Management Accounting: Concepts, Techniques, and Tools

Management accounting
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Concept of management accounting.................................................................................3
P2. Methods of management accounting reporting................................................................6
TASK 2............................................................................................................................................7
P3 Techniques of cost analysis .............................................................................................7
TASK 3..........................................................................................................................................13
P4 Planning tools used for budgetary controlling................................................................13
TASK 4..........................................................................................................................................15
P5 Management Accounting System....................................................................................15
CONCLUSION ............................................................................................................................17
REFERENCES..............................................................................................................................19
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INTRODUCTION
Management accounting refers to an assistance tool used by managers, this tool helps
them to formulate plans to achieve long term and short term objectives of the firm. It helps
managers by analysing and interpreting results provided by financial accounting. Management
accounting aims at improving quality of information provided to management about business
operations, with the help of this information, managers decide their future course of action
(Bobryshev and et.al., 2015). This report is drafted by consultancy firm AJ and sons for their
client Innocent Drinks. Innocent drinks is in business line of manufacturing juices and smoothies
which are sold in supermarkets, it is headquartered in United Kingdoms. This document is
divided in three parts, where, first part throws light upon management accounting systems and
how they are applied on business processes. Second part focuses on application of management
accounting techniques on a given set of data. Last part studies about use of different type of
planning tools in order to solve financial problems faced by Innocent Drinks.
TASK 1
P1 Concept of management accounting
Management accounting (often referred to as managerial accounting) is the process of
conducting various studies on all facets of accounting information, in order to help managers to
frame policies and also do planning for future actions. It is for internal use to make perfect
business plans while, on the contrary, financial accounting aims at furnishing internal as well as
external related parties with financial information (Chenhall and Moers, 2015).
Basis of comparison Management accounting Financial accounting
Meaning An accounting system which
assist managers to formulate
policies and strategies using
results of financial accounting
An accounting system, that
only prepares financial
statements, and gives no
comparison or analysed
results.
Compulsion It is not compulsory to do It is compulsory for every
organisation.
Users Internal users Internal and external
stakeholders.
Information Provides monetary as well as
non monetary information
Provides only monetary data
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Time period There is no fixed time frame to
conduct analysis
On the contrary, time frame is
fixed, usually, one accounting
year to prepare financial
statements.
Importance of management accounting is elaborated below, which proves why it should
be used by Innocent Drinks, though there is no compulsion:
 Decision making: The basic purpose of doing management accounting is to assist
management in decision making (Ghasemi and et.al., 2016). In this, various
analytical charts, tables, forecasting can be done done to help managers of
Innocent Drinks to formulate their policies and strategies.
 Identification of problem areas: There may be some problems that may arise in
future, and with the aid of management accounting, managers of Innocent Drinks
can foresee those problems and will prepare their organisation accordingly.
 Price setting: Various tools of management accounting provide essential
information to marketing and production managers, in order to help them to fix
prices of their products.
Innocent drinks can adopt practice of management accounting in order to make required
changes in policies and strategies. Management accounting is a useful aid for every function of
Innocent drinks like, marketing, production, sales, finance, etc.
Management accounting is related to every department of business and results into a
management accounting system, some of them are explained below: Cost Accounting system: It is branch of management accounting which analyses and
interpret all types of cost incurred in an organisation. This process helps managers to
analyse which cost centre has excess expenses and which area needs more investment, so
that, they can generate more returns (Kostyukova and et.al., 2018). Innocent drinks can
use this system to analyse cost of different activities, this will help mangers to see their
incurred cost pattern, and will help them to go for cost cutting on high cost consuming
centres, and then, they can take required corrective measures. Inventory management system: Inventory management refers to management of
inventories of a company. This management starts from planning of ordering and ends
with the exit of it from company. This means, that from where to purchase, what and how
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