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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