Financial Analysis of Prime Furniture: Management Accounting Report

This report provides a comprehensive analysis of management accounting systems and their applications within Prime Furniture. It begins with an introduction to management accounting, emphasizing its role in collecting and interpreting data for effective business management. The report details various management accounting systems, including inventory and logistics, cost accounting, job costing, and price optimization, illustrating their significance in financial analysis and decision-making. It further explores methods of reporting, such as performance reporting, budgeting reports, and logistics and inventory reports. The benefits and applications of these systems are highlighted, demonstrating their impact on inventory management, cost analysis, and price setting. The report also examines how management accounting is integrated into organizational processes, concluding with a discussion of the accounting systems used to calculate ratios and determine profitability. References to relevant books and journals are included to support the analysis.

UNIT 5

TABLE OF CONTENT
 Introduction
 Management accounting systems and its requirement
 Methods of reporting in Management accounting
 Benefits and application of management accounting systems
 management accounting system and management accounting is
integrated within the organizational process
 CONCLUSION
 References

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, analyze 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.

Management accounting systems and its requirement
Management accounting – This is an accounting tool that help in creation
of financial reports of organization 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. The superior managers of Prime Furniture follow these
systems to collect useful information & convert it into appropriate
information for making future plans.

Continue..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.

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First in first out (FIFO): In this method stock is calculated by accountant
based on stocks that were stored at beginning. 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 organization determine
different type of cost incurred into various operations of company. Costs
are categorized 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 organization every department has different job
roles & cost expenses which are controlled or managed through Job
costing system. Selected organization use this system to keep track of
overall engineering costs, job orders, unit costs etc. to know actual

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Price optimizing systems- Based on actual cost or market cost of
commodities, this system is used to determine price of goods. The
manufactured goods produced by Prime Furniture utilize price optimizing
system to set affordable price rates of commodities.
Methods of reporting in Management accounting
 Accounting management reporting: This process consist of
generating financial analysis report based on revenues or expenditures
occurred during organizational 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:

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Performance reporting- Employee performance is important to measure
and improve for effective establishment of goals. 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 organization 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.

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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. Managers prepare
these report by gathering data of unpaid invoices displaying money value
awed by organisation form its customers.

Benefits and application of management accounting systems
 Inventory management systems
Prime furniture use this system to maintain stock inventory of wooden
furniture. The method mainly focuses upon monitoring utilization of stock
material according to consumer demand.
 Cost accounting system
This method help chosen firm analyze 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).

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 Job costing system
The job performances carried at Prime furniture are assigned to
multiple departments. Under this method cost of every job
performed is analyses & segregated by accountant manager of
respective organization
 Price optimizing 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.

How management accounting system and management accounting is
integrated within the organizational process
Management accounting is a system of organizational management whose
implementation, although flexible depending on the type of operations
within the organization, is dependent on specific approaches and
techniques that determine the scope of costing or operational analysis.
Although every management accountant can use a specific method or
technique that best suites its organization, the freedom that comes with the
random selection of the approaches increases chances of inconsistency