Management Accounting System and Financial Effort at Prime Furniture

This report provides a detailed analysis of management accounting practices within Prime Furniture, a growing East London-based company planning to start a training course. It explores various facets of management accounting, including the essential requirements of a management accounting system, different methods for management accounting reporting, and the application of marginal and absorption costing for pricing strategies. The report also delves into inventory costing, highlighting ordering, holding, and storage costs. It discusses the types of management accounting techniques used in financial reporting, emphasizing the importance of relevant costing for pricing decisions. Furthermore, the report evaluates different planning tools, such as cash budgets, capital budgets, and production budgets, along with their advantages and disadvantages. It also compares how management accounting systems can be adapted to respond to financial issues, drawing comparisons between companies like Asda and Aldi to illustrate different approaches. The analysis includes an examination of financial problems, like mismanagement of job costs and low profitability, and proposes solutions such as balanced scorecards and benchmarking. The report concludes by underlining how effective management accounting contributes to a business's sustainability and success, and this document is available on Desklib, a platform offering a wide range of study resources for students.

Management
Accounting

INTRODUCTION
The concept of management is a practice of making report in which helps for succeed
activities to organisations that helps managers for making the company's decision. Management
accounting helps company for managing its financial reports for its better performance which
gives higher results for the company (Pelz, 2019). Management accounting helps company for
organising its resources in the way which helps it for accomplish its objectives which helps
company for higher profitability. It has various functions such as planning, organising,
managing, controlling, budgeting etc. It helps managers for assessing company's act which helps
it for accomplish its objectives. Management accounting is the source which helps for
maintaining company's transactions for its better performance which gives its higher
profitability. Company which use management accounting for making its higher profitability.
The company which is includes for this report is Prime Furniture. It is the growing East London
bases company which is planning for starting training course. This report includes topics which
are management accounting system and necessary requirements of this, methods of management
accounting reports, marginal and absorption costing in order to price style. Other than this it
includes limitations and benefits of various form of planning instrument and how entity adapting
management accounting system in state to financial effort.
TASK 1
P1: Management accounting as well as different types of management accounting system with
essential requirements:
P2: Different methods for management accounting reporting:
TASK 2
P3: Calculating marginal along with absorption costing to devise income statements of company
Costing is a mechanism that helps company to identify its costs elements for businesses.
It helps for assessing the value of the customs, geographic, location, channel of medium,
commodity, processes etc. In context to Prime furniture as the furniture company it helps for
developing its costs which helps company for accomplish its objectives. Company assessing its
costs for running its activities for managing costs which gives higher profitability for the
businesses (Bennett and James, 2017).
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Marginal costing: It is a activity in which a company use for its overall price that extra
units are produces. It includes variable costs that occurs when the goods, services are produces. It
views the variable costs which includes for the goods.
Absorption costing: Absorption costing is the process for manufacturing costs which
includes total costs for the businesses. It views the costs which are includes for the businesses for
running its activities. It helps for assessing costs which helps for higher profitability for business.
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Inventory costing: It comprises costs for holding & order inventory. In other words, it is
termed to that costs which are connected with acquisition, storage and administration for
inventory. It has various kind for costs that are as follows:
 Ordering costs: It refers to the process for costs for delivering order for the suppliers
includes for preparing the costs, transportation costs and receiving costs for the company.
 Holding costs: It is all about the carrying costs for the merchandise for the company's
warehouse which includes various costs financing costs, storage space costs, inventory
risk costs and inventory service costs.
 Storage costs: This is said to the costs which businesses views for out of inventory costs
which it bears when the inventory for sales are less than its demand. It includes disrupted
costs, customer's loyalty costs, value costs etc.
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M2: Types of management accounting techniques used in financial reporting:
Within business products, Costing shows a critical part. Costs should relevant which
helps for pricing decision making. In context to Prime furniture, it is about its resources which
helps for better productivity which helps for the higher profitability. Costing refers for the costs
which are includes for the production for goods, services. It includes various costs which are
inventory costing, absorption costing, marginal costing. These costs helps managers for better
decision making which helps for higher profitability (Paiva and Carvalho, 2018).
