Management Accounting Report: Analysis of Prime Furniture's Systems

This report delves into the realm of management accounting, offering a comprehensive analysis of its principles, systems, and applications within the context of Prime Furniture. The report begins by defining management accounting and highlighting its significance, differentiating it from financial accounting and exploring various management accounting systems, such as inventory management, cost accounting, and price optimization. It then proceeds to examine management accounting reporting, detailing the features of financial data and different types of reports, including performance reports, accounts receivable aging reports, and inventory reports. The report further explores cost and costing methods, including cost volume analysis, cost variances, and marginal and absorption costing. Budgetary control and planning tools are also discussed, with an emphasis on capital budgets, flexible budgeting, and SWOT analysis. Finally, the report addresses financial problems, the characteristics of effective management accountants, and the importance of financial governance. The report concludes with an overview of the key concepts discussed and their relevance to effective business management.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................4
TASK 1..........................................................................................................................................................4
P1 Management Accounting System:......................................................................................................4
Management Accounting:....................................................................................................................4
Benefits of management accounting systems:.........................................................................................6
P2 Management Accounting Reporting:..................................................................................................6
Features of Financial Data:..................................................................................................................6
Different types of reports.....................................................................................................................7
TASK 2..........................................................................................................................................................7
P3 Cost and Costing Methods:.................................................................................................................7
Accounting techniques to produce financial statements........................................................................12
Interpretation of prepared financial statements......................................................................................12
TASK 3........................................................................................................................................................12
P4 Budgetary control and Planning tools:..............................................................................................12
Common Costing Systems:................................................................................................................14
SWOT Analysis:................................................................................................................................15
TASK 4........................................................................................................................................................16
P5 Financial Problems and Financial Governance:................................................................................16
Characteristics and Skills of effective management accountant:........................................................17
CONCLUSION.............................................................................................................................................18
REFERENCES..............................................................................................................................................19

INTRODUCTION
Management is made up of two words: management and accounting, both of which are
necessary for running a firm and making sound judgments. It is critical for businesses to know
how to expand and prosper in a hard climate. It has become essential for managers to employ a
management accounting needs and implement reports that will assist them in operating and
running their businesses efficiently (Nassereddine and Ahmad, 2019). This can assist in making
sound business judgments. It outlines techniques and concepts for effective planning, selection,
and administration of relevant business operations, as well as administration by evaluation and
effectiveness evaluation. Prime Furniture was chosen as the subject of this research. The research
includes a thorough examination of several accounting systems/frameworks, reporting
methodologies, and planning tools that are successful in addressing financial issues.
TASK 1
P1 Management Accounting System:
Management Accounting:
While there's no precise definition defining management accounting, it may be regarded
as the foundation or comprehensive method of collecting, analyzing, identifying, documenting,
and analyzing financial as well as non information in such a way that management of the
company may develop its plans and identify opportunities so that organisational vision and
mission are met. The notion of managerial accounting emerged around the end of the 19th
century to govern and regulate an institution's inner structure and constituents. The following are
some key distinctions between management and financial accounting:
Management Accounting Financial Accounting
This accounting system may utilise and show
monetary or non-financial relevant data.
Financial information are often used and
provided by revenue recognition systems.
Management accounting information is used
by team members including as administrators,
proprietors, and board of directors.
External parties including as stockholders, the
authorities, entrepreneurs, rivals, and others
can value refers accounting information.

