Management Accounting: Types, Benefits, and Integration in Industry Processes

This document provides an introduction to management accounting and its importance in organizations. It discusses different types of management accounting systems, such as cost accounting, price optimization, job costing, and inventory management. The document also explores the benefits of these systems and how they integrate into industry processes. Additionally, it covers the use of budgets for planning and control in management accounting.

Management Accounting

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
Introduction to MA..................................................................................................................................3
Different types of MA system.................................................................................................................4
Presenting financial Information.............................................................................................................5
Benefits of different types of system.......................................................................................................6
Management accounting system and reporting and their integration in the industry processes...............6
TASK 2.......................................................................................................................................................6
Micro economic techniques.....................................................................................................................6
TASK 3.....................................................................................................................................................10
Using budgets for planning and control.................................................................................................10
Analysis the use of different planning tools and application for building and forecasting the budget. . .11
TASK 4.....................................................................................................................................................12
Comparison among industry by adopting management accounting system to solve financial issues.....12
Management accounting in solving financial problems that lead to organizational success..................13
Evaluation planning tools for accounting help to solve problems and support industry with sustainable
success...................................................................................................................................................13
CONCLUSION.........................................................................................................................................13
REFERENCES..........................................................................................................................................15

INTRODUCTION
Accounting is the statistical measurement of the multiple accounts that are used for
conducting business operations to measure the income of a company. Management is the
arrangement of tasks that contribute to accomplish organizationally established goals. It contains
planning, organizing, staffing and attempting to control the business operations for the speedy
running of a business. Management accounting is defining as the combination of reports and
accounts in which mention all the cost and price of business activities. To understand the concept
of the report selected organisation Prime furniture which is a growing East London based
organisation. The company planning about the start training course for the new trainee so for this
prepares report in which mention all the necessary information. This report consists of
comparison between management accounting and financial accounting and defines all the
management accounting systems and reports that apply in the business. Additionally, mention all
the planning tools that was using for the budgetary control and compare with other organisation
to identify all the financial problems. Moreover, all the financial problems are identifying by the
management tools and sort out by the different systems.
TASK 1
Introduction to MA
Management accounting: Accounting for management is the inner task of every organization,
which plays a crucial role in every sector. It seems to get essential business-related knowledge,
and increase profits. The corporation's executives prepares various kinds of reports that provide
complete details and offer suggestions about what needs to be done in order to efficiently operate
a business. Management accounting basically aims to understand, supervise and analyze the
complex data used only to make the much more suitable business organization decisions.
Management accounting system: It is internal part of the business that supports to business to
providing all the financial information on the basis of internal operations. To manage all the
business activities require applying the different systems that helps to make decision in
appropriate manner.
Difference between MA and FA
Financial Accounting Management Accounting
This accounts are prepared with a specific
format that is used to compare with other
organisation.
No specific format is used for management
accounting system. It prepares with the help of
past information.

It helps in making investment decision and in
credit rating that increases organisation's value.
It helps to make planning, recording and
controlling the activities in order to take
decision.
It focuses on history that helps to make
effective business decision.
This focuses on future and make management
report on the basis of relevant information.
It is used by the external users like as
shareholders, creditors and bank.
It is used by the internal users like employees
and managers.
Different types of MA system
Cost accounting system: As per the name given to this system specifies the costs of the various
goods and services offered by the companies. The primary objective of this training is to get the
real income from the sale of goods and services. It helps determine which commodity can yield
income, and which one is not. Prime Furniture is applying this system to know the industry's
actual operating costs. Furthermore, this company's managers can test the feasibility within each
campaign and preserve income by rising operational cost.
Price optimization system: This method is being used to using different channels and describes
how clients react to various prices for their goods and services. It explains the prices that help
achieve the specific goals including such income value creation. In addition, it helps include
guidelines to determine rates that would match both manager and consumer. Here, Prime
furniture was using a price management method that helps to establish the reasonable rates of
infrastructure works and makes good use of all the costs that hold things company profits. In
many other terms, this program is used to control the rates and to give business and consumer
experience. In the absent of such a system, an company cannot have specific raw essential needs
which can deduct the organization's income.
Job costing system: Job costing is a method for allocating and collecting the production costs of
a single product device. The work cost document would show the specific facilities and
equipment that were specifically used for every item and an additional number of overtime
production. Because there is a considerable variation in the product sold, a different task request
cost database for every item (rather than each job or that for) is required for the job costing
system. The work cost record would show the direct facilities and equipment that were
specifically used for each item and an additional number of overhead purchasing.
Inventory management system: It is an accounting method that helps to better control the stocks
and manage all the operational activities in systematic manner. This is mainly used in the
infrastructure and industrial company which helps to hold the products in reasonable parameters.
This provides an accurate record of raw materials or finished products saving cash and effort.

