Implementing Management Accounting for Financial Solutions: Prime

This report provides a comprehensive analysis of management accounting systems implemented at Prime Furniture. It explores various management accounting techniques such as marginal costing, absorption costing, normal costing, historical costing, and standard costing, detailing their application within the organization. The report also examines budgetary control tools, including operational budgeting, predictive analysis, standard costing, variance analysis, and flexible budgeting, highlighting their advantages and disadvantages. Furthermore, it discusses different methods of reporting in management accounting, such as performance reporting, budgeting reports, logistics and inventory reports, and accounts receivable reports. The analysis showcases how Prime Furniture uses these systems to manage costs, optimize pricing, and solve financial problems, offering insights into the practical application of management accounting principles.

UNIT 5

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
LO1..................................................................................................................................................3
P1 Determining various management accounting systems and its requirement in organisation 3
P2 Determining methods of reporting in Management accounting............................................5
LO2..................................................................................................................................................6
P3 Application of management accounting techniques within organisational context.............6
LO3..................................................................................................................................................9
P4 Budgetary control tools for planning at organisation with its advantages & benefits ..........9
P5 Comparison between how organisation are implementing management accounting system
due to solve the financial problem............................................................................................11
CONCLUSION..............................................................................................................................15
REFERENCES .............................................................................................................................16

INTRODUCTION
Management accounting is a process of collection of useful data & converting it into
information that can be communicated easily to managers for scaling up business. Management
accountants at workplace identify, analyse and interpret data into interactive logical content
related to cost or budget of products & services. This data is collected through various
performance reports, maintenance of track records etc. regulating profits or losses in business
environment. The report below show financial analysis of Prime Furniture based on link between
different departments. Below assessment show difference between financial & management
accounting with application of various techniques.
MAIN BODY
LO1
P1 Determining various management accounting systems and its requirement in organisation
Management accounting – This is an accounting tool that help in creation of financial
reports of organisation by proper analysis of business costs & activities. Junior accountant at
Prime furniture uses this form of accounting process to check management reports and
communicate them successfully to internal stakeholder of chosen firm.
Management accounting systems- These systems are used by management accountants
to examine overall company processes financially (Samuel, 2018). The superior managers of
Prime Furniture follow these systems to collect useful information & convert it into appropriate
information for making future plans.
Inventory and logistic management system- This system mainly deal with managing
statistical data related to stock inventory managed by organisation for monitoring final goods
production operations. In context with Prime furniture, This system is adopted to store various
type of goods detail such as wooden articles, furniture, raw material and finished products etc.
Below are various methods used to calculate inventory of selected corporation:
Average cost method(AVCO): This methods calculate goods as stock into warehouses on
basis of average cost price of every item. Sum total of all goods is divided by number of goods in
stock in this method on monthly or annual basis.

Last in first out (LIFO): This method help accountant use goods that were released
recently. Managers at prime furniture use this method to acquire current stock goods at store-
places.
First in first out (FIFO): In this method stock is calculated by accountant based on
stocks that were stored at beginning (Quattrone, 2016). This method help manager of chosen
firm use previous stocks at present to carry out business operations at workplace.
Cost accounting systems- This system help organisation determine different type of cost
incurred into various operations of company. Costs are categorised into different forms that is
overhead, variable, fixed, inventory and marginal costs. In context of Prime Furniture, marketing
executives use this system to know actual cost expenditure occurring at workplace. Based on
these expenses budgets are created for promotional activities.
Job costing system- In an organisation every department has different job roles & cost
expenses which are controlled or managed through Job costing system. Selected organisation use
this system to keep track of overall engineering costs, job orders, unit costs etc. to know actual
expenditures accumulated at workplace.
Price optimising systems- Based on actual cost or market cost of commodities, this
system is used to determine price of goods (Šiška, 2016). The manufactured goods produced by
Prime Furniture utilize price optimizing system to set affordable price rates of commodities.
Benefits and application of above explained management accounting systems to chosen
corporation:
Management accounting systems Benefit & application
Inventory management systems Prime furniture use this system to maintain
stock inventory of wooden furniture. The
method mainly focuses upon monitoring
utilisation of stock material according to
consumer demand.
Cost accounting system This method help chosen firm analyse
company budgets with incurring cost
expenditures during manufacturing process.
Also determination of different form of costs is

