Management Accounting System and Techniques

This document provides an overview of the management accounting system and its essential requirements. It discusses various management accounting techniques such as cost volume profit analysis and different types of costs. The document also explores management accounting reports and their significance in decision making. Additionally, it highlights the benefits of different management accounting systems and their integration with organizational procedures.

Unit – 5
Management Accounting

Contents
INTRODUCTION...........................................................................................................................................4
TASK 1..........................................................................................................................................................4
P1 Management accounting system and their essential requirement....................................................4
P2 Management accounting reports.......................................................................................................7
M1 Benefits of system.............................................................................................................................8
D1 Integration with organizational procedure........................................................................................9
TASK 2........................................................................................................................................................10
P3 Management accounting techniques...............................................................................................10
M2 Application of MA techniques.........................................................................................................13
D2 Interpretation of data......................................................................................................................14
TASK 3........................................................................................................................................................14
P4 Planning tools for budgetary control................................................................................................14
M3 Uses with application of tools so to forecast budgets.....................................................................15
TASK 4........................................................................................................................................................16
P5 Comparison of ways in which management accounting systems are adopted to respond financial
problems...............................................................................................................................................16
M4. Analyses of ways management accounting helps in resolving financial problems.........................17
D3. Evaluation of the ways planning tools respond appropriately to solve financial problems as to lead
sustainable success................................................................................................................................18
CONCLUSION.............................................................................................................................................18
REFERENCES..............................................................................................................................................19

INTRODUCTION
Management accounting is an application of bookkeeping theory in addition to
knowledge of organizing bookkeeping details during that time. It's utilized by managers to take
decisions to its functions that were operational. Additionally, it assists in protecting assets and
making conclusions with the intention of resource utilisation, devising plans or policies so as to
manage operations in addition to displaying details (Adler, 2013).. Management accounting can
be just really actually a procedure of inventing plans, which makes comparisons, forecasting
budgets and presenting economic together side data which assists in operation investigation. For
increasing efficacy together side efficacy for sustainability which creates revenue in addition to
the purpose of enhancing productivity it's useful. In this report discuss About various topics like
management accounting and its requirement, Methods which can be used for managing
accounting reports and costing technique that can help to decide the cost of organisation in order
to maintain the profits. Additionally, report discusses about planning tools which is used in
budgetary control and different type of accounting system to solve the financial problems within
industry
TASK 1
P1 Management accounting system and their essential requirement
Management Accounting: It involves processes for preparing management accounts
combined with Accounts which aids in providing accurate in addition to managers timely advice
which can be used by managers of earning short and daily term decisions. Bookkeeping concept
is oriented that will be useful for planning future activities in addition to deciding. Managers of
Prime Furniture utilize this kind of bookkeeping with the aim of preparation decision. It bridges
the difference between other divisions and section which assists in project surgeries. It's thought
of as backbone of company by organizing accounting accounts with the aid of details since it
enriches efficacy of section. Analysts with the intention of earning investment decisions that are
predicated on operation of the institution within an accounting season us financial accounts
(Arroyo, 2012).

Management accounting system: It encircles methods which enable a business to keep
up operational tasks ineffective method. Systems are created as a way to help in decision making
for providing advice to direction. As a way to enhance purposes of section that increases
productivity and in precisely exactly the exact same period elevation managers of Prime
furniture Company uses various kinds of management accounting approaches.
Origin, role and principles of management accounting: It is widely accepted that the word
'Strategic Management Accounting' was first developed by Simmonds (1981, p26), who
described it as 'the collection and review of market data and its rivals for use in corporate
strategy creation and tracking.
Management accountant's function involves gathering, documenting and recording
budgetary data from different divisions within an organisation, tracking and reviewing their
expenditure, and recommending financing and distribution. The principal role of management
accounting is planning ahead (Fadzil and Rababah, 2012). For a small business budgets are all
spending reference.
Control accounting: Costs are better managed at both the levels at which they are incurred-at
origin accounting controls. Individual employee’s results, descriptions of product problems, and
application and use of resources like equipment, fuel, maintenance costs, automobiles, etc. are
planned in the context of quantitative data. Throughout this way power over staff, resources can
be practiced.
Accounting for inflation: A benefit cannot be assumed to be gained when equity is still left
untouched. This increases the value of money isn't constant. Therefore, the value of capital
allocated by the shareholders of the company concern must be measured in terms of the actual
money value by reorganization reporting. In this manner rate of inflation is assessed in order to
determine the company concern's real performance.
Difference between management accounting and financial accounting
Basis Financial accounting Management accounting
Definition It is defined as accounting system
which is utilised by business to
prepare all the financial statements.
This accounting system use to
collect financial and non financial
information that record in the

