations can make sure that they
make an appropriate use of this data in a right manner.
 This Budget can be helpful for the aim of ensuring that the data will be used in a suitable
way so that the business of the necessarily as well as requirements can be done as
effectively and efficiently.
Disadvantages-
 This Budget is too costly to prepare and its preparation also takes a lot of time. Thus, in
this way it can be stated that its preparation can create an impact on the companies.
 This Budget is not highly accurate and therefore in this way this can affect it a lot.
Therefore, in this way it can be stated that its preparation does not guarantees accurate
results to the organization.
Production Budget-
It is a Budget in which the ascertainment of the needs and requirements which are related with
Production can be made so that the appropriate measures can be taken for managing them in a
proper manner quite effectively and efficiently (Souza and Gasparetto, 2020). For an
organization like Good Clothing Ltd, it is quite important that its preparation can help a lot in
taking the right and appropriate actions for progressing further in the future.
Advantages-
 In this Budget, the forecasts related to the production of different types of products within
the organization can be done which can help the organization a lot in taking of the right
decisions quite effectively as well as efficiently in the future.
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 In this Budget, the better business of the production related requires as with needs that
can be carried out so that the organizations are capable to ensure that the accomplishment
of the future targets and aims that can be carried out.
Disadvantages-
 The preparation of this Budget needs a lot of time as well as money and therefore in this
way creates an impact on the companies as due to this reason their level of functioning is
impacted.
 This Budget is too complex to prepare and therefore its preparation requires a lot of
efforts to be made so that the management of the appropriate level of needs and
requirements can be carried out.
Overheads Budget-
In this budget, the ascertainment of the several sort of overheads can be done and
therefore in this way this can be quite accommodating for the specific aim of management of the
the overheads of the different types of departments of the organization in a better manner
(Taschner and Charifzadeh, 2020). For an organization like Good Clothing Ltdit is highly
important and essential that this budget can be prepared for the accomplishment of the target and
aims in the future.
Advantages-
 Its preparation can help in the better management of the overheads which can therefore
create an advantage for the organization.
 Its preparation can lead towards chances of enhancement in the overall profits which can
help the organization.
Disadvantages-
 Its preparation is quite costly and requires a lot of time. Therefore, in this way this creates
an impact on the organization.
 It does not always provides accurate results and therefore in this way creates an impact
on the organization.
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TASK 4
P5: Differentiation of organizations
Financial Problem- Financial Problem refers to a condition in which the organization
faces financial issues and therefore it affects it a lot (Thanh Hoai and Nguyen, 2021). For Good
Clothing Ltd, it is quite important to make sure that its assessment can be carried out quite
effectively and efficiently.
The Financial issues which are being faced by Good Clothing Ltdare as follows-
 Lack of profits from the job orders- There are lack of profits from the job orders in the
organization. In the context of Good Clothing Ltd, it can be stated that this is creating an
impact on the organization as its overall profits are being impacted as a result.
 Lack of profits because of setting of low price- There are lack of profits within the
organization because of setting of low price and therefore in this way this creates an
impact on the organization. For Good Clothing Ltd, it can be stated that this can impact
the organization a lot and therefore can affect its overall level of profitability.
The various kinds of techniques can be used for the purpose of solving these particular problems.
The techniques which can be used by Good Clothing Ltdare as follows-
 KPIs- These are the Key Performance Indicators. Their use could be be quite important
and helpful for the organization so that it is capable to make sure that the measurement of
the level of performance can be performed. Good Clothing Ltdcan make its use for the
purpose of solving the problem of job orders as through it the better management of the
job orders can be done.
 Benchmarking- These considered to be the setting of various benchmarks and standards
so that the problems can be solved (Wahyuni and Putra, 2020). Good Clothing Ltdcan
therefore make sure that through its use the problem of lack of profits can be solved
which will therefore help the organization a lot.
Comparison of organizations
Basis Good Clothing ltd. Marks and spencer
Financial issue Excessive Costs in the
departments of the
Mismanagement of the
inventory items in the
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