Management Accounting Report: Prime Furniture, Unit 5 Analysis

This report provides an overview of management accounting, focusing on its role in decision-making within a company. The report begins with an introduction to management accounting, its history, and its benefits, followed by a comparison with financial accounting. A case study on Prime Furniture, a growing furniture company, is presented to illustrate the practical application of management accounting principles. The report details the essential requirements of a management accounting system, including cost accounting, inventory management, job costing, and price optimizing systems. Different types of management accounting reporting methods such as budget reports, investment appraisal reports, and execution reports are also discussed, highlighting their benefits and challenges. The conclusion emphasizes the significance of management accounting as a crucial tool for internal decision-making. The report includes references to academic sources supporting the concepts discussed.

Management Accounting
Unit 5

Table of Content
• Introduction
• Companies brief
• Management accounting and its history
• Benefits of management accounting
• Difference between financial and management accounting
• Essential requirement of management accounting system
• Different types of management accounting reporting methods
• Conclusion
• References

Introduction
Management accounting is the process that actually help the managers of the company to take the decisions.
Management accounting further involve the concept of cost accounting and financial accounting. This report
include various important things like, meaning of management accounting, history of management accounting,
differentiation in between financial and management accounting.

Background of company
• This report prepared on Prime furniture.
• A growing company in London.
• It was established in October 2019.
• Sale the furniture through mail-orders and the internet.
• This company is a private limited organisation.

Management accounting and its history
• Management accounting is the concept which deal with the bright concept of accounting information, which
are useful for the growth of the business. This is must be known that management accounting is not supplant
for financial and cost management and accounting system.
• Management accounting thought which was developed through English before and during the industrialised
process of company. During the process of 19th century, the size of the organisation are small but due the
changing nature of the companies and growing demand the size of the organisation are increasing day by day.

Benefits of management accounting
• Decision making
• Planning
• Controlling
• Organising
• Understanding financial information
• Identifying problems

Difference between financial and
management accounting
Basis Financial Accounting Management Accounting
Objective of accounting To make a report for the internal and external stakeholder of
company.
Used planning, organising, directing and controlling which are useful for the internal people
of company only.
Focus It is mostly prepared on past information and data. Its main focus is to make future decision of company.
Importance Financial accounting is based on correctness of data and it must be
verified.
Its importance is to relevance of data and they can modify.
Provisions Financial information is based on whole company. This is not prepared for whole company only some of the sectors are needed to prepare.
Compulsory It is compulsory in all the organisation. This is not as compulsory in the company.
Rules and regulations They follow generally accepted accounting principles (GAAP) mostly in
UK and US countries.
Companies majorly develop management accounting principles and measurement rule as
per the need of company.
Size Financial accounting is précised. Management accounting is formed in detailed.

Essential requirement of management
accounting system
• Cost accounting system: Prime Furniture can use this accounting system to identify the cost structure,
inventory valuation, evaluate the profitability of company and controlling cost benefits etc. this system is also
used to understand the concept of fixed and variable factors.
• Inventory management system: This management system is used to manage the inventory in order to
analysis the company’s situation. The use of prime furniture need which are properly to achieve the benefit
within the company.

Cont.…
• Job costing system: There are different type of jobs and activities which are founded in company. Job
costing system is the process tell the company to allocate total manufacturing cost in between all of jobs and
activities.
• Price optimizing system: It is the methods which is used for analysing different analytical system to
understand the nature of customers at different price levels.

Different types of management
accounting reporting methods
Budget Report: It is one of the essential services of
the organisation, which help plan and quantitative
manage future activities.
Benefits: This budget provide a detailed and valuable
means of controlling. Motivate the management
process the early and timely management problem.
Challenges: The management of the company is
stuck as their inflexibility of their administrative.
Here the company can use only financial information.
Further it is a time consuming and costly methods.
Investment appraisal reports
This is important to appraise the performance of
investment, prime furniture can use this in order to
project risk, maturity etc. before investing in projects.
Benefits: It make attractiveness in projects in terms
of NPV and profits.
Challenges: It require different type of tools and it
only considered financial data.

Cont.…
Execution Report: It is another type of report which is used for knowing the condition of projects while
implementing and executing project details.
• Benefits: It help the company to identify the information related to projects, determine the problem and
control them.
• Challenges: It need more human resource management, it is time and size constraints.

Conclusion
From the above report it is concluded that management accounting is the very important tool which help the
company in their decision making. This function is used in the internal process of company to getting more
benefits. The company can use different use different type of techniques such as budgeting report, investment
appraisal, job costing, and execution report.

References
• Christ, K.L. and Burritt, R.L., 2017. Water management accounting: A framework for corporate
practice. Journal of Cleaner Production, 152, pp.379-386.
• Cuzdriorean, D.D., 2017. The use of management accounting practices by Romanian small and medium-sized
enterprises: A field study. Journal of Accounting and Management Information Systems, 16(2), pp.291-312.
• Diab, A.A., 2019. The appearance of community logics in management accounting and control: Evidence
from an Egyptian sugar beet village. Critical Perspectives on Accounting, p.102084.