Along with these statements are
presenting in front of internal as
well as external stakeholders.
books. And these books are
presenting in front of internal
shareholders.
Information There are consisting of only
financial information.
In this system includes financial
and non financial data.
Main objective To present all the information that
present actual position of business.
It helps to prepare strategy and take
short term decision.
Inventory Management system: This system is employed for its oversight of stock
items in addition to non refundable assets. It is also known as software platform or applications
that are employed by directors to monitor degree of inventory (Grabner and Moers, 2013). Prime
furniture directors use this method to track both the incoming and outgoing of products or
materials. It assists in getting data regarding inventory amount which causes reducing scenarios
associated with under over-stock or stock in warehouses or workplace. Insights are provided by
tracking amounts of inventory in different stock locations in addition to making decisions for
inventory that is compulsory. This technique is demanded regarding maintain in addition to step
by step list of returned and new products that leaves or enters warehouses or organizations in a
certain time of purchase.
Cost accounting system: The following name is product breaking system. System is
utilized to gauge costs of services and products together side analyzing profitability, controlling
cost. This method can help in estimating accurate service or product cost founded on operations
that are profitable. Cost accounting system's requirement is to find out prices, controlling costs,
adjusting standards also to categorize price predicated on mill cost, selling cost, direct cost and
so forth. Utilizing system, production managers of Prime furniture watchfully analysis costs of
services and products that are distinct. Additionally, it aids in cost reduction which causes
maintaining cost in addition to increasing margin of benefit and reducing it.
Job costing system: It's also referred to as job ordering. It's used for collecting costs
linked to job or output as well as delegating. This technique is embraced during that time
products or items are generated that change in another and cost is associated together with

products. It involves collecting information linked to costs which are connected with ceremony
occupation that is special or production. Managers of Prime furniture apply this system to collect
information predicated on labor in addition to guide material plus it may be tailored in
accordance with the demands of consumers. The dependence on occupation is always to ensure
that job or product price covers all of expenses and at precisely exactly the exact same time
provide profits (Guffey and Harp, 2016).
Price Optimizing system: It's a mathematical application which aids in assessing of
variations of requirement at different amount of pricing and further unite the data along with
relevant information that are centered on cost in addition to inventory levels so as to provide tips
for shifting prices which causes progress of profits. It assists in understanding perception of
clients towards prices of services and products that are organizational and to quantify behavior of
consumers. A marketer of Prime furniture employs this system with the intention of discovering
pricing arrangements to generate payment conclusions. Price optimizing system's requirement is
to find prices of goods in maximizing profits that are operating, manner which helps (Harrison
and Lock, 2017).
So, the aforementioned approaches are used in Prime Furniture Company plus so they
help in Enhancing efficiencies of surgeries that result in endurance of the business enterprise.
P2 Management accounting reports
Management accounting reports: Such coverage concentrates towards advice That Are
received from financial accounts and also so is used for that use of decision making, preparation
and performance measurement. According to the requirements that these reports are willing
through the accounting stage as critical decisions have been accepted on the validity of reports.
Accounting reports have been used in Prime Furniture for providing relevant facts to
managements at several degrees to be able to consider corrective measures where required by
minding those reports.
Performance Report: This report is prepared with the aim of assessing or reviewing
performance of organizations or individuals. It's also applied for quantifying employee’s
performance so as to construct strategies for prospective or taking great decisions. Performance
reports are employed by managers of prime furniture to produce tactical decisions which lead to

