Management Accounting: Types, Systems, and Reporting Methods

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems................................................................................................1
P2: Explain different methods used for management accounting reporting...............................3
TASK 2............................................................................................................................................5
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs...........................................................................5
P4 Budgetary control tools along with their advantages and disadvantages............................10
TASK 4..........................................................................................................................................13
P5 Comparison within ways that adopts by organisation to adopt management accounting
system........................................................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting can be defined as the process that keep records to perform all
work as per internal information and monetary benefits. This refers that with strategic decisions
organisation is able to get better results by managing task with proper budget. Internal
stakeholders determines employees, managers, leaders etc. to analyse business entity for
performing all work with in market. This also leads external stakeholders to understand current
status of enterprise. Moreover, this report is written from perspective of Prime furniture which is
operating their business at small scale level. It also highlights on management accounting to
provide management accounting that is leading company to perform all work as per management
accounting system. Absorption and marginal costing that is used by management to analyse
actual cost of production. In the last, adoption of management accounting system to respond
financial problems will also included in this report.
P1 Explain management accounting and give the essential requirements of different types of
management accounting systems.
Management accounting: This is an operation in which financial information are being
analysed by the help of financial statement so that decision can be obtained and pre decided
goals can be achieved within the given specified time (Ansoff and et. al., 2018).
Evolution and origin of management accounting: At the time of industrial evolution
the management accounting concept was introduced. When the need of decision making was
based totally on financial information these concepts came into existence. Transportation and
textiles are two major components of Prime furniture in management accounting.
Management accounting system: Various type of system which are required to be
followed by organisation so that to get competitive edge and for analysis of financial
performance. Management accounting includes system of cost accounting, price optimisation
scheme etc. Prime furniture is involved in manufacturing activities in order to recognise benefits
of the systems and establishing them considerably. These factors are explained below:
Difference between financial and management accounting:
Management accounting Financial accounting
 This helps the manager to take profit
generating decisions for the business
 This helps the management team in
recognising real financial position of
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entity.
 This assist in providing all kind of
monetary and non monetary
information.
the organisation with the help of annual
financial statements.
 It renders information only for
monetary terms.
Different management accounting systems are as under:
Cost accounting system: This is a system which assist in rendering information which
are related to cost of the company that are engaged in manufacturing numerous products and
services. In the context of Prime furniture, this system renders all the relevant information of
manufacturing activities so it is necessary for them to follow this system. Preparation of efficient
budget will be easier for department of finance so as to forecast future activities related to the
business (Bryce, 2017). Two types of coast are incurred during production process which is
direct and indirect costs. Direct cost are allocated directly to the manufacturing activities
although indirect cost s are allocated to provide assistance in direct manufacturing activities.
Inventory management system: It is a system which helps in proper maintenance of
existing stock level so that to fulfil requirements of customers. Prime furniture is supposed to
acquire this system so as to establish effective relation with clients and by keeping appropriate
level of stock in warehouse and supplying products on time to the customers they can increase
customer loyalty (Certo and et. al., 2016). Inventory management system is of three types which
are FIFO, LIFO, AVCO. LIFO can be defined as the last purchased inventory will be processed
first. FIFO means earliest purchase will be firstly processes and AVCO means the method in
which cost get distributed on the basis of produced units. Management of Prime furniture is
accountable for collecting information regarding these inventories through this system of
inventory management.
Price optimisation system: The system of price optimisation involves taking out
information regarding concept of client for newly established pricing policy that is necessary to
keep loyal customers in the business. For Prime furniture it is most suitable as this helps in
maintaining current clientele by fulfilling expectations in reference to any change in price.
Job order costing system: This is a system which support all the information regarding
actual cost allotment in process of manufacturing of every unit in the organisation. This helps the
organisation in maintaining proper records of overall costs that generates easiness for the
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