Management Accounting Principles and Planning Tools for Budgetary Control

MANAGEMENT
ACCOUNTING PRINCIPLES

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Task-1..............................................................................................................................................3
Introduction to management accounting and its principals.........................................................3
The essential requirement of different types management accounting systems..........................3
Different methods of management accounting reporting............................................................4
Evaluation of the benefits of management accounting systems and its application within the
organization.................................................................................................................................5
Management accounting systems and management accounting reporting integrated within
organizational processes..............................................................................................................5
Part B...........................................................................................................................................5
Task-2..............................................................................................................................................7
Comparison of three planning tools for budgetary control with their advantages and
disadvantages...............................................................................................................................7
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1

INTRODUCTION
A process of accounting by which organizations prepare financial statements that helps
the external users as well as internal users of accounting to make financial decisions is known as
management accounting. This report will be based on the case study of JM. It is a company
headquartered in London, United Kingdom and deals in products related to clothing and apparel
This report is prepared in order to analyse the use of planning tools and the role of management
accounting in making business decisions. This project will include a portfolio of calculations for
financial statements and further find ways to implement management accounting within an
enterprise.
MAIN BODY
Task-1
Part A
Introduction to management accounting and its principals
The process of determining, measuring, analysing and presenting financial information to
the internal management of an organization is known as management accounting. This financial
information assists the internal management to make business decisions for the purpose of
achieving organizational objectives (Ameen, Ahmed, and Abd Hafez, 2018.). The concept of
management accounting follows a set of principles which are presentation of unbiased data,
accurate presentation of financial statements, consistency, stability and punctuality. The
principle of unbiased data states that the information presented in the statement should be
relevant and accurate for the users. It should not focus on achieving personal objectives, rather it
must help the company in making business decisions. The methods and principals of accounting
followed for the preparation of the statements should be consistent throughout. The principle of
punctuality states that the financial information should be presented to its users on time so that
the management can make necessary decisions on time without being delayed.
The essential requirement of different types management accounting systems
The need of the different types of management accounting systems have been explained below:
Cost accounting

Cost accounting is a part of management accounting used by the company Capital
Joinery. It helps the company in determining and segregating different costs associated with the
process of manufacturing and production (Maheshwari, Maheshwari, and Maheshwari, 2021).
With the help of the cost accounting, the company can find out costs associated with different
units and take necessary steps in order to control the cost and increase the profitability of the
company.
Inventory management system
The inventory management system is a way through which companies keep a track of
their inventory. There are various methods of inventory management followed by Capital Joinery
such as FIFO, LIFO, AVCO (Azudin, and Mansor, 2018.). These methods help the company in
identifying the need of inventory within the organization and ordering whenever required.
Job costing system
Job costing system of management accounting is used to identify the cost associated with
a specific project or job. The method of accounting is implemented within the capital joinery in
order to identify the accurate costs related to individual projects and take necessary actions
accordingly.
Different methods of management accounting reporting
Budgeting report
A budgeting report is projected report which helps the company in comparing the actual
expenditure with the forecasted budget. The method of management reporting is used by Capital
joinery for controlling cost and expenditure incurred by comparing their actual expenditure with
budgeted one (Pedroso, and Gomes, 2020).
Accounts receivables aging
The company Capital Joinery makes use of accounts receivables aging reporting for the
purpose of achieving the best financial results by managing the cash flow of the organization.
This report helps an enterprise in keeping a track of the debtors and creditors of the company.
Profit and Loss
The preparation of P&L statement by the Capital Joinery also comes under the scope of
management accounting reporting. P&L statement helps in identifying the expenditure incurred
and the profit earned within a specified period (Cescon, Costantini, and Grassetti,2019).