D2: Explanation about certain financial reports within activities of business
From the financial reports of the company, it is viewed that for product costing,
absorption costing, marginal costing etc. Absorption costing views profits for the quarter first is
4300, for second quarter is 3400. Marginal costing views profits for the quarter first is 1900, for
second quarter is 3100. These costing helps for businesses for know its expenses which helps for
decision making. These costing helps company for better performance which helps for higher
profitability for the businesses.
TASK 3
P4: Various kinds of planning tools with disadvantages and advantages
The concept of budgeting is an act of anticipate expenditure, financial income of the
company which helps for decision making. It is about preparing the budgets which includes cash
flow, balance sheet, income statements etc. it provides the way for employees which helps them
for better performance. Company's makes budgets for managing its cash flows which helps for
better performance which helps for higher profitability for the businesses. It is the process for
planning for expenses, income which company makes for running its activities. Budgeting is
about planning for making expenses for earning income which helps for higher profitability. In
context to Prime furniture, it helps managers for spending money. It helps company's for better
utilisation for its resources for the better performance which helps for the higher profitability.
The company makes budget for evaluating the performance which ensures for company has
sufficient money for running its activities which helps for higher profitability for the businesses
(Agustia, Sawarjuwono and Dianawati, 2019).
Budgeting helps company for manage the cash flows, reducing costs, higher profitability
for making a higher investments. It is a concept for providing content to the organization team
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for managing worker of their better performance. It also helps for designing, managing the
direction of the businesses. It aids for achieve the expenditure, taxes for the businesses for
managing costs for the businesses (Phan, Baird and Su, 2017). It helps for strategic decision
making for the decision making which helps for higher profitability.
Types for budgets:
Cash budget: The concept of cash budget is to measurement the cash inflows and
outflows of the organisation's complete a specific time period. These are generally given to idea
whether a company has enough amount keep day to day operations. The purpose of this is to
determine that whether the firm has enough cash balance to meet out its short term requirements,
it also helps the management to find the surplus of funds so that the firm can take the suitable
actions.
Capital budget: It consists the capital receipts and payments. In receipts (borrowing,
loans or Reserve Bank of India) and capital payments belong to capital expenditure (land and
building, machinery, equipment and also investments etc. It is also making the investment
decisions in a long term. It is all decide by the firm whether they invest or not in a particular
project.
Production budget: In this production budget, it can measure the amount unit of
products that are necessary to be manufactured. It depends on the income, inventory level,
revenue etc. or how much the firm will sell their units in future period. A manufacturer create a
cost budgets for the direct costs like direct labour, direct material and direct overhead that are
needed in the manufacture process.
M3: Planning tools along with applications with the purpose of forecasting as well as preparation
of budget in company
For all organisations managers use several planning instrument for the better
performance. In context to Prime furniture, company's management use various financial tools
which includes various budgets cash budget, capital budget, production budget etc. cash budget
is the process for the know cash outflows & cash inflows for the businesses. Capital budget is the
process for know capital receipts and payments for the businesses (Granlund and Lukka, 2017).
In receipts and capital payments belong to capital expenditure (land and building, machinery,
equipment and also investments etc. production budget is about manufacturer creates a cost
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budgets for the direct costs like direct labour, direct material and direct overhead that are
compulsory in the production process for their businesses.
TASK 4
P5: Comparison about the ways through which management accounting systems can be adapted
for responding issues of finance
There are several types of business problems which most of business entities face while
running their business operations . A financial problem refers to a particular situation in which an
organization faces different types of problems as well as difficulties. This can create an overall
impact on the firm and thus it can impact the overall level of profitability. The financial
problems which are faced by Prime Furniture are explained as follows-
 Mismanagement in the job costs- The job costs of the company are being mismanaged.