Every company used this management accounting ability to ensure an effective inventory record
and sell it by using various methodologies, also including LIFO, FIFO and average. Prime
Furniture Company uses this strategy to maintain databases of raw materials and finished
products goods which enable to verify the quantities of products and position the next request of
raw resources.
Presenting financial Information
Different types of MA reports: The management accounting reports are the result of the
organization's results reflecting the expectations of both internally and externally administrators.
Such accountability plans are published using various accounting practices which help to define
the organization's productivity condition. Most of these reports are used to schedule, control,
assess success and make the right decisions that will be profitable for retailers and society. This
report is created according to the necessity during the accounting and finance period which helps
to provide clean and consistent information about company practices. Prime Furniture is
preparing different types of reports to provide detail information of every department such as:
Budget report: It can be described as some type of report involving the provision of actual and
standard revenue, expense data. In addition, it provides data on the difference between real
income and projected revenue. Thus overall these documents play a significant role in the
appropriate performance component. Prime Furniture, the above-mentioned company, publishes
this document which providing them with details on current revenue & income produced, and
projected objectives for a specific period of time.
Cost managerial report: All types of business entities are preparing this report to understand the
price of the institution, and to enhance the profitability. In the better framework, cost control
reports have included cost of raw materials, labor costs and overheads that continue to test
productivity by holding costs. Prime Furniture supervisor could use this report to cost estimate of
the organization's social and other project activities. If the director discovers that the company
spends more money on operations, he will control the costs to increase revenues.
Inventory cost report: This is the most requested document written by the institution's
president. It's being used to actually manage stock and to produce goods that have the required
price of the items and resources. This report includes items such as hourly labor costs, holding
cost and operating cost of production. This report is created by the owner of prime Furniture
Company to test production costs and make suitable decision in market. In addition, the
executive may assess the effectiveness of keeping the supply chain.
Accounts receivable report: This is a kind of report that relates to presenting details from
different debtors on the total recoverable sum. In other phrases, businesses do online payment,
such as card payment exchanges, across both forms. For credit payment contracts contain all the
money transfer amount information and also the schedule the payment was made. With both the
aid of these firms, it is possible to determine how often the borrowers owe. As in the above-

mentioned company Prime Furniture, they generate this document and maintain all their debt
holders effectively and systematically mostly on grounds of it.
Benefits of different types of system
Cost accounting system: Calculating the expense of production and obtaining estimate
of existing month revenue is helpful. In Prime Furniture company consists of applying cost
accounting method that attempts to determine the value of every other venture in various
projects. In addition, by implementing this accounting method an company may determine every
system's progress.
Price optimization system: It is helpful to maximize company's product costs that
determine however much budget is required by resolving costs to raise income. Using this
method in Prime Furniture company manager will calculate the project organization costs or
provide service quality using the rates.
Inventory management system: This management system is important for keeping
monitor of stock and availability for products and services as per requirement. It is also
beneficial to test the quantities of raw materials and finished goods which serve to retain
approved guidelines. Prime Furniture's administrator is implementing this method to test the
amount of raw commodity and completed products to support monitor the stocks and position
new ordering of raw materials since that inventory levels.
Management accounting system and reporting and their integration in the industry processes
Management accounting system and reports interconnected in
organizational procedure such as stock management system are useful for monitoring stocks that
contains guidance via stock reports being utilized to maintain stock management and market
control systems beneficial in knowing pricing via budget reports or work reports that are being
used to control the rates of the professional. In addition, the cost accounting system attempts to
measure the entire costs of context of the business operations via cost financial reporting which
provide data in regard of the cost accumulated in a company.
TASK 2
Micro economic techniques
Cost: In order to make a purchase, cost is the cash payment a corporation has expended to
manufacture it. Within an organization, cost shows the amount of money expended on
manufacturing or developing a services or products. Price will not include the benefit increase.
Cost volume profit: The Cost-Volume-Profit (CVP) analysis is utilized to evaluate how expense
and production adjustments impact the net revenue and net profits of a business. There's many
predictions made when doing this research, which include: selling cost per unit is static. Indirect
expenses are unchanged per unit. Gross fixed costs are stable.

