P1 Management Accounting System - Doc

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management Accounting System:..........................................................................................3
Management Accounting:......................................................................................................3
Management Accounting Systems:........................................................................................4
Benefits of management accounting systems:........................................................................5
P2 Management Accounting Reporting:......................................................................................5
Features of Financial Data:.....................................................................................................5
Different types of reports .......................................................................................................6
TASK 2............................................................................................................................................6
P3 Cost and Costing Methods:.....................................................................................................6
Cost: .......................................................................................................................................6
Income statement using marginal costing..............................................................................8
Income statement using Absorption Costing........................................................................10
TASK 3..........................................................................................................................................11
P4 Budgetary control and Planning tools:.................................................................................11
Budget: ................................................................................................................................11
Pricing Strategies:.................................................................................................................12
Common Costing Systems:..................................................................................................13
SWOT Analysis:...................................................................................................................13
TASK 4..........................................................................................................................................14
P5 Financial Problems and Financial Governance:...................................................................14
Financial Problems...............................................................................................................14
Financial Governance:..........................................................................................................15
Characteristics and Skills of effective management accountant:.........................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Business activities and operations are more diverse and complex nowadays and cost
accounting method is not enough to calculate little costs. The economic and business world
needs a effective system which can help in managing, assessing and controlling overall internal
business processes. For this purpose, the method or framework that has been developed is
management accounting that is also known as managerial accounting (Mistry, Sharma and Low,
2014).
Herbert Johnson (Hatters) which is a hat and caps manufacturing company situated in
Bond Street, London founded by Herbert Lewis Johnson in 1889 has been chosen to prepare this
report. This report will discuss about various management accounting systems management
accounting reports. It also involves understanding of different types of casts and costing
methods, budgets and planning tools and financial problems. Further, it describes financial
governance and characteristics and skills of managerial accountant.
TASK 1
P1 Management Accounting System:
Management Accounting:
Although there is not any specific definition for management accounting but in simple
words, it can be defined as a framework or overall process of collecting, filtering, classifying,
recording and reporting financial and non-financial data in such a manner that administration of a
firm can plan its strategies and make the decisions in an effective manner so that organizational
objectives and goals can be achieved successfully (Trigo, Belfo and Estébanez, 2016).
Managerial accounting concept was evolved at the beginning of nineteenth century to manage
and control the internal structure and components of the organizations. Management accounting
has some significant differences from financial accounting which are given below:
Management Accounting Financial Accounting
Data and information used and presented by
this accounting framework may be financial or
non-financial.
Financial accounting system always use and
provide financial data and information.

Internal stakeholders such as managers,
owners, board members are the users of
management accounting data.
Financial accounting provides its data for the
use of external stakeholders such as
shareholders, government, investors,
competitors, etc.
Managerial accounting do not follow any
specific formulas or formats in preparing and
recording the data.
Financial accounting is abide with legal
compliances to follow a pre-described format
for presentation of data and information.
Management Accounting Systems:
Managerial accounting system can be described as a technique that is used to manage the
internal functioning of an organization with the help of available financial as well as non-
financial data and information. Management accounting system for assessing different
departments and activities is developed by Herbert Johnson Ltd so that the management of the
company can manage and record the status of each and every activity. Various managerial
accounting system followed by the selected company are presented as under:
Inventory Management System: Inventory management system is primarily introduced
to identify the status of stocked goods whether it is raw or finished. This system helps the
management of the respective company in monitoring and recording every movement in the
stock. Manufacturing firms such as Herbert Johnson Ltd uses latest inventory management
system software to trace even the single unit of their production (Thomas, 2016).
Cost Accounting System: Cost accounting system is a method to trace and record the cost
that has been incurred at the various stages of production. This costing system helps the
management of chosen firm for identifying various direct and indirect costs of production so that
all the cost can be assigned to their specific cost centres and actual cost of inventory can be
calculated.
Price Optimisation System: Price optimisation system has been developed to identify the
price of the business offerings that customers wants to pay willingly. This system provides help
in understanding the customers' behaviour towards different rice range for various products and
services. The administration of the selected firm is capable to evaluate the maximum price for a
product which is profitable for the firm as well as affordable for the customers.