Management Accounting & Methods of Natural Windows Ltd

Organization Selected : Natural Window Limited
Question :

This assessment will cover certain questions which are like:

  1. Give the effective services to enterprise with their areas of funding.
  2. What are the ways of management and functionality in funding.
Answer :


In today's scenario, Management Accounting is such which help company to have proper decision in firm and they also record the financial and non-financial activity. These term is that who aid in making investment in better way. Generally, every individual firm look forward to conduct research in order to gain information of market as where investment can be made and maximum return can be gained (Arroyo, 2012). Moreover, technology is playing crucial role in accounting and helping enterprise to record every transaction at single place in right context. Normally, changes in outside environment does affect the working of organization and for such few creativity in policy and procedure do help in handling and maintaining the situation in better way.

The report is based on Natural Window Limited, as offer various wooden doors and windows in a reasonable range that attract the customers to take their product and services and make them to satisfy. Firm themselves uses effective technology according to requirement to improve their working in better way too. Management accounting is that as uses different method. Although, planning tools with comparison of two entity and also help in many financial issues of company.

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P1 Management Accounting and its various types of accounting systems.

To: General manager of Natural Window

From: Accounting officer.

Management Accounting:

Management accounting help to determine the process of measuring, identifying, interpreting, analysing and communicating financial information to accomplish a firm's goals, known as accounting. There is a difference between management accounting and financial accounting; management accounting provides detailed financial information and develops reports for internal and confidential use for a company's managers to take decisions, whereas financial management aid in offering information to the external parties like stakeholders,public regulatory and lenders, in accordance with general accounting principals of an organization (Chenhall and Smith, 2011). The purpose of preparing management accounts and reports is that; it offers a timely and accurate statistical and economical information which is required by the managers to establish routine and short time decisions with efficiency. There are several kinds of managing accounting types including inventory management, cost accounting management, price optimization, and job costing system.

Cost accounting system –

Cost accounting system is also known as costing method  which renders a framework that is applied by the corporation to calculate the approximate costs of products with respect to inventory, profit analysis and cost control. It measures  the lump-sum amount of product investments to know the value of inventory and earned profit and  control on production cost. It measures the actual costs of product through identifying total inputs for every piece of production step plus fixed costs such as capital instrumentation depreciation. It individually measures and record the costs of inputs comparing with outputs to assist management of a company to value financial performance (Burritt, Schaltegger and Zvezdov, 2011). Any task can only be explained through costs so that any business manager rely on statistical data that helps to take a decision. In management cost accounting refers as a key concept because it offers many analytical tools such as budgetary control, marginal costing, standard costing, operating costing and inventory control for the management to improve the efficient production. For illustration, in Natural Window Ltd. , includes cost of developing windows from purchasing raw material like woods and all, manufacturing and furnished for the sale, these all phases have different expenses and calculated in cost accounting systems.

Inventory management –

Simply, inventory management is a method to control and keep an eye on  the ordering, and storage of components which is used in production of goods. It involves some kinds of such goods, stock consumables, supplies finished goods, to keep in account that what are the available assets and what are the needed to develop  new finished goods for sell, on a major note it, it overseeing and control the inventory stock and furnished goods, so that it can minimize the overstocking and under stocking problems to maintain flow of work. Through maintaining stock accounts across locations, it becomes easy for the managers to have an insight that make them able to take inventory decisions (Bodie, 2013). For example, Natural Window Ltd., offers a home furnishing things like windows and doors so it required to keep a record of raw materials like woods, glazing etc. so that it can identify the needs of new purchasing and finished products so that it will not come up in a situation of loss, by over supply or under stocking.  There are many kinds of inventory systems such as creating purchase orders, receiving, relocating, adjusting and disposing of inventory, sales orders, picking, packing, shipping. The foremost benefit of inventory management is that it enhances the key points with accurate workflow.

Job costing system -

Job costing system defines manufacturing costs individual goods or a batch. It is applied only when items are different from each other, it involves the costing on  particular kind of products on which different prices are applied, it is important to accumulate the cost to determine correct estimate of a firm which is capable to quote prices of that can generate reasonable income. It also requires to accumulate three kinds of job costing system like labour, direct materials, and overhead (Baldvinsdottir, Mitchell and Nørreklit, 2010).   For an instance, in Natural Window Ltd., cost of developing two kinds of windows can be differ because of their input material, manufacturing and labour so the job costing system will apply to know the estimated price and the remaining cost can be refund under the contract.

Price optimization systems -

Price optimization systems can be determine as mathematical analysis, in terms of how consumers responds to distinct level of prices for purchasing goods and services. It also involves in the process of determining best fit costs by the company, which can bare the all expenses in product development. It aid to recognize the maximum desired aspects and minimizing the unwanted factors.

Although management accounting and its various system are such which help in working in smoother manner and thus this is such which lead to attain the goals and objectives in right context too.

P2 Different method used for accounting report.

