P1: Management Accounting and Its Essential Requirement

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 (LO1 & LO2).....................................................................................................................1
PART (A).........................................................................................................................................1
P1: Management accounting and essential requirement of management accounting system 1
P2: Explain different method of management accounting reporting......................................3
Benefits of management accounting system..........................................................................4
Evaluation of management accounting system and management accounting report integrated
with organizational process....................................................................................................5
PART (B).........................................................................................................................................5
P3: Appropriate technique of cost analysis to prepare an income statement.........................5
The difference between profits of marginal and absorption costing are as follows:..............6
TASK 2 (LO3 & LO4).....................................................................................................................8
P4. Advantages and disadvantages of different types of planning tools used for budgetary
control.....................................................................................................................................8
Analysis of various planning tools and their application.....................................................10
Evaluation of Planning tools for Responding to financial issues.........................................10
P5: Response of management accounting systems towards resolving financial problems. .11
Management accounting leads organizations to achieve sustainable success......................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is the process of recording business transactions using different
accounting systems so as to facilitate management to formulate an effective plans and strategies
for the betterment of an organisation (Management accounting, 2018). It is useful almost for
every organisation to achieve competitive advantage in market as it help in analysing the actual
financial position of company which enable management to make changes in existing plans and
strategies so as to retail their strong position in market. Accounting manager is held responsible
to maintain books of accounts such as Profit and loss a/c, Balance sheet, Cash flow statement etc.
on annual basis. The present assignment report is based on Rowlinson Knitwear which is
engaged in manufacturing and selling school and corporate wear garments to the people of UK
and throughout the world. The report includes discussion on various accounting systems along
with their benefits, management reporting system, different costing methods, planning tools to
control budget and financial resolving tools such as KPI, Benchmarking etc.
TASK 1 (LO1 & LO2)
PART (A)
P1: Management accounting and essential requirement of management accounting system
According to the Institute of Management Accountants (IMA):- Management
accounting is termed as a profession which gets involved in decision making process,
formulation of planning, adoption of management styles and preparation of financial statements
with the help of which management can frame and implement organisation's strategy (Statements
on Management Accounting, 2018).
According to Chartered Institute of Management Accountants (CIMA):
Management accounting is defined as analysing of information to formulate business strategies
so as to drive business to achieve growth and success in competitive market (Belfo and Trigo,
2013).
According to Certified Management Accountants (CMA), Management accounting is
applicable on accounting manager's professional knowledge and skill in order to prepare
financial statements so that management of an organisation can assist organisation in achieve
growth and sustainability by making suitable plans and policies (Maher, Stickney and Weil,
2012).
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Management accounting principles:
Influence: Communication facilitates insight that is influential. Management accounting
provide credible information about current position of company which can hugely influence the
decision-making process. For example, facing financial losses directs management to make
changes in their credit policies so as to avoid any bad-debts.
Relevance: It refers to accuracy of data which can decide the effectiveness of decisions
and plans formulated by the management of an organisation. For example, recording business
transactions in financial statement must be relevant and accurate so as to identify whether the
company operate business or successfully (Ax and Greve, 2017).
Value: In this, impact on value is analysed. Management accounting relates
organisation's strategy to its business model and requires a better understanding of environmental
factors. Analysing of information recorded under financial statement guides the management of
company to identify the errors which restrict them to achieve expected results.
Credibility: It means accounting professionals must be ethical, accountable and mindful
of the organisation's values, governance requirements and social responsibilities. For example, if
financial statements such as profit and loss a/c, Balance sheet etc. shows true and accurate
financial position of company then it help in gaining trust of shareholders which in turn
providing financial help to them (Bennett and James, 2017).
Different accounting systems:
Cost accounting system: It is a system which help in analysing cost of products which
includes fixed, variable cost etc. It facilitate management in identifying the actual cost incurred
in manufacturing process which enable them in setting up pricing policy for their targeted
customers after adding margin on it. Thus, using such system by Rowlinson Knitwear help them
in reducing cost of business operations by analysing amount invested properly (Crosson and
Needles, 2013) .
Price optimisation system: It refers to a system which determines the actual perception of
customers towards company's pricing policy which assist management to make decisions
whether to make changes in current pricing policy or not. Using such system by Rowlinson
Knitwear facilitate management to attract new and retain loyal customers by providing them
products and services at their preferred prices.
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