enhancement of the provider. All these are utilized to quantify performance of each and every
employee and of whole business by the close of year. Utilizing such reports, most managers
provide rewards or incentives to this employee who plays with high potentiality for that role of
motivating them to achieve organizational goals (Hiebl and Mayrleitner, 2017).
Budget Reports: This record is regarded as essential report since it can help in providing
advice regarding performance within an accounting period. Organisational budgets comprise all
resources of expenses in addition to earnings that are centered on previous outcomes or
adventures. It's used with the intention of ascertaining the degree of expenditures. If the degree is
high then effective activities are required as a way to create levels down at high levels. Managers
of Prime furniture uses funding reports usually concerning maintain hands on financial
outcomes. It's the business enterprise in accomplishing its objectives ineffective method.
Account Receivable ageing reports: This record categorizes qualitative accounts
receivable in accordance with the period of period outstanding to get a statement. It's utilized by
people companies that execute surgeries on credit provisions and also to find out allowances to
your balances that are doubtful. Employing this particular report, prime furniture managers
identify defaulters in addition to financial health of possible customers. It's likewise valuable in
regaining money from assorted creditors by forcing clients to get payment for impending amount
(Hilton and Platt, 2013).
Cost managerial accounting report: This record can be used for calculating costs of
fabricated products or items from considering raw material prices, labor costs, direct costs,
overhead costs in addition to additional added costs. Financial managers prepare such accounts
for the role of providing transparent picture of costs of distinct services and products. This report
can be utilized in Prime furniture to give advice centered on cost prices in addition to prices of
almost any solution and also to gauge benefit margins. It involves stock depreciation, overhead
costs together with hourly labor expenses. Direction of this provider uses it to comprehend the
essence of most expenses and diluting resources within most sections of business unit.
M1 Benefits of system
There are defining different benefits of the systems in context of Prime furniture such as:

Systems Benefits
Inventory management system  This system is supporting to maintain accurate level
of stock.
 The main benefit of this system in Prime furniture to
track all the inventories which is utilised at different
level and reducing situation that connected with over
stock as well as under stock at work place.
Cost accounting system  It supports to forecast actual cost of different items
with the reason of controlling cost and investing
profit margin of an organisation.
 Through this system a manager of Prime furniture
deduct all unnecessary amounts.
Job Costing system  This system is beneficial in estimation of direct cost
as well as indirect cost.
 In Prime furniture this system related with the
accumulating cost in regard of specific job.
Price optimizing system  It is mainly applied by the organization to analysis
profitability in different manner.
 This helps to understand customer views and set
effective price structure as per the requirement.
Accordingly, they are implementing effective plan to
attract more customer in regard of business.
D1 Integration with organizational procedure
In Prime furniture company different actions are Performed which rewards in conducting
operational activities in smooth style in sequence to attaining goals of company. Management
accounting systems enriches internal functions that contribute to raising fertility. With the
assistance of bookkeeping systems plans are willing, activities are structured, helps in
performing use communicating among different purposes deviations are commanded and

wastage is reduced that contributes to enhancing growth of industry. On the opposing hand,
accounting accounts are useful for assessing and assessing performance of employees in addition
to organisation as whole (Kaplan and Atkinson, 2015). Accounting systems in addition to
accounting reports are linked to many purposes of business enterprise.
TASK 2
P3 Management accounting techniques
Cost volume benefit is a form of measurement which can be used to determine how
value and quantity adjustments impact the operating revenue and net profits of the company.
This requires a versatile strategy as well as a difference in cost.
Cost: This includes the amount of cash that is produced industry issue for the manufacture of
commodities. It is important in all organizations because it helps to identify the costs of
production activities. There are discussed various types of cost:
 Direct & indirect cost: Direct cost implies costs that arise directly and it needs a single
cost which helps to indirectly and directly identify the cost. Whereas as indirect costs for
completing business shapes emerge in further than one economic activity.
 Fixed and Variable cost: Fixed costs are characterized as costs that cannot alter or
remain constant in the business transactions. Where the cost as variable can adjust
according to requirement. It's having changes by increasing the amount of production
cost operation. Fr example, direct material and direct labor (Kieso, Weygandt and
Warfield, 2019).
Absorption Costing: A Costing technique that's utilized by organizational managers to appraise
cost of services and products within an accounting period. It encircles costs predicated on labor,
raw material in addition to manufacturing costs. Herein, so as to market single merchandise in
aggressive marketplace location Prime Furniture computes cost ODF merchandise with
absorption breaking technique.