done by Prime Furniture for setting market
prices of their products (Otley, 2016).
Job costing system The job performances carried at Prime
furniture are assigned to multiple departments.
Under this method cost of every job performed
is analysed & segregated by accountant
manager of respective organisation.
Price optimising system This system is useful for selected enterprise to
determine suitable price rates for Furniture
sold at market industry. This method is
beneficial for company as it help them earn
maximum profits by optimized sett up of price
for products.
P2 Determining methods of reporting in Management accounting
Accounting management reporting: This process consist of generating financial
analysis report based on revenues or expenditures occurred during organisational processes.
These reports help managers determine performances as well as make predictive decisions for
planning of future goals. In context of Prime Furniture, there are different reports maintained by
managers discussed below:
Performance reporting- Employee performance is important to measure and improve for
effective establishment of goals (Nitzl, 2016). In relevance with Prime Furniture, this report help
accountants evaluate past performances, check current status of risk factors, changes in financial
statements and forecast time of work completion. Stakeholders of respective firm keep complete
record of work completion based on reporting period of every task allotted to employees.
Budgeting report- This report showcases comparison between predictive budgets and
actual result report. Managers use this report when expenses occurred in organisation are
increasing at high level exceeding provision amount saved according top set budgets. These
reports are formed based on future sales assumptions of furniture, available funding, revenue
forecasting options.

Logistics and inventory report- This report is created to measure & evaluate different
processes & stocks present at chosen firm. To visualize multiple procedures of transportation,
warehousing, and distribution channel network, accountant create an operation's layout. The
layout is divided into factors consisting of all practical details for checking status of furniture
goods preserved and complied at warehouses.
Accounts receivable report- This report keep record of all credit transactions consisting
of investments, liabilities, invoices outstanding etc. Following report is used by Prime Furniture
to determine status of customers in accordance with company operations (Speckbacher, 2017).
Managers prepare these report by gathering data of unpaid invoices displaying money value
awed by organisation form its customers.
LO2
P3 Application of management accounting techniques within organisational context
Marginal costing technique: This accounting system lay emphasis on calculation of
overall costs during production process. Marginal cost on production services is analysed by
manager of organisation through calculation of variable costs and aggregate contribution. This
technique is utilized by Prime furniture to make good decisions for estimating overall
contributions including sales price & variable costs.

Interpretation: The above analysis showcase calculation of firms net profit with respect
to its costs consisting of Production process, semi- variable costs, selling or distribution expenses
(Napitupulu,2018). The total sales done is sixty six thousand by selling of furniture items by
Prime furniture. The cost of goods sold is deducted with closing stock of organisation to get
gross profitability earned. Selling and distribution cost include , promotions, transportation, tax
rates, advertisement , salaries, warehousing etc. These costs are deducted from overall sales
earned to get net revenue value for products sold.
Absorption costing technique: This accounting system is for developing full product cost
that includes direct & indirect expenses in accordance with overhead rates. In context of chosen
firm, managers utilize absorption costing statements to do valuation of closing & opening
inventory on basis of full production. This technique is best way to estimate profit margins as
well as overall costs of different overheads in inventory management.

Interpretation: From above analysis, actual cost incurred at organisation is determined
with calculation of absorption profit costing. According to Prime furniture budgeting cost are
differentiated on basis of fixed, variable, production costs (Malmi,2016). The fixed cost of
organisation is around sixteen thousand which is marginally added with other expenses to
calculate total closing inventory value. Moreover opening and closing inventory is evaluated at
the end of period of reporting. Opening stock is value of products that are available for sales at
starting of accounting financial year.
Formulation of final account statements by application of management accounting
techniques explained below:
Interpretation: The above statement show various expenses incurred during operation of
business, In context of Prime furniture, The fixes costs come under overhead of fixed selling
expenses that affect variable costing profit of firm. After calculating the variable costs, opening

& closing expenses are deducted to get final value of absorption costing profit. The above
analyses also showcase inventory costs from beginning of year till end of accounting period.
Normal costing: This costing technique is used by organisation to know actual cost per
overhead rate. The direct cost of products is calculated based on raw material, labour required &
overhead prices etc. This costing method consist of allocation of all costs that are directly related
to the company internal operations and products manufactured.
Historical costing: This accounting management technique is used for calculating assets
or liabilities within organisation (Malina,2017). Prime Furniture utilizes this method for its fixed
assets such as wooden articles, chairs , cabinets and tables etc. to measure actual cost value under
GAAP principles of accounting.
Standard costing: This technique is used under cost accounting for substituting expected
costs with actual price of commodities at organisation. In context of Prime furniture this method
is used to keep record of variances helping them in tracking up actual & expected cost of
company products.
LO3
P4 Budgetary control tools for planning at organisation with its advantages & benefits
Budgeting and control: Organisations use budgetary control technique to manage
financial jargon consisting revenues or expenditures incurred in a specific period. In context of
Prime furniture, this tool is utilized by firm to compare income revenues with current expenses
of every department based on the budgets created for every month or annual year.
Operational Budgeting: Organisations use operational budgets to know actual funds
used at running business functions within specific period. In relevance with Prime furniture,
there are a lot of categories in operational budgeting that come under sales, production, cost of
goods sold, administrative cost and income statement budgets.
Selected corporation allocate sufficient funds to every department regulating these
budgets successfully for earning profitability or enhancing productivity effectively. This
budgeting tool consist of different elements mentioned in following points:
Predictive analysis- This function lay emphasis in setting budget based on predictive
analysis of actual & predetermined costs that may occur in future with current expenses. Prime