This is creating an overall impact on the company because in this way this can affect its
overall level of operations. This is reducing its level of profits which it can earn in the
future.
 Low profitability- The profitability level within the company has reduced a lot because
the company has not been able to follow the recent price trends which is creating an
impact on its pricing levels. For the company this is problematic as it can impact the
financial situation adversely.
Further, a use of wide range of techniques can be made so that these financial problems are
resolved. The techniques which can be used by Prime Furniture for the purpose of solving the
financial problems are explained as follows-
 Balanced scorecard- This is a technique which can be used to ensure that the overall
assessment of the performance level of the organizations can be made by regularly
assessing the performance of the employees of the firms. Therefore it can be said that by
making the use of this particular technique the company can solve the problem of job
costs which will help it a lot in enhancing its overall level of profits (Eldenburg,
Krishnan and Krishnan, 2017).
 Benchmarking- It is a technique which helps in ensuring that the various types of
benchmarks and standards can be set. Prime Furniture can make a use of this particular
technique so that the financial problem related with profits can be resolved highly
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effectively and efficiently without issues. This can help a lot in ensuring that the right
prices and the profitability level is enhanced.
Comparison of organizations
Basis for comparison Asda Aldi
Problem related to finance Asda is lining a financial
problem of excessive costs and
overheads which is creating an
impact on the overall
profitability level.
In contrary, Aldi is going
through a tough situation
related to financial problem of
mismanagement of the
different types of inventory
items which is affecting the
overall inventory costs.
Management accounting
system
Asda can make the use of
Management accounting
system of Cost accounting
system which will help in
solving this particular problem
and ensuring that the costs can
be managed appropriately.
Aldi can make the use of
Management accounting
system of Inventory
management system which
will help in solving this
particular problem and
ensuring that the stock items
can be managed properly
(Dewua and Barghathť, 2019).
Application of Management
accounting system
Application of the Cost
accounting system can be done
by ensuring that the
identification of excessive
costs can be done and they can
be reduced.
Application of Inventory
management system can be
done by ensuring that the
identification of the stock
items can be done so that the
problem of stock can be
resolved.
Therefore, by learning from Asda and Aldi, the management of Prime Furniture can
make sure that the financial problems can be resolved by using Management Accounting
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Systems. The use of Job costing system can be made for resolving the problem of job costs and
the use of Price optimization system can be made for resolving the problem of prices effectively
and efficiently.
M4: Analysis of problem in finance associated to management accounting system which takes a
business towards success in sustainability
The concept of management accounting helps the entity for managing the funds in which
firm can accomplish its objectives (Hiebl, et. al., 2015). In context to Prime furniture, company
use management accounting systems for managing its action. Organisation use several
formulation to solving its financial problems which are KPI, benchmarking, financial governance
etc. financial problems includes mismanagement for job costs, profitability etc. Management
accounting approaches helps for solving problems which helps for accomplish company's
objectives. It helps company's for better decision making which helps for the higher profitability
for the businesses (Li, 2018). It provides financial information for accounting use which helps
for higher profitability for the businesses.
D3: Planning tools helps in resolving financial problems:
With context of Prime furniture, designing instrument which aids for breakdown the
financial problems. It includes various budgets which are cash budget, capital budget, production
budget etc. company use various financial tools which helps for higher profitability for the
businesses. Company use various planning tools budgeting which helps for managing the
employees which use resources for better performance which helps for higher profitability for
the businesses (Napitupulu, 2020).
CONCLUSION
After completing the project it can concluded that management accounting is the act for
making report which helps managers for decision making which gives higher profitability for the
businesses. It has a several functions which includes planning, organising, managing, analysing,
budgeting etc. It is the process which helps company for managing its activities which helps for
the higher profitability. It helps business for making its decisions better which helps its for higher
profitability for the businesses. Management accounting has various types for reports which
includes performance report, budget report, inventory management report, account receivable
report etc. company's use various planning tools for managing its expenses, income which helps
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