In compiling and access information,
management accounting doesn't really adhere
to any precise formulae or standards.
Financial accounting complies with legal
requirements by presenting knowledge and
statistics in a pre-defined manner.
Management Accounting Systems: A management accounting system may be defined as a
strategy for managing a firm's daily procedures with using accessible profitable and non records /
knowledge. Prime Furniture has created a management accounting system for reviewing various
sectors and operations such that the management team can track and control the condition the
each and then every operation. The following are the possible management accounting systems
used by the target business:
 Inventory management system: This system is mainly used the manufacturing
organisation to track the stock in organisation at different stages. The purpose of an
inventory management process is to achieve the condition of stored products, even if they
are raw or completed (Nyamwanza, Madzivire and Madzivire, 2020). This technology
aids the particular management team in observing and recording all stock movements.
Prime furniture, for example, employs the most up-to-date enterprise resource planning
technology to monitor every single model of their manufacture.
 Cost accounting system: This system is a way of tracing and recording the additional
costs at different levels of the project. This pricing methodology aids administration in
determining numerous internal and external operating costs such that all expenses can be
attributed to their respective overhead costs and the true inventory holding costs can be
computed.
 Price optimization system: A pricing optimization method was created to determine the
price of pricing models that people are willing to pay. This approach aids in the
comprehension of clients' responses to different rice ranges for various items and
services. The management of the chosen organisation is responsible for determining the
highest standard of service that is both lucrative for the company and accessible for the
consumers.

Benefits of management accounting systems:
Accounting
Systems
Benefits
Inventory
Management
System
 By combining the whole manufacturing and selling process, this
system aids in enhancing operational efficiency.
 It also saves a lot of time, cash, and area, all of which may be put to
better use.
Cost
Accounting
System
 A cost accounting system aids in the elimination of different
unreasonable and unneeded manufacturing expenses.
 This approach also assists managers of a chosen business in
distributing capital fairly and keeping power over manufacturing
process (Dijkman, 2019).
Price
Optimisation
System
 Management has the power to select the best pricing, resulting in
increased compensation and employee happiness.
 With the aid of this method, the worry concerning pricing constancy
may be put to rest.
P2 Management Accounting Reporting:
Management accounting reporting refers to the process of documenting and providing
financial statements to employees and managers in order for them to monitor and review the
efficiency and effectiveness and growth of the organizations. According on the cost and time or
kind of business, such accounting reports may be generated regularly, annually, or annual. The
managerial accountant's data in such statements must have several characteristics that make it
useful, as shown below:
Features of Financial Data:
•Accurate: Data and analysis should be reliable, and they should be recorded at the time of
operation. It should not be entered numerous times, even if it is used for several tasks, because it
may be misinterpreted.

•Relevant: The information contained in the studies should be useful for the reason for which it
was supplied. In order for managers to make appropriate choices, it is vital to examine the needs
on a regular basis.
•Trustworthy: The material must come from dependable, coherent, and steady references.
Changes to the data collection techniques and procedures should be avoided since they may
affect the evaluation process.
Prime Furniture prepares a variety of reports to assist its management in monitoring the
effectiveness of its personnel and also the company that are listed below:
Different types of reports
Performance Report: A performance report is used to assess an activity's or a person's
result or effectiveness. This report compares real results to measurement methods in order to
determine the differences. It also aids in determining the causes of such aberrations and
attempting to correct those unless the outcomes are negative (Kharlamova and et. al., 2020).
Accounts receivable agin report: This study is an important tool for businesses who
operate on loan terms. This report aids in the management of the firm's working capital by
staying on top of clients, their debts, charge on interest charges, and so on. This report is
intended to assess and restrict credit regulations, as well as raise the debtor inventory turnover.
Inventory report: Government and commercial firms, such as Prime Furniture, provide
these reports to improve their manufacturing techniques. The leadership's management can
evaluate different manufacturing phases and manufacturing plants to identify procedures,
operations, and procedures that might be enhanced.
TASK 2
P3 Cost and Costing Methods:
Costs - In accountancy, costs refer to the cash value of expenditures / expenditures on raw
materials, inventories, commodities, suppliers, people, utilities, and other items. This is an
amount that is recorded in the financial statement as an expense or a cost under several headings.