furniture apply this function to control its unnecessary expenses over past years with improved
budgeting of plans to deal with uncertain event or situations arising in future.
Standard costing- Before execution of operational functions in organisation, this tool is
used based on predictive budgets created with expected costs or incomes (Järvinen,2016).
Chosen firm does this form of costing through classifying costs into current, basic, ideal or
attainable standards. Application of standard costing by Prime furniture is used for calculation of
direct labour, direct material & manufacturing overhead costs.
Variance analysis- Organisation use this analysis to investigate difference between
behaviours that are actual or planned quantitatively for monitoring business operations. In
relevance with Prime Furniture, aims at identifying reason behind variance occurrences through
use of statistical data or analytics approach.
Flexible budgeting- Budgets are created under this method on annual basis to keep
overall track of business activities. Managers of Prime furniture use this budget to know actual
position of business in organisational environment with its key benefits or disadvantages
discussed below:
Advantages Disadvantages
Flexible budget tool is helpful for chosen firm
to know accurate data of various costs
occurring internally & externally associated
with business .
These budgets are not subject or department
specific as they give general information only
about costs & incomes which is not useful for
company in long run.
This is an appropriate option for
communicating these budgets to all department
at workplace as they contain overall analysis of
firm's resources (Hall,2016). Since common
results are derived from above tool , it gives
flexibility of options for manager to adapt
changes over current financial plans.
Creating flexible budgets require critical
analysis that can be done by an experienced
research professional resulting in increased
expenditure of hiring employees. There is no
accuracy in decisions that may sometimes lead
company incur huge losses with over or under
estimation of budgets formed.
Capital budgets- This is a budgeting tool that help selected enterprise determine best
suitable option for investment funds from various other alternatives. Senior accountant managers

of Prime Furniture uses different type of capital values to set budget for investment in a new
project or product discussed below:
Net present value: NPV help business determine net value of fixed asset at Prime
furniture for making investment decisions over a certain period of time.
Average rate of return: This value is calculated based on aggregate of total amount of
cash flow over investment period averagely. The quantitative value is divided by number of
outcomes for AVV calculation by accountant at selected entity.
Interest rate of return: This is an estimated analysis of what return of interest
organisation can gain form potential investments made on new or existing projects. In context of
Prime furniture has been utilizing the calculation of interest in estimation of return for its
alternative expenditure over investments.
Repaying period: This is a payback period for investments done by company consisting
of time taken to recover costs (Drury,2018)
. Short time period for return on investment is most appropriate option for Prime furniture after
investing into a particular project or opportunity.
Advantages Disadvantages
This technique is useful for selecting best
investment option by estimation of rate of
return over every project company has
invested.
This tool of analysing which investment
alternative will be best to take is time
consuming & costly.
Capital budgeting is useful fr Prime manger to
attract maximum external investor consisting
of supplier, general public, related businesses
etc.
Businesses may incur loss as budget created is
not accurate only estimated may affect wrong
decision making by managers.
Analysis with application of budget preparation and forecasting:
Manufacturing firms like Prime furniture focus on completion of long term objectives set
by manager through effective use of above planning tools discussed. In relevance with chosen
enterprise, accountants & researchers use capital budgets or operational method to control as
well as monitor firm expenditures.

P5 Comparison between how organisation are implementing management accounting system due
to solve the financial problem.
Management accounting is important concept in order to smoothly run the business
operations and functions. it is necessary for an organisation in order to know about the needs and
demand of customers as well as developing brand image in the mind of customers. There are
ample numbers of accounting policies in order to effectively developing financial statements for
stakeholders and making comparison between them. It considered as various tool and techniques
utilised by organisation in order to properly allocated the resources due to smoothly run the
financial business. it includes various financial problems which are facing by organisation in
order to used various techniques because it is helpful to solve the problems. it involves
organisation developing various measures in order to organisation successful survive in the
marketplace.
In context of prime furnitures, it includes organisation effectively adapting policies and
procedures which result as enhancing organisation profitability and productivity of company.
Budgetary control is techniques which are helpful for measuring performance and find out the
various solution for problems (Abdusalomova, 2019). It is process which refers to various
financial governance faced by an organisation in order to follow such rules and condition. There
are various small business effectively adapting financial system because developing brand image
in the market and managing business activity. It considered as environment changes very first so
organisation accordingly developing business operations in order to solve the various problems
and issues.
There are involves comparison between the organisation which are mentioned below.
Method Prime furniture Pearl Chartered
Accountants
Liquidity, solvency and debt
ratio.
It includes organisation
utilised various tool and
techniques in order to
effectively implementing
liquidator solvency, debt and
equity ratio method. All this
method are helpful for fulfil
It includes organisation used
another ways of ratio due to
effectively measuring financial
performance of organisation. It
is process which refers to
various factor are present in
the market so evaluating