Management Accounting: Types, Methods, and Planning Tools

This document provides an overview of management accounting, including the essential requirements and different types of accounting systems. It discusses the methods used for accounting reporting and explores the advantages and disadvantages of different planning tools used for budgetary control. The document also includes a case study on two organizations adapting management accounting systems to respond to financial problems. Subject: Management Accounting, Course Code: N/A, Course Name: N/A, College/University: N/A

Management Accounting

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·TABLE OF CONTENT
TABLE OF CONTENT...............................................................................................................................2
INTRODUCTION.....................................................................................................................................3
PART 1...................................................................................................................................................4
Management accounting, essential requirements and different types of accounting systems.........4
Methods used for accounting reporting ...........................................................................................5
PART 2 ...................................................................................................................................................6
PART 3..................................................................................................................................................10
Advantages and disadvantages of different types of planning tools used for budgetary control.. .10
Comparison of two organisations are adapting management accounting systems to respond
financial problems...........................................................................................................................12
CONLUSION ........................................................................................................................................12
REFRENCES..........................................................................................................................................13

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·INTRODUCTION
Management accounting can be understood as provision of accounting information in
order to better inform business scenarios for gaining high functional financial structure.

Innocent drinks is company producing and distributing beverages, juices and smoothies
where operations are focused for generating stronger business understandings and also
widely focusing for potentially also heading new working goals. Report explains
management accounting aspects and new working aspects where businesses are focusing
widely ahead within new competitive paradigms (Fleischman, R. and McLean, 2020).
·PART 1
·Management accounting, essential requirements and different types of accounting systems
The management accounting can be understood as one of the most important aspect
where managers within company uses provisions of accounting information in order for
better financial information formation for better informing themselves , before they decide
matters within company business structure. Management accounting aids company
performance metrics for controlling wider effective paradigms where reports typically
consists of company production data and information pertaining to money usage and how
appraisals of various accounts payable, receivable activities and valuation of raw and in-
production inventory enables wide range of progress coming on among businesses. The
industry trends and forecasts are are also an important aspect of management accounting
where there are various paradigms working on among wide range of functional innovation,
leverage of stronger working synergy which will enable Innocent drinks to reach larger goals
within business avenues. There are 3 types of accounting systems highly important which can
be
4
壱Stock Management: The inventory management can be understood as function of
understanding stock mix of company, with wide range of various demands on stock
where demands are influenced by external and internal factors. Stock and inventory
management propagates value and creation of stock purchase order, analyses supplies
at reasonable levels within business for gaining stronger business framework within
wider parameters (Cescon,Costantini and Grassetti, 2019).
4壱Price optimisation: This is the use of mathematical analysis by company for
determining how various customers are further responding to prices for products and
services, through various channels for various products and services through various
business scenario fundamentals. It is also used to determine prices that company

determines for meeting objectives such as stronger profit rates and maximised
operating profits. Innocent profits will be able to work on definite price structure by
using this system and analysing price fundamentals which will generate stronger
liquidity within business avenues pertaining to higher working goals.
4壱Cost accounting system: It is a framework used by frames for estimating cost of
their products, services for profitability analysis, inventory valuation aspects and cost
control paradigms functionally operating widely among business scenarios.
Estimating varied accurate cost of products is critical for profitable operations ] and
wider functional goals formation which will enable Innocent drinks to gain more cost
profits.


四Methods used for accounting reporting
Accounting reporting methods can be understood as rules of company followed in
reporting revenue and varied expenses where there are various primary methods which are :
accrual accounting and cash accounting methods, where it can be understood that cash
accounting reports revenue, expenses as they are received in business and paid. Whereas
accrual accounting reports them as they are earned and incurred within business scenario for
pertaining stronger working synergy within major paradigms. Managerial accounting
within Innocent drinks shall emphasize further on inside information received through
financial accounting which are used for planning, regulating, decision making working
aspects within business scenario, The reports are continuously analysed as critical financial
investments decisions are continuously being generated by analysing them and also
pertaining focus for inventory management (Abernethy and Wallis., 2019