Absorption cost: This is another costing method that is used to develop up a full production costs
along with actual expenses and the percentage of overhead expenses that describe institution
profit levels. These methods are mostly used in the manufacturing sector, which through
retaining profits aims to assess the organization's expense.
Quarter 1
Particulars Amount
Sales 66000
Less: Cost of sales
Production Cost (78000* 0.65) 50700
Semi variable (78000 * 0.20) 15600
Total variable cost 66300
Less: Closing stock 10200 56100
Gross Profit 9900
Less: Expenses 400
9500
Selling and distribution as
fixed 5200
Net Profit 4300
Quarter 2
Particular Amount
Sales 74000
Less: Cost of sales
Opening stock 10200
COGS (66000*.20) 13200
Production cost (66000*0.20) 42900

Total variable cost 66300
Less: Closing stock 3400 62900
Gross Profit 11100
Less: Selling expenses 2800
8300
Fixed expenses 5200
Net profit 3100
Variable costing profit 1900 4700
Opening inventory 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100
Opening inventory 0 10200
Closing stock 10200 3400
Marginal costing: This is a costing method that includes variable and fixed costs which are
measured in units and time to assess the cost can be computed and in amounts. Variable
compensation related to those costs that may alter after such a transition in production where
they stay constant as operating expenses to measure income. This approach can be used by any
company to achieve the same income by specifying fixed costs and variable costs.
Quarter 1
Particulars Amount
Sales 66000
Less: Cost of sales
Opening inventory 0
Production cost 50700

(780000*0.65)
Less: Closing stock
(12000*0.65) 7800
42900 42900
Contribution 23100
Less:
Fixed overhead 16000
Fixed selling expenses 5200 21200
Net profit 1900
TASK 3
Using budgets for planning and control
Budget: The budget relates to
organizational process financial
management for a given time frame. It
consists of scheduled sales volumes and
earnings, commodity amounts, costs and
expenses, assets, liabilities and flow of
cash etc. These are extremely important for
Prime Furniture to operate its development
more efficiently and effectively. The budget
Quarter 2
Marginal
Sales
Less: Cost of sales
Opening inventory
(12000*0.65) 7800
Production cost (66000*0.65) 42900
Less: Closing stock (4000*0.65) 2600
48100
Contribution 25900
Less:
Fixed overhead 16000
Fixed selling expenses 5200 21200
Net profit 4700
Variable costing profit 1900 4700
opening profit 0 7800
Closing stock 7800 2600
Absorption costing profit 4300 3100
Opening inventory 0 10200
Closing stock 10200 3400

cycle also involves many other tasks including such planning, tracking, managing and reviewing
the revenue objectives just so the budget can grow appropriately to meet the corporation needs.
Budgetary Control: Budgetary control pertains to how much the supervisors use
expenditures in a specific accounting period to regulate as well as manage costs and operational
environments. In many other phrases, budget control is the method for managers to set budget-
specific accountability and operational targets, evaluate real outcomes and measure outcomes as
required.
Capital budget: Capital budgeting is the procedure which a company maintains to
determine possible bigger projects or expenditure. Descriptions of ventures that will involve
capital budgeting before they can be accepted or denied include the development of new factory
or a major expenditure outer or in the company. When portion of capital budgeting, Prime
Furniture must calculate the potential inflows and outflows of cash of a mentioned location to
evaluate if the future profits that will be produced constitute a reasonable target criterion.
Advantages: As a decision on investment budgeting is probably the more important and
essential company decisions, great care must be exercised in their handling. Like in the first
instance, a really actions influence the company's possibility; they also have an impact on the
company's powerful advantage.
The most significant are the current asset, because they have the long-term effect on the
company. In a context, the current asset constitute the company 's actual able to earn resources.
They help the firm to manufacture the fixed goods which can eventually be exploited for profit.
The judgments on fundamental analysis are economic financial analysis as opposed to the
strategic activities.
Disadvantages: All working capital strategies assume that the different investment plans under
discussion are necessarily compatible, which in certain extreme situations may not have been
valid in practice. The capital budgeting strategy calls for predicting potential cash flows and
capital inflows. The future is often undecided and may not be the accurate information provided
for the long term. Evidently, the findings can be disappointing, based on flawed information.
Operating budget: An operating budget is an estimation of the predict revenues and
expenditures over one or more potential periods. The executive team usually formulates an
operating budget just before the start of every year, which displays planned functions of the
business for the whole year. A variety of subordinate budgets can help this budget and includes
data at a much more simple stage. There may be recognize different expenditures, for instance,
covering salaries, the value of products sold and stocks.

