Management Accounting

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1 Explanation of management accounting along with essential requirements of its systems.................3
P2 Description of different methods which are used to report information of management accounting. .4
M1 Evaluation of benefits of all the systems which are used for in organizations...................................5
TASK 2..........................................................................................................................................................6
P3 Calculation of costs with the help of different costing techniques such as absorption and marginal
costing.....................................................................................................................................................6
M2 Application of range of management accounting techniques............................................................7
TASK 3..........................................................................................................................................................8
P4 Explanation of budgetary control along with advantages and disadvantages of different planning
tools.........................................................................................................................................................8
M3 Analysis of various planning tool’s use in preparing and forecasting budgets................................10
TASK 4........................................................................................................................................................10
P5 Comparison of different organizations on the basis of use of management accounting systems to
respond financial problems....................................................................................................................10
M4 Management accounting to respond financial problems and the way in which it can lead entities of
sustainable success................................................................................................................................12
CONCLUSION.............................................................................................................................................13
REFERENCES..............................................................................................................................................14

INTRODUCTION
Management accounting is the mechanism that helps the company determine the running
costs that are further useful for the production of financial reports. It was also included in the
decision-making process made by the business director. The report will be prepared for review
by outside stakeholders such as customers, stakeholders, prospective buyers or the organization’s
owner (Almasan and et.al, 2016). This report based on the AJ & Sons which is a consulting firms
and provide advise to people in regard of their business. The company has different types of
clients in different sectors and one of client Innocent drinks is facing the problem of COVID 19.
Consulting firm AJ & sons provide the advice to apply management accounting system and
reports in order to maintain business. This report covers numerous topics including such
accounting systems or multiple accounting methods that we used with suitable techniques to
measure product costs. Along with to control budgetary system apply the different planning tools
in business entity. Furthermore use management accounting tools and systems to methods for
addressing corporate financial difficulties.
TASK 1
P1 Explanation of management accounting along with essential requirements of its systems
Management Accounting: Management accounting is a term that involves variations of
decision-making, efficiency processes, designing additional strategy for managing assistances
when formulating and executing strategic plans. The main elements related to the framework are
preparing, managing and decision-making. In context of Innocent Drinks, management
accounting is used to classify, gauge, compile, review, examine, analyze and evaluate useful
information to development of a framework in order to prepare, assess extended reach data in
order to ensure resource-related consumption.
Management accounting system: A modern approach containing activities to sustain
processes, to calculate price levels, to provide data and to promote monitoring of accounting
identified as management accounting systems. It works in planning, performance assessment,
numerical monitoring with subjective information that provides form of communication
(Alsharari and Abougamos, 2017). Different accounting systems in use at Innocent Drinks are as
defined as:

Cost accounting system: This system is utilized for evaluation commodity prices so to evaluate
income and managing costs is achieved by cost accounting method. In Innocent drinks, business
analysts utilizes the method for measuring exact equity markets by collecting manageable,
contingent, incentive, sunk, unpredictable and output associated expenses. The system's critical
requirement at institutions is to document accurate figures along with reporting that is needed by
the leadership system to ensure current activities in addition to organizing forward.
Inventory management system: To monitor the movement of goods from suppliers to storage
in relation to the inventory control system for the place of selling requirements. In other words,
it's a set of technologies and also processes that track, install and operate company stored items.
The device will be used at Innocent Drink to classify product objects together with all the
appropriate details relating to the products. In Innocent drink factories use the device to identify
sources for each product, produce purchase orders and also predict future requests to position
requests even before stock need to remove underlying situations. Such system's essential
requirement is to regularly monitor stock contribution to holding stock management that enter or
exit the workspace (Appelbaum and et.al, 2017).
Price Optimization system: This system aims to assess how demand shifts according to
differing stages of prices. In addition, the device incorporates information to gather accounting
data to recommend fresh rates that can increase income. Innocent Drinks administration is
chosen to consider consumer expectations of existing product prices and thereby adapt
established business sector pricing strategies for enhancing brand loyalty along with booming
profit growth. At Innocent Drinks, the framework has important criteria for predicting demand,
assessing marketing strategies and keeping quality optimized.
P2 Description of different methods which are used to report information of management
accounting
Accounting reports are used primarily to prepare planned events, actually looking
outcomes in relation to making decisions. Through all the reports, company knows about the
organizational activities and preserved by corporate managers alongside evaluating the factors
the industry is able into it. Innocent Drinks execute strategy different reports and recognize
revolutionary places where changes need to be made to achieve tremendous results. Underneath
are different paths used in management accounting reporting:

