Management Accounting Systems and Reporting for Tomkins Plc

This report provides a comprehensive analysis of management accounting principles and their application within Tomkins Plc, a multinational engineering company. The report begins by defining management accounting and exploring various accounting systems such as price optimizing, cost accounting (including job order and process costing), and inventory management, and job costing systems. It then delves into different management accounting reports like budget reports, accounts receivable aging reports, and job cost reports, emphasizing their merits and applications within an organization. The report also evaluates the integration of management accounting systems and reports within organizational processes, highlighting their importance for strategic decision-making. Furthermore, it measures different costs using techniques like absorption and marginal costing to create appropriate income statements, and analyzes various management accounting techniques to plan financial reporting documents such as balance sheets, profit and loss statements, and cash flows. Finally, the report creates a financial report that applies and interprets information for various business activities, providing a thorough overview of management accounting practices within the context of Tomkins Plc.

MANAGEMENT
ACCOUNTING

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INTRODUCTION
Management accounting is referred as the process of formulating management and
accounting reports that includes facts and information so that manager of company can take
decisions in an appropriate manner. It benefits in preparing reports on monthly and weekly basis
so that organisational work can be accomplished in a systematic manner (Adler, 2013). With the
help of these reports, cash flows, revenues, sales and other aspects can be acknowledged in a
desired manner. This assignment is based on Tomkins Plc which is a Britain based reputed
multinational engineering company, situated in London, UK. This organisation was founded in
1925 and operating with more than 30,000 employees at present. This report will discuss about
different kinds of management accounting systems and their needs in achieving targets and
objectives of company. Also, various kind of management accounting reports are also discussed.
With the help of different kinds of costs such as Marginal and absorption cost, an appropriate
income statement is prepared. Other than this, different management accounting tools to resolve
the issues of financial problems are discussed in brief.
TASK 1
P1 Define managerial accounting and the needs for varied kind of accounting systems related
with management
Management accounting has referred to the procedure of identifying operational and
business costs so that the income and financial accounts and reports of a business can be
prepared and accurate decisions can be taken. Main reason of using this tactic is to improve the
profitability and earning revenues of company so that high advantage over rivals can be attained
in a desired manner. In case of Tomkins Plc, company can take the help of management
accounting to manage their accounts and other income statements in a proper and systematic
manner (Bennett and James, 2017). In this context, there are several management accounting
systems which can be used by a business organisation to perform their business operations in a
proper manner. In context with Tomkins Plc, different management accounting systems are
mentioned below:
 Price Optimising system: This accounting system will helps a business firms in deciding
the prices for their various products or offered services. This will benefit the company in
acknowledging the demand of customers for certain products even when their prices are
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changed and modified. In context with Tomkins Plc, this system can be used to manage
the rates of products in different market segments. This will help the company in
determining different prices like promotional price, discounted price, initial pricing etc. Cost accounting system: This accounting system will benefit the company in
recognising the cost of services or products. Due to this, company is able to formulate
desired selling and marketing strategy so that high revenues and profits can be earned.
With the help of this system, effective costs for services and products can be maintained
so that attention from large number of customers can gained in a simplified manner
(Booth, 2018). This system will help the company in estimating actual and estimated cost
so that to overcome the differences right kind of strategies can be formulated. For this
system, there are two kind of accounting methods which are discussed below:
Job order costing: This method of costing is good for those businesses which
prepares special and innovative products. By using this particular method, manufacturing
costs can be identified easily. Industries can use this method to acknowledge the cost
related with production if their rates are enhanced by estimated data.
Process costing: This kind of system is perfect for organisations which are
producing or manufacturing products. This costing method will help in acknowledging
the cost of different processes in a desired manner.
 Inventory management system: This accounting system will benefit the firm in
maintaining their inventory as per the requirements and demands of customers. Due to
this, particular management system has been used for effective flow of services and
goods as it fulfils the expectations of consumers in a desired manner. This type of
accounting system is very beneficial for Tomkins Plc to manage and track the records of
different inventory so that business activities can be performed without any disruptions.
By this, they can reduce their costs and maintain appropriate inventory for the company
(Bryer, 2013).
 Job costing system: This type of system helps in measuring costs which is required in
providing services or products. It is suitable for those organisations that provide different
range of services or products. As Tomkins Plc is an engineering company which
manufactures products, it is very essential for them to estimate individual price for each
of the product. With the usage of this system, individual costs can be acknowledged so
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that organisational work of manufacturing or production can be accomplished in a proper
manner.
P2 Define different methods used for managerial accounting reports
There are varied management reports for accounting that helps a business firm of a
company in preparing appropriate statements of accounts. This will benefits them in taking
advantageous decisions so that company can achieve high advantage over rival organisations.