Marginal costing: It includes those expenses that are paid for manufacturing additional
unit at work. It utilizes overhead costs for decision-making purposes with a view to rising

commodity prices and increasing productivity. Estimates based on modes of marginal costing are
as follows:

M2 Application of MA techniques
There are various Methods that are used by financial supervisors so as to organize
financial records. These records are utilized by internal in addition to external parties such as
stakeholders and owners as a way to make future decisions for the enhancement of company.
Departmental manager’s records each day trades and apply the exact same to financial
department with the intention of preparing income statements in addition to balance sheet which
aids in providing budget of business.

D2 Interpretation of data
Financial accounts are put of files which can be used by analysts to examine financial
operation of business enterprise. By minding these reports, decisions associated with investments
have been accepted. These reports comprise profit and loss account, cash flow statements
together side balance sheet including detailed information linked to business operational tasks.
It's compulsory for all kind of companies to prepare such reports to determine financial standing
in competitive sector.
TASK 3
P4 Planning tools for budgetary control
Preparing of budget: Budget is the calculation of revenue and expenditures that arising
from the execution of a commercial operation inside the company. Each organization should
formulate such budgets which serve to obtain revenue and expenditure details. This is the
determinism that begins before the first project commences. Such as, Prime furniture’s manager
plans a budget by tracking the activity like selling, purchasing, and capital accessibility. The
budget helps to offer a sense of potential risks and can be changed if necessary (Knyvienė,
2014).
Planning tools are the strategies that administrators are using to track and efficiently
leverage the budget. This also helps to improve organization’s efficiency or competitiveness.
Nero Ltd's director uses multiple forms of planning tools or strategies to maximize efficiency in
the sector.
Operating budget: It is a financial strategy intended to fulfill the liability or environmental
sustainability commitments of the company across term. This helps to efficiently manage the
company operations. Managing real or fixed expenditures is critical. Director of Prime furniture
plans operating budget for the continuation of operational programs inside the company. Such
kinds of budgets are planned on a quarterly, half-annual and monthly basis.
 Advantages: Operating budget aids to produce strategy daily to day operations of
business consequently perhaps not need to rush into to financial ditch. It helps Prime
furniture to tracking the real expenses, casting future expenditures and in addition help

build investment as a way to do operating works effortlessly. Additionally, it is helpful to
handle the present expenses and prospective expenses.
 Disadvantages: The disadvantage also such since it's time Consuming process which
have additional hours. It cannot give proper results such As earnings and expenses might
be gains that affect operational actions (Nielsen, Mitchell and Nørreklit, 2015).
Capital Budget: Budgeting based on little Alterations From preceding duration budgeted
results is evidenced to incremental funding. When handling governments don't need a lot of time
to invent fresh details for funding they prepare budgets during incremental strategy. In this
funding application, the numbers for new budgeted levels are raised in a steady speed in
accordance with the preceding season funding. The fund section of Prime furniture uses
incremental capital funding for construction equality values one of divisions in order that all
section have been supplied similar levels with the addition of worth in previous season funding.
With this budget, proper premises are created for gaining future losses and profits which farther
ensures financial stability along with all performance.
Advantages: The preparation tool of incremental funding removes rigorous expenses
while framing current year funding which farther contributes to saving management period.
Implementation of this funding is simple and doesn't demand tough analysts and calculations will
make certain which there are no massive deviations in funding year which contributes to stable
funds such as Prime furniture year annually.
Disadvantage: Incremental funding is ready according to previous assumptions that reveal
unreliability for present year funding. Preparing of this funding promotes more spending that
Contributes to paying unnecessary capital of association. Additionally, it causes perceptual
allocation of funds to sections which reduces business earnings to great amounts.
M3 Uses with application of tools so to forecast budgets
Exercising financial control usually are completed with tools that are planning. These tools
are utilized to establish goals, establishing deadlines, controlling expenses, delegating
responsibilities, communication objectives and observation performances by proper funding
prediction. Planning tools for example cash flow funding, overhead funding and budget are
utilized to determine prospective conditions and projecting them during funding prediction. Such