Job Cost report: The document aims to know huge areas of profits in favor of focusing on extra
requirements while wasting taxpayers’ money on jobs with low profit margins suffered. With
that kind of management report, Innocent Drinks organization can understand the accuracy of the
overall expense incurred in each task by comparing the predicted income which can be generated
through this kind of project. Furthermore, the report allows people to make adjustments on
inefficient regions even before opportunities of spiral outs in order to assess expenditures mostly
during entire project (Burritt and Christ, 2017).
Performance report: The purpose for preparing a performance report is to assess the overall
efficiency of the company together with its employee results mostly during fiscal year. Innocent
Drinks executives use progress reports to gather work-related information, make crucial
decisions to include learning opportunities for workers where quality isn't up to the standard.
Moreover, performance monitoring also strengthens contact between clients, superiors and
departmental heads. Upper executives reward its workers with thorough review of such
monitoring system for the dedication and contributions to delivering tasks on the required time
period.
Accounts receivable aging report: This report is prepared for those entities who deal with this
document in the payment style so they have lenders. It will assist at raising money in the future.
With the support this Innocent Drinks report administrator will recognise the case of fraud who
refused to pay. Rather limited corporation does not prepare this report since they do not have to
schedule it, but also because they offer financial institutions, this business prepares it. Therefore
this report is essentially useful for the finance service provider to keep their customer
information in the system.
M1 Evaluation of benefits of all the systems which are used for in organizations
Management Accounting
System
Benefits
Inventory management
system
 Efficient inventory management lets Innocent Drinks
keep their consumer records correct to the full.
 Enhanced client information will help managers develop
effective plans that can ultimately help the organisation

achieve its strategic goal and objectives.
Cost accounting system  With this approach, it lets the director save their costs.
 Using this approach, managers cut the price which
improves the company’s profitability.
Price optimization system  Allow the employer build different consumer
requirement techniques.
 It will assist the business define its customers' habits
(Butterfield, 2016).
TASK 2
P3 Calculation of costs with the help of different costing techniques such as absorption and
marginal costing
Marginal costing: It is the system in which variable costs assumed to be the cost of the product
and fixed costs thought to be the cost of the time. It is costing strategy whereby variable cost per
unit varies due to output shift but the fixed cost remains same in. Costs are separated into two
sections in this cost analysis first one is cost dynamic and other one is cost set.
Absorption costing: The method of absorption costing is used to define the expenses involved
with the supply chain, and to quantify for each unit produced. It covers not only the cost of the
products produced as well as the running costs of production, either set or adjustable. Due to
various that it is called complete costing process, all expense included on the costing system.
This costing approach involves the different costs, such as raw material, direct labour, variable
overhead output and fixed overhead, necessary at the time of the purchase. It also contains the
fixed & variable sales and operating costs (Culasso and et.al, 2016).
By using various costing methods such as absorption & marginal costing system accountant, the
statement of income is prepared and the estimate is listed elsewhere here:

M2 Application of range of management accounting techniques
Management accounting techniques are essential for preparing documents relating to
financial reporting. Ratio analysis became possible with the support of certain accounting
principles, various financial reporting records, such as income statement. That's why these
accounting practices provide all the financial details that form the foundation for financial

statements planning. In preparing financial statements, the Innocent Drinks Company uses a
range of management accounting frameworks and strategies that comprise of the necessary
details. Business produces income statements by accounting methods, using the details provided
(ElKelish and Rickards, 2018).
TASK 3
P4 Explanation of budgetary control along with advantages and disadvantages of different
planning tools
It is mechanism whereby management use budget to track or regulate product costs within
the specified time frame. In the budgetary control managers must set monetary or quality
requirements and correlate them with actual results. Budgetary monitoring will be carried out in
the sense of Innocent Drinks Business with the aid of taking appropriate planning instruments.
Planning Tools: The Management Accountant utilizes the budgetary analysis tool to schedule
and monitor the different business operations. Budgetary monitoring is an essential method for
assessing economic activities in a desirable direction, i.e. achieving a sufficient return on
investments. There are numerous preparation methods that are used to manage the budget and
render company capable of creating its required outcomes. Any of the methods on planning
mentioned elsewhere here:
Zero base budgets: It is a method of budgeting that helps the company explain expenditure from
the foundation that will be calculated with each new cycle. Cost from the zero base build
expenditure will be simply calculated. Innocent Drinks prepare of this budget in order to estimate
of future business activities and take base as Zero. Any benefit or drawback mentioned following
is as follows:
Advantage: It seeks to enhance the participation of workers who worked of collecting budget
details. Successfully assign resources which help to reduce costs (Georgiev, 2016).
Disadvantage: It takes time to build expenditure because they have to start at the beginning, that
is both costly and time consuming.

Cash budget: It is the measurement of money in the given time frame in view of the inflow or
outflow to business dealings. It aims to compare the organisation of weather capable of meeting
or not meeting their requirements. Advantage or drawback set out below:
Advantage: Through using monetary tools and facilities it improves the productivity of business
activities. It's helping the management team experience the organizational cash flow truth.
Disadvantage: Numbers can influence the business outcomes can be changed in the cash budget.
It would also restrict the budget to rise on continuing operations (Guinea, 2016).
Fixed budget: Fixed budget are all those expenditures that have no impact due to revenue and
production adjustments. Even the static budgets recognize these estimates. Organizations during
the budget cycle are unable to make adjustments to these expenditures. Innocent Drinks
Corporation is using this budget for the operations that will continue defined for the whole length
of time money earmarked. This Budget's benefits and drawbacks are:
Advantage:
• Fixed budget allows financial resources simple for a given period of time. It assists the
organisation to monthly or quarterly review revenue.
It eliminates the burden of monthly budget changes and companies can focus on the main
operations
Disadvantage:
• This budget would not make efficient resource distribution a goal.
• It consist of lack of flexibility, if a company wishes to adjust in the potential leading to a drop
in revenue or volume, therefore it cannot adjust that (Hoozée and Mitchell, 2018).
As per the above planning tools managing costs in the organisation at the time of production
activities. Innocent drinks administrator monitor cash strategy to assess reliable cash inflow or
financing activities. Handle their costs that help to minimize the cost of the product and decrease
the price of the product that raises the production immediately. It also leads both to improved
productivity and effectiveness.

M3 Analysis of various planning tool’s use in preparing and forecasting budgets
Budgetary management planning methods play an essential role in the budget management
and prediction. This is just so since different preparation methods provide all the account
statements required this became the foundation for predicting the expenditures. Here the chosen
Innocent Drinks Company incorporates the various planning methods such as operating budgets,
zero-based budgets etc. All of these assist the organisation in detailed budget planning. Along
with establishing the operational basis for the expenditures through correct estimates of income
and expenditures (Horvat and Mojzer, 2019).
TASK 4
P5 Comparison of different organizations on the basis of use of management accounting systems
to respond financial problems
Many businesses around the world are experiencing challenges linked to lack of funding; it was
referred to as financial challenges. It is very essential for all companies to ensure that they
manage them appropriately in order to minimize the risk of their adverse effects on the company.
Tesco Plc is facing numerous financial difficulties. Its summary is as continues to follow:
Delayed payments from customers: This issue happens since all customers who decided to
accept the sum owing within a certain length of time afford to perform on delivery date. This
problem impacts on Bentley Motors, as it generates the circumstance of lack of money for
efficiency reasons and brings out operational activities.
Inappropriate management of fund: Bentley Motors is facing a further obstacle so if people
that work inside the company are not qualified or do not have accounting principles knowledge,
so they make errors in the documents. Then it highlights the difficulty of unacceptable wealth
management. Because of this, administration struggles to define the individual's real capital. It
also contributes to excessive carrying out of operations management (Rickards and Ritsert,
2018).
There are different types of techniques that can be used to recognize all of the issues mentioned
above. Bentley Motors uses approach to determine the financial issues that it is facing:

Benchmarking: This management tool relates primarily to the contrast of the actual situation of
the firm with the rivals in order to assess flaws in the corporate policy. In Bentley Motors it's
being used to work out the issue of customers' overdue payments. When it is used, administrators
tried to analyze their credit practices with many other companies and make adjustments to their
own approaches.
Key performance indicator: These are the performance metrics that organizations use to assess
the loss or progress of the actions they take to collect intelligence. There are two kinds of these,
financially and non – financially.
Financial KPIs are used to evaluate and monitor financial problems and non-financial
KPIs are used to classify the sources of problems in non-financial division-related operations
such as production, distribution network, etc. Financial KPI is used in Bentley Motors to
recognize the problem of improper investment management which helps to examine those
problems (Upping and Oliver, 2016).
While recognizing all the financial problems, the businesses are proposed to comply with them
instead of implementing suitable methods. Financial governance which is listed below is often
used in Bentley Motors:
Financial governance: It can be described as a tool that directs all companies as per accounting
standards to build their documents correctly and efficiently. Only with aid of it, deferred
payment issues and improper wealth management will be tackled as it will direct Bentley Motors
managers are responsible for ensuring they correctly compile all the documents. If it is achieved
then the probability of the problems will be minimized.
Basis Bentley Motors Aston Martin
Issue face by
company
The corporation is facing issue
inappropriate management of fund in
managing in systematic manner. Due
to ineffective communication and
poor decision making, management
of firm is facing issues in maintaining
The company face the problem
of Delayed payment by
customers as a result it create
problem of liquidity in the
business. It creates problems in
business and impact on the

their fund. operational activities.
Management
accounting System
The entity's administrators use the
Price optimization system to address
the financial dilemma of overdue
cash transactions. Only with aid of it,
a fair deal will be agreed on for all
goods sold by the company which
will reduced the amount of
borrowers.
Job order costing system is used
to resolve the issue of inadequate
wealth management since all
work will be properly
accomplished with the aid of it
and the resources will be handled
in a structured way.
Technique In order to manage fund in the
business use KPI and improving
performance. It helps to improve the
performance of business in
financially manner (van der Poll and
Mthiyane, 2018).
Benchmarking is a method of
comparing the efficiency of the
goods, services, or operations of
a corporation with those of some
organization holding the largest
market share in the field.
Benchmarking is about finding
the inner potential for change.
This technique used by entity to
recognize the problem of delayed
payment from customer that
direct impact on the performance
of business.
M4 Management accounting to respond financial problems and the way in which it can lead
entities of sustainable success
Accounting management is very useful in addressing the financial challenges that can enhance
organizational performance. It is a structured procedure consisting of different accounting
methods and strategies that help to solve financial difficulties. Innocent Drinks uses the approach
of price management to resolve their issues and this technique essentially eliminates both their

competitiveness as well as other problems. There, correct assessment of the financial issue is
necessary so that accurate financial procedures can be applied.
CONCLUSION
It has been inferred from the above analysis that management accounting is very critical to
the organization. Since it offers many advantages such as tracking everyday transactions,
reviewing the data and preparing financial statements with the aid of it. It also assists the
manager in formulating plans for the future and decision-making process. Management
accounting systems including such inventory, cost accounting, and price optimizing. This helps
to improve both efficiency and performance. Different reports are used at the time of formulation
strategies to monitor success which is also useful for managers. To operate the business activities
effectively apply the different planning tools such as, cash budget, operating and zero based
budget.

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