With the use of these reports, manager in Tomkins Plc can achieve reliable income or financial
statements. There are various types of management reports that can be prepared by manager of
Tomkins Plc so that all transactions of company can be recorded by efficient means. In case of
concerned organisation, different reports are mentioned below:
 Budget reports: A budget report has been referred as internal kind of report that is used
by organisation's management for comparison of estimated budget in comparison with
the actualised business performance for a particular time period. In case of Tomkins Plc,
by using this report performance of a company within financial year can be
acknowledged in a desired way. This report has same format as the income statement
(Cheng, 2012). Tomkins Plc can use this budget report to provide incentives to their staff
members so that they can perform with their full efficiency in order to achieve rewards in
return. Future budgets of a firm are also prepared with the help of this report due to which
organisational goals are attained in a desired manner.
 Account receivable ageing report: This is a management report which consists of
unpaid customer invoices and credit memos in accordance with their priority dates. It is a
basic tool that is used by the personnel in Tomkins Plc to acknowledge overdue for
payments. With the help of this report, Tomkins Plc can analyse about their credit
policies in a proper way so that the bad and old pending debts can be minimised. Beside
it, this report will benefits in maintaining the liquidity of organisation so that projects can
be accomplished in a timely manner.
 Job cost reports: This type of management accounting report is associated with the
identification of expenses, costs and profitability for a specific job. Data and information
which is included in other reports are foremost mentioned in this report. By using this
report, each job and activity which is performed by company is listed in a proper way
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(DRURY, 2013). This benefits in acknowledging the total incurred cost of company.
With the help of this report, projects which are in progress are also estimated in terms of
their costs. It will benefit in elimination of those procedures which are not benefiting the
company by any means. This kind of report will allow the company to handle their work
in a profitable manner.
M1 Describe the merits of management accounting systems by mentioning their applications in
context of company
Different management accounting system possess wide advantages in context with
Tomkins Plc and other organisations. Some of the advantages and application of these systems in
relation with the business organisation is mentioned beneath:
 Job costing system: With the help of this system, a business firm can predict various
types of expenses and costs for the manufacturing and production procedures. It will
benefit the staff and management in Tomkins plc to eliminate duplications of work and
efforts. This is because of a work is performed for a single time, it can be used again
while needed. Other than this, by using this system, company can acknowledge the
quality of work which is performed by them (Evans, Burritt and Guthrie, 2013).
 Price optimising system: By using this accounting system, opinion and preference of
customers for different range of products or services is identified. Usage of this system
will benefits Tomkins Plc in enhancing their operational costs with best pricing. Other
than this, price optimisation system will benefits the company in segmenting their
customers in a systematic and organised manner.
 Cost accounting system: This management accounting system benefits an organisation
in measuring the effectiveness of different organisational processes so that required
modifications can be carried out as per requirements. By taking help of this system,
Tomkins Plc can fix and reduce their costs as per the situation. Also, this system will
provide essential information so that organisation can make their plans in a proper
manner.
D1 Critically evaluate management account reporting and systems integrated within
organisational process
In order to achieve wide advantages, Tomkins Plc is required to have an appropriate
integration among managerial accounting systems and accounting reports as it will results in
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taking appropriate decisions so that business organisation can gain strategic advantage. Along
with this, organisational processes and goals can be attained in a timely manner due to which
effectiveness of company will enhance. Without using systems like price optimisation, job cost
system, inventory management, it is not possible for a business firm to maintain their
transactional records in a proper way. For instance, manager of company can use inventory
management system, by this employees in Tomkins Plc can get access to needed information and
facts about current inventory level. By preparing inventory reports, when need of required
inventories can be identified in a simple manner (Garrison and et. al., 2010).
TASK 2
P3 Measure different costs by using various techniques of costs analysis to create appropriate
income statements
In case of different business firms, a cost is defined as the amount of capital that is used
for manufacturing a specific good or service. It is defined as a monetary value that denotes the
total expenditures which are incurred on products, services, raw material, supplies, equipment,
labour and other concerned aspects. There are different kind of costs which are used by business
firms to prepare their income and financial statements. In context with Tomkins Plc, these costs
are mentioned below:
 Absorption costing: It is defined as a tactic which is utilised for calculation of costs that
is invested with the aim of manufacturing and producing different products. It includes
both variable and fixed type of costs. Due to this reason, absorption costing is also
referred as the full costing method (Grabner and Moers, 2013).
 Marginal costing: This is a type of cost which is used by business firms to measure the
net profitability of their activities and operations. It includes variable costs only. This
method is used by both medium and small kind of business firms as these methods results
in denoting high profits in the financial reports of company.
