Management Accounting System and Techniques

Management
Accounting System and
Techniques

Table of Contents
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
P1: Explanation of Management Accounting and Essential requirements of different types on
Management Accounting System...............................................................................................3
P2: Different methods used for Management Accounting Reporting.........................................5
Task 2...............................................................................................................................................6
P2: Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption cost. ..........................................................................6
Task 3.............................................................................................................................................11
P4. Advantages and disadvantages of planning tools...............................................................11
Task 4.............................................................................................................................................13
P5 Comparing how organisations adapting management accounting system for responding to
financial problems.....................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management Accounting is a segment of accounting that aids the business to make
necessary decisions related to its functionality and management (Alsharari, 2016). This includes
decisions like price determination, number of units to be sold in order to earn profit or how much
of a bonus can the business afford to give its employees. Management accounting helps the
business to form a report that further helps in the use of planning tools and determining costs.
This facilitates the business to work smoothly with and extensive opportunity of growth and
expansion.
Management accounting is a combination of Management and Accounting, management
is an art of getting things done through people by influencing and motivating them in the right
way on the other hand accounting is a process of identifying, recording, analysing and presenting
data in an effective way. Management accounting is accounting of such data which can make
people do the required tasks and take important planning decisions.
For better understanding of this concept, Innocent Drink company has taken. It is an
organisation of medium size. This report has defined various types of management accounting
system which is important while making decision for an organisation. Various techniques are
explained which is useful in determining costs. It also explains the types of planning tool that is
used to predict the problems that are going to arise in future. The relevant information is
described in a proper manner.
Task 1
P1: Explanation of Management Accounting and Essential requirements of different types on
Management Accounting System.
Management accounting termed as process of identifying, measuring and analysing and
providing information to the managers and focusing on all accounting metrices. This is will be
very useful in relation to the cost of goods and products that is being purchase by the
organisation (Choi and Byun, 2018). Management Accounting System and analyse the situation
of a company Innocent Drinks, that makes smoothies and juices sold in supermarket, coffee
shops and other outlets. Management accounting will enable Innocent Drinks to get
organisational reports and these reports will help it to make necessary changes and take required
decisions in the organisation itself and the management.

Management Accounting will provide the organisation with information about
manufacturing which can further help in preparing budgets which will aid in improvement of
management. This includes various system that is used by company and following requirement
are as follows-
 Cost Accounting System: It is one of the essential system of management accounting
system. This system consists of various accounting techniques by which the business can
find cost of certain tasks and projects, with this they can compare their profits with their
costs and take necessary decisions and plan accordingly. In context to Innocent Drinks,
the company uses Cost Accounting System with which they are able to manage all their
relevant cost like that of raw material, processes and of distribution of products. The
essential requirement of cost accounting system in the Innocent Drinks is that it creates
sense of efficiency and effectiveness in the organisation and maintaining the reliability is
done by this method.
 Inventory Management System: This system has techniques that help the management
to maintain the level of stock (Christensen and Himme, 2017). This system involves the
process of stocking and restocking the organisation's inventory so as to increase overall
sales as stock will be available when needed. Innocent Drinks uses this system with its
various techniques to manage its inventory. Techniques may include LIFO, FIFO, JIT
and ABC analysis. This is important for the Innocent Drinks to use this system as it
facilitates in maintaining the stock requirement in the organisation and that builds the
efficiency in the management.
 Job Costing System: Job costing system is a type of management accounting system
which is generally used by manufacturers because accountant can easily estimate the cost
of performing a every job. This system will help the accountant in assessment of the costs
of every department separately. The organisation assesses the cost required for every job
and running business activities. This information is of crucial use for the managers to
formulate trading strategies. The importance of this essential requirement in the company
facilitates the organisation to develop this system as it gives an idea to properly defined
the job that is being performed in the organisation to identify the cost of each department
that is being done in Innocent Drinks to analyse the overall cost to the company.