Advantages: An annual budget allows in the potential not just to distribute resources to Prime
furniture company in the shorter period and also for multiple phases to three years. This assists
the business to forecast its costs and control its expenses to fulfill its lengthy-term financial
commitments in the brief period. It takes thorough work to create an operating budget with a
broad term of the financial needs of the business. To produce appropriate financial forecasts,
analyzing past reported revenues, customer buying patterns and environmental factors
in business region is needed.
Disadvantages: In setting up an operating budget the real operating costs within each
organization can not suit the estimates made. Even though you know you can invest a certain
number of money, that doesn't suggest they should be distributing those money equally to
agencies.
Analysis the use of different planning tools and application for building and forecasting the
budget
Different types of planning tools are using by the Prime Furniture to developing and estimating
of the expenditure plan. These are helping the business to estimate the total income and
expenditure at arise in the future and impact on the business activities in direct manner.
TASK 4
Comparison among industry by adopting management accounting system to solve financial
issues
Financial Problem:
Cash flow challenge: The Prime furniture business faces an unprecedented financial problem as
it has less investment activity that involves selling and purchasing fixed assets. It is important to
sell the capital assets to solve this issue, which will improve the capital injection than the output.
Spending more than earning: The Prime furniture faces other money issue which is its
expenditure is greater than revenue. This spends additional capital in the infrastructure plan with
a low productivity resulting in having a budget. To solve this issue, company wants to establish a
strategy that tends to determine how much expenditure requires to be made in specific projects.
Management tool: To identify different financial problems require applying different
management tool such as:
Benchmarking: It is a strategy used to compete with various organizations by
determining the effective strategic strengths. Prime Furniture manager may use these strategies
to evaluate both organizational effectiveness and claim which firm is most productive. It can use
company analysis to evaluate results, which allows enhancing and growing interesting feedback.

KPI: It is the primary performance metric used to measure the efficiency of a workplace-
worked company and workers. Prime Furniture company manager helps with the KPI
methodology used to assess efficiency and make changes to business operation. This also
supports to recognize the issues that can occur when doing market and create corrective steps.
Financial Governance: Prime furniture company will solve the monetary problems and
to make government-formed rules and regulations. In addition, company with the aid of financial
governance will improve profitability.
Comparison among organisation
Prime Furniture UCK Furniture
The investment is more than revenue causing
financial problems.
To fix challenges, it needs to implement KPI
methods that can track workers and
organisational performance.
It faces cash flow problems which need to be
addressed by that investment operation.
It applies a benchmarking strategy that enables
quantitatively analyze different organization
results.
In order to address the financial problem, the
cost accounting system can be used to help
measure the exact costs of business
transactions.
To address this problem, it is important to
implement an accounting system for inventory
management that will enable maintain accurate
accounts of raw materials and completed
products and order them as needed.
Management accounting in solving financial problems that lead to organizational success
Managerial accounting program including such Benchmarking and KPI is beneficial to
both the organization's development and contributes to organizational progress as director of the
Prime Furniture business uses KPI to assess the efficiency that will ultimately steer the

entire organizational cost reduction via the utilize of cost accounting method. In addition, it can
compete with other companies by implementing the Benchmarking and can enhance the
efficiency that will contribute to success of a business.
Evaluation planning tools for accounting help to solve problems and support industry with
sustainable success
Each organization uses a variety of preparation tools that helps to provide an effective
response to money problems and encourages the organization to solve financial difficulties. The
Prime furniture will submit budget reports, inventory reports and managerial accounting
documents because it will include a detailed and reliable cost estimate that might happen within
the company. And if managers consider that overlay analysis can be addressed by implementing
the study and estimating cost amounts that will contribute to the improvement results.
CONCLUSION
It was inferred according to the above report that Managerial Accounting is the method of
defining, evaluating, documenting and displaying the financial data used only to make successful
decisions by reflecting on the expense and productivity of the business. Accounting system is
useful for the collection of financial and non - financial details that may be essential to the
company for successful decision making. This study dealt with multiple threads including such
management accounting and its method, methods for budgets and management issues that arose
throughout business dealings.

REFERENCES
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