Management Accounting and Reporting Systems

Management
Accounting

INTRODUCTION
TASK
P.1. Explain management accounting and give the essential requirement of different type of
management accounting system ?
Management Accounting is the activity of summarising, recognising, presenting as well
as recording of all the transactions that are related to money in the accounting books like cash
flow statement, balance-sheet, P&L . It is concerned to tracking and estimating cost which will
be incurred in future and through managing the business operations wastage of money can be
reduce. To maintain financial record various accounting system is adopted by Prime Furniture
all the decision making is done on the basis of it. Following are the accounting system followed
by the company .
Management Accounting system: It is used by organisation to provide the information
which is most important to the business. Generally manufacturing concern use such system to
ascertain cost as well as managing their process.
Cost Accounting system: This system is used to analyse different types of cost such
variable cost, semi variable cost, fixed cost, overhead cost. It is important for every company
Like Prime furniture to estimate the cost that are incurred in their offering. So it become easy to
finance unit to prepare budget after analysing these cost. This system is followed by Prime
furniture to analyse the cost of various furniture. It is used to simplifying the task of the
manufacturer, who require to continuously track the flow of stock through various stages of
production.
Job costing System: As it is a method of costing in which different cost are charged to
different product. As per specification of customers products are prepare so the value are vary
from product to product. Mostly the industries which are related to printing printing press, ship
building, auto mobile garage, repairing workshops, furniture are follow this method of costing.
Job costing involves approximating the expenses of three primary aspects of the job such as
material , overhead and labour. company Prime Furniture uses the job costing process to track
the true costs to deliver a job, so a firm can charge the right price to achieve its target profit
margins.

Inventory Management System: It is the system that are used to track the inventory. It
is fully computerised system which is commonly used in the organisation to analyse deliveries,
inventories, sales. To overcome with the issues that are related to overstocking and under
stocking this system are followed by Prime Furniture as it helps in maintaining sufficient stock in
the go downs or stores. To clear the inventory from the stores Prime furniture use the method
HIFO( Highest in first out ). To avoid obsolescence problem , following system is adopted by
furniture company due to this unnecessary expenses are also eliminated. Various cost such as
ordering cost, carrying cost are attracted to manage inventory for that this system is used. t has
become vital for the survival of an organization to have a good control over inventory, otherwise
the company can lose their control over the profits.
P.2. Explain different methods used for management accounting reporting?
Management Accounting reporting: It is also known as cost accounting. It focus on
those information which is received from inside with the help of financial accounting For various
purpose reports related to management accounting are prepare. These are used in business for do
planning, regulating , performance measurement, to take important decisions . During the book
keeping period these reports are generated on continuous basis. Managers of organisation Prime
furniture use these reports for the purpose to high light the pattern and also try to convert them
into information which is most useful for the company.
Accounts receivable ageing report: These reports are prepare by Prime Furniture
employees in which details of all the debtors are recorded. Record of due date of payment,
amount of credit sale are done. If there are large number of defaulters are there than company
may need a complete transformation to tighter credit policies as cash flow is critical to the
operation of any business.
performance report: Performance reporting is a part of communications management
plan. Collecting information related to work performance, analysing it, creating reports and
sending them to respective stakeholders is involved in reporting performance of the project.
Performance reporting improves customer insights by focusing on the best sales opportunities. It
also develops a visibility of the business partner activities and the purchasing behaviour. With