In case of Tomkins Plc, organisation can take help of both type of costs so that an
organised and systematic income statement can be prepared. In context with Tomkins Plc,
different income and financial statements are mentioned below:
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Annex (A)
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M2 Analyse various management accounting technique and plan financial reporting documents
Different techniques that are related with the management accounting helps the business
firm in sustaining financial documents and reporting statements such as balance sheets, profits
and loss statements and cash flows etc. Without taking help of different accounting tools such as
financial statement analysis, cost financial systems, Tomkins Plc is not able to identify their
financial position within market (Granlund and Lukka, 2017).
D2 Create a financial report that appropriately applies and interpret information for various
business activities
Each business firm such as Tomkins Plc is required to formulate their financial reports
such as cash flow, balance sheets and loss & profit statements in a systematic way. This will
allow the company in identifying their financial place in marketplace. In case of Tomkins Plc,
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the organisation is needed to interpret their transactions that are formulated while performing
business operations. By this, they can easily acknowledge their funds and finances which are
invested for a particular business activity.
TASK 3
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P4 Explain the merits and demerits of several kind of planning tools of budgetary control
A budget can be defined by that document which is made by the company to record all
the approximation of earning and expenditure based on the upcoming program and strategies. On
the other hand, budgetary control is the procedure which shows that how managing director
utilize the budget for controlling on their cost and organisational activities in a particular period
of time. In Tomkins PLC, budgetary control helps them to establish monitor and control on their
operational activities by guiding them the proper utilisation of monetary resources (Hartmann,
Perego and Young, 2013). Moreover, it assist the organisation to find the difference between
actual figures and estimated figures so that they can find out the reasons behind this difference
and improve them. There are various type of planning tools which are used for budgetary control
such as:-
Zero based budget: It is main part of budget controlling, as in this budget all the
activities start with the zero base. According to this budget every year a new zero base budget is
prepared in which all the figures of past years are ignored. In the Tomkins PLC, management of
this company adopt this budget for preparing the budget with transparency. Here are defined
about the merits and demerits of this budget:
Advantages Disadvantages
 It is most beneficial budget as it brings
more accuracy and transparency in the
budget results.
 This budget is perfect for new
invention or new project as it is start
from zero base.
 This technique is consume more time
and cost in preparing the budget.
 In this budget previous data is not
considered which creates sometimes
problem as company have to do more
research and efforts.
Master budget: Every department have created the budget for different organisational
functions, this budget is sum total all of the budgets. By preparing this budget Tomkins PLC can
easily keep a summary of all the operational details at one place (Kober, Subraamanniam and

Watson, 2012). There are various merits and demerits of preparing this budget which are
described below:

Advantages Disadvantages
 It gives a brief report of all the
organisational functions in one file.
 By preparing this budget managers can
know about overall approximation
profits of the organisation.
 As it contains information of all the
budgets so it is not able to specify all
the functions.
 This budgets contains various budget
within which create difficulties for the
managers to find data of each element.
Flexible budget- This budget is suitable for the companies as they can change it
according to the company's needs. By preparing this budget Tomkins PLC can know that how
the revenue and expense will change according to the changes in the output. This budget is more
suitable for them as compare to static budget. The various merits and demerits of this budget are
defined below:
Advantages Disadvantages
 It is more flexible, it assist managers to
record all the changes according to the
market situations and demands.
 This budget also help the companies to
measuring the overall performance of
the organisation.
 This budget create confusion sometimes
because in preparing the budget
managers have to concentrate on every
change which create great confusion.
 This Budget is easy to make by
following some process and strategies
but the organisations are following that
process which treats lack of disciple in
the organisation.
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Annex (c)
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M3 Analysis the use and application of planning tools for maintaining the budgets
There are various planning tools which are used for preparing and forecasting the
budgets. These planning tools are related to the various budgets which assist an organization to
take effective decisions in order to achieve the organizational aims and targets. These budgets
include zero based budget, master budget and flexible which are using by Tomkins PLC to
forecast and consolidated financial statements. Zero based budget is used for identifying
productive activities while master and flexible budgets are used for estimating transactions
related to objectives of the organization (Lachmann, Knauer and Trapp, 2013).
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TASK 4
P5 Defined the comparison between that how organisations using management accounting
system for solving the issue of financial crisis.
Financial problems: These problem refers to the deficiency of the capital resources
which creates a big issue in the organisation. As all the operational activities are dependent on
the funds, without it an organisation cannot survive in the marketplace. A company needs to
solve this kind of issue so they able to take effective decisions related to their goals and
objectives. Tomkins PLC is also facing some financial issues which has impact on their business
activities so they need to solve these issues. Some of the problems which they are facing are
defines below:-
Improper money management system: This issue is arising because the management of
the company have not proper knowledge about the rules, regulations and principal of the
accounting and they do not have appropriate skills of money management (Lukka and Vinnari,
2014). The management of Tomkins PLC also has not proper knowledge about how to allocate
their monetary resources which affects their money management system. This have badly effect
on the operational activities of the company and lead them in a downfall position.