CV Analysis (Cost Volume Analysis) analyses the patterns of value fluctuations in response to
cost and quantity variations. In layman's terms, it's a projection of how pricing and volumes
would affect earnings. The senior management may select the sales level at which the firm will
be in a hardly any point for these metrics, known colloquially as the CVP Study. This is referred
to as the break-even point (Blankley, Kerr and Wiggins, 2018).
Cost variances - When actual experienced costs differ from standardized prices, these would be
known to as variances. The favorable variation is produced if the actual expenses are smaller
than the standardized expenses or if the added value is larger than the standardized profits. On
the other hand, whenever real costs are more than regular expenditure or revenue is lower, this is
termed a negative variance.
Cost Volume Profit: This type of analysis is used to determine the influence of costs on
operational profit. It is also recognized as break-even assessment, which is used to calculate the
revenue and pricing structure break-even level such that the chosen company's leadership may
make smaller financial choices.
Flexible Budgeting: It is a means of creating a budget statement that flexes or changes
depending on the needs of the company. The administration may change the operating costs that
fluctuate with income using a flexible budget. This budgeting is more applicable to a constant or
stable expenditure due to the extreme following reasons:
• The business success may be forecasted with higher precision.
• Make it easier to accurately analyses the performance of individual departments.
• The expenditure for variety of activities can be adjusted to reflect changing circumstances.
Marginal Costing: Marginal costing is a way for calculating the cost of producing one more unit
of a commodity. This pricing approach is used to determine the institution's maximal
manufacturing capacity. All variable expenses were allocated to the manufacturing units, since
all overhead costs were deducted from of the contributions (Bakhshi, Azinfar and
NabaviChashmi, 2021).

Absorption costing: The absorption costing strategy assumes that all costs associated with the
manufacturing process should be assigned to the production facilities; this implies that this
technique incorporates all manufactured overhead costs, either fixed or dynamic, directly or
indirectly in origin, in the cost of manufacture.
Valuation methods
 FIFO- This method assumes that inventories bought or produced for the first time are
sold, but fresh stock is not. The price of the products provided is then ascribed to the
worth of the earlier stock, and the expenditure of the most recent stock is tied to the
inventory's fulfillment.
 LIFO- This method is commonly used to assign financial costs to inventories. It is
predicated on the idea how the last item of stock acquired is the first product to be
discharged / auctioned.
 Weighted average costing technique- The simplest approach to inventory is periodical
weighed averaging. The net expenditure of the things purchased for sale is calculated,
and the amount of required items is split, as the computation is completed at the end of
the period. It's useful to distinguish between buying and sells.
Calculations:

Accounting techniques to produce financial statements.
In the reporting of business administration, financial statement is also grouped into
absorbing-method and marginal-method systems. As for Prime furniture, absorption and also
marginal-costing procedures show earnings. Aside from these, company's financial preparation
represents a wide range of strategies, like the standard spending architecture, cost occurrences,
and so on. The computation of the prospective expenses considered for contrast might be
interpreted as connected to the usual costing. Operating expenses are assigned and estimated by
growing engagement for various sorts of activities (Tarekegn, Yosef and Gutu, 2020).
Interpretation of prepared financial statements.
Though the following produced income statement is discussed, it can be indicates that the
majority of net income by absorbing cost technique is 1900 GBP. Operating income are
comparable to 4,700 pounds, producing a marginal cost framework. The profit percentage
variation is mostly attributable to under or over fixed-cost absorbing for various methods.
TASK 3
P4 Budgetary control and Planning tools:
Budget: A budget may be described as an estimate of future receipts and expenses which
may occur inside the company during a given timeframe. These are created using prior
expenditures and expertise to assess the company's future demands. Budgetary control is the
process of evaluating those expenditures to the desired achievements, identifying variations, and
regulating the operation as per the expenditures. The following are examples of the many sorts of
budgeting created by the chosen firm:
Capital Budget: A capital budget is created to examine the firm's anticipated deals involving
investment revenues and expenditures. This budget covers the acquisition or selling of