as for instance Money flow funding is put by financial accountants in Prime furniture to
precisely estimating payments and receipts of profit long run where as financial budget is
employed to predict earnings or expenditures that could happen throughout long or short term.
These planning tools have been implemented with the aim to appraise existing financial
functionality therefore to prepare plans for upcoming amount of time in order boost gains.
TASK 4
P5 Comparison of ways in which management accounting systems are adopted to
respond financial problems
Management accounting system is accustomed to make fiscal decision with assistance
from account and trade. It's embraced by business thing to understand the financial issues that
can be confronting organisation and find the answer of issues. Such as, Prime furniture,
managers uses several sorts of management bookkeeping system which help address the
difficulties and boost the endurance (Burns, 2012). Financial problem would be the crucial issue
for business since it increases reductions and reduce profit margin of entire small business. A
business should concentrate on financial problem and also so as to make the most of the
earnings.
 Unequal cash flow: It is a typical financial problem that comes inside the business entity
like inflows cannot similar with the outflow. The manager of Prime furniture is recording
all the transactions like operational, investing and financial activities.
 Spending more than income: When a business entity spends amount more than income so
it will create financial problem. That time business activities are not conducting smoothly
by the Prime furniture.
Management accounting tools
Key performance indicator: This really can be of use technique that's utilized to measure
business operation. It helps measure procedure for shows and business success of a small
business. It includes financial and non financial indicators which help track the operation and
solve the fiscal issues that can be originating within business enterprise. The director of Nero Ltd
concentrates on company procedures and operates so as to fulfill tactical aims.

Benchmarking: This method can be utilized to compare Company's operation along with other
business enterprise. It helps improve the operation by comparing with rival thing. It's largely
utilized to address the financial issues that can be originating within business as a result of a
reason.
Financial Governance: This means government regulation and policies that are applied to
collect, manage, track and control the company performance. It's setup by government to restrain
over business tasks by deciding the coverage’s within business enterprise. Prime furniture
employs this to address the fiscal problem that's spending significantly more in relation to just
income. The director of Prime furniture is likely to create strategy which helps solve financial
matter (Nixon and Otley and Emmanuel, 2013).
.
Comparison between Prime furniture and KPG furniture
Basis Prime Furniture KPG Furniture
Financial Problem The company is facing Unequal cash
flow financing problem because
manager forgets to records that
financial, investment and operating
activity (Ward, 2012).
The financial problems like
spending are more than income
that reduces its profits and
increase debt.
System To face this financial issue manager
should use cost accounting system that
will help to maintain the records of
transaction and other activities in a
systematic way.
For controlling this problems
and increase the profits
company should use inventory
management system that will
help to track the goods and
services within organisation.
M4. Analyses of ways management accounting helps in resolving financial problems
Various bookkeeping methods are linked inside management bookkeeping that plays key
roles in resolving issues precisely. Such as, Prime furniture could take advantage of KPI method

of work out issues related to unequal cash flow. This may improvise situation as pressurize
strategies is likely to soon be implemented on customers that will lead to well timed obligations
and can resolve fiscal resources problems that may eventually result in sustainable
accomplishment (Sánchez-Rodríguez and Spraakman, 2012).
D3. Evaluation of the ways planning tools respond appropriately to solve financial
problems as to lead sustainable success.
Planning tools sets plans to activities therefore that budgetary quotes are willing to manage
operations and funds. Tools of preparation including budget, income funding in addition to
overhead funding are all chosen by Prime furniture for solving issues. Such as for instance the
business enterprise is payable with trouble in money flow to conduct surgeries. Inside this,
application of cost accounting system for example cash flow funding may give you benefits to
collect information about cash flows and also create plans to boost the requirements such a
manner that contributes to leading renewable success (Wickramasinghe and Alawattage, 2012)..
.
CONCLUSION
As per the above report it has been summarized that in present time management
accounting can play essential role that helps to record all the transactions in the accounting
books. Accordingly a business takes short term as well as long term decision. There are
analyzing different system and reports which are presenting accurate situation of business. Along
with various planning tools helps to forecast future condition. There are identify the financial
problem that sort out through accounting system and management tool such as KPI and financial
governance.

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