Late payments by buyers: In the corporate world, it is the second big issue with them as
they are selling their products and services on credit basis. It is become a huge problem for
Tomkins PLC when they are not able to make payment on time from their customers after the
certain period of time they have to considered it as bad debt which creates financial issues due to
lack of money.
Decrease in income: It happen because of company's expenses are more than their
income or company's does not operate their operational activities in a proper manner which
results their income is decreasing day by day (Nitzl, 2016)
Thus, these are the main issues which have to face the Tomkins PLC, from overcoming
this situation they are adopting some of the techniques that are mentioned here:
KPI (Key performance indicators): This technique is utilized by organisations to
continuously check their organisational performance so they can determine that where they are
successful and where they need to improvement. In every organisation different KPI is used
according to their purpose. There are two types of KPI include financial and non financial. The
first KPI is used by the management for identifying the capacity to manage and uses monetary
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sources and second is used by them for determining the monitor issues. In Tomkins PLC
financial KPI is used by managers in order to recognise problems in money management system
by determining the problems in it.
Benchmarking: This technique is using by various companies to compare their
operational activities, plans, products and services from other competitive companies. It helps
them to identify about the areas, processes, and methods where they need to be changes. In
context of Tomkins PLC it helps them to solve the issue of late payments by buyers as it assist
them to make those strategies which can impact on their customers mind and they will inspire
their customers for paying on time.
Finance governance: It is related to that process in which an organisation know that how
they can gather, manage, control, and monitor on their financial related issues. By adopting this
they able to modify their organisational actions and control on financial crisis. By adopting this
technique Tomkins PLC resolve financial challenges of improper money management system
and late payments by buyer as it guides them to record appropriate data in books according to
principles.
Here are defined about the different management accounting systems of different companies in
order to solve financial issues:
Basis Tomkins PLC Caunton Engineering
company
Description Tomkins PLC is a
multinational engineering
company which is working in
the industrial & automotive,
situated in London, UK.
Caunton engineering is
working in design, in
manufacturer, and in steel
fabrication in UK.
Financial issue This company is facing
Improper money management
system and late payment by
buyers (Suomala and Lyly-
Yrjänäinen, 2012).
They are facing decrease in
income issue as their cash
inflow and cash outflow is not
equal.
Management accounting For preventing themselves For solving financial crisis like
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technique from this kind of problems
they are adopting “finance
governance” technique”. This
will help them to make proper
strategies and plans by which
they can controlling and
monitoring on their
organisational activities.
decrease in income they will
adopt “Benchmarking”
technique. By which they can
compare their plans with
another companies and make
necessary changes so they able
to maintain their cash inflows
and outflows.
M4 Defined the way how management accounting help in solve the financial issues
Management accounting system is useful for every organisation for overcoming their
issues as it contains various tool and techniques. Every company has their own purpose so they
choose the technique according to their purpose. Managers in Tomkins PLC applying
management accounting systems and other related techniques like KPI, financial governance and
benchmarking to recognise and take actions against issues of improper money management
system and late payments by buyers (Tucker and Lowe, 2014). These tools help them to analyse
their adverse situations and after-that help them to bring new changes by effective strategies for
solving that issues. By these tools they can provide proper guidance in making comparative
analysis of policies and decisions of an business for achieving their organisational objectives and
sustainability in the market.
D3 Utilisation of planning tools to resolve financial difficulties:
The different planning tools such as zero based budget, capital budget, master budget etc.
helps an organisation to solve the financial issues. These all the tools help the Tomkins PLC to
make the strategies and plans for overcoming their financial issues. Along with this, these
budgets help the manager to estimate the expenses and incomes by which they can easily
compare their actual figure from their estimated figures. It will help them to control on difference
and also provide integrity in annual report by determining future action of company and how
efficiently company is towards its vision (Zoni, Dossi and Morelli, 2012).
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CONCLUSION
In accordance with above given report, it is summarised that without taking the help of
management related accounting systems, it is not possible for a business organisation tp manage
their accounts in a desired manner. To attain expected outcomes, owner and manager in a firm is
required to utilize different kind of accounting method like job costing system, price optimisation
system etc. other than this, different kind of report such as performance report, budget report,
inventory report, appropriate accounting reports can be prepared so that strategically
advantageous decisions can be taken by company. By using costs such as marginal and
absorption costs, a proper financial statement can be formulated. There are different type of
planning tools for budgetary control like flexible budget which manages budget of company
appropriately. With the help of techniques like benchmarking, KPI various financial problems
can be resolved in an efficient manner.
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