Accounting is considered as main aspect of firms like Natural Window. Moreover, financial accounting do help in making proper and effective decision to top general manager of company in order to attain higher profit too. Although control and monitoring can be seen in better scenario. Generally there are some method of accounting which help entity too:

Inventory reporting: It is such which help firm to check up stock in warehouses in effective way. This reporting system is that which does help company to managed in right manner or not (Contrafatto and Burns, 2013). These type of system do assist in minimising the chances which occur in manner of overstocking and under stocking.

Application: Inventory reporting system can help in effective working and warehouses can be analysed at anytime. Even though such type of reporting can help them to manage the over and under stock scenario. If overstock is there then manufacturing of doors and windows can be minimised and thus in condition of under stock a production can be there and thus such criteria can make firm to provide their product and services on time too.

Account Receivable reporting: Finance accounting thus help in managing the activity in great manner and also manage cask flow of firm in right context too. This reporting handle thing like from who and how much amount has to be received. In various information is available like from whom to receive, time and how much amount etc. are criteria is involved. Therefore, it also minimise consequences with cash flow in effective manner.

Application: Natural Window Limited firm can use such reporting system in better manner and although entity can receive the amount which is remaining from different parties and even on time it can be received as well so that work of natural window does not get hamper related to finance. Generally, it is quite maintained on monthly or quarterly basis.

Account payable reporting: This method can help firm to maintain their record as to whom the amount has to be paid and how much even though on which date too (Elbashir,  Collier and Sutton, 2011). Having proper maintenance of record and paying amount on time bring to have a effective relation in between the supplier of raw materials and company too.

Application: The Natural Window Limited it that company who uses such type of reporting as this help them to collect information as to who the amount has to be paid and on which date. Such kind of software and system does help firm to work in smoother manner. Payment of money to raw material lenders can bring in having effective relation and even though also help in making a goodwill of firm too.

Performance reporting: Performance reporting application should be there and it is that which is normally used by many company not only by Natural Window, such concept help firm to determine the performance of employees and whole management of company and it is being done with measuring the performance with various method, this is such which will also increase the performance and productivity of employees and make firm to attain their goals and objectives in right format (Granlund, 2011).

Application: This is that which also applicable on Natural Window as effective increase in performance can be seen, even though with this identification of various issues and problems can be determined at the lower level and according to scenario proper steps also be taken to improve those. Bringing effective policy and procedure help employees and management to work in effective way in enterprise.

Budget Reporting: Budget is that which allow accounting management to divide the finance available in right contrast and this also help firm to work with coordination in between various department too. Budget can be considered as expense which occurred in performing certain task or activity. Therefore, different division should use amount in right manner and using in proper format also lead to reduction in wastage, which directly help to make an effective and proper decision in company (Koh and Tan, 2011).

Application: The Natural Window is small company who does not have various department but they also need to have a budget reporting as this help them to reduce the wastage of finance and thus they can use such at right place. Even though entity use such criteria which help in making an effective decision and also bring strength to work in proper way too.

All these reporting system is such which also help in having a work in proper manner as well and thus make company to attain their goals and objectives in right context too. All these help in managing the financial criteria in right format too.

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P3 Technique of Cost analysis using marginal and Absorption cost.

In accounting system a income statement is such which do include the document of company in better manner and thus help in managing accounting in Natural Window Limited. It include different thing like revenues and expenses in better manner, even they also include the operating and the non-operating activities in right context too. Hence, it help in calculating net profit and loss as well (Kotas, 2014). The marginal and absorption cost is hat which help in calculating the finance and help in making income statement in better way:

Cost: An amount which is being paid or given up in order to gain something in better way. In businesses, cost is that which is usually considered as monetary evaluation as (effort and material, resources, risk incurred, opportunity and time utilisation ) are all such include at production and delivery part of goods and services too. Even though all the expenses are cost but all costs are not ( incur in acquisition in generating income and asset).

Absorption Cost: It is that which is used normally with selling and administration expenses and also include the income statement too. It also considers the finished stock and it is also considers direct labour and material with variable and fixed overhead. Moreover, it also include costing criteria which is somewhere very much significant for firms and having an adequate decision too and it can be made with reduction of wastage in resources in efficient manner. Hence, this is method which was earlier used with traditional accounting.

Marginal costing: Marginal cost is said to be occurred with additional production made and their fixed cost does gets affected in various ways too. This is being considered as extra production and also manufacture the product which do make out with variable cost and it has to be considered as income statement in better way (Liao, Chu and Hsiao, 2012). Mainly, the cost is also related with labour and raw material which do used in manufacture in having additional part of product in right context too. Hence, it is better to understand this with difference in between the marginal costing and absorption costing:

Difference of the basis

Marginal cost

Absorption Cost


It is the technique which help in making decision by organization and somewhere it also help firm to discover various total cost in production and it is called as marginal cost.

This is such which do include total cost and also lead to cost centre and it is used to determine various total cost of manufacturing and it is also known as absorption cost of firm.


The use of methodology in making better decision in favour of company in effective way.

This type of costing is such which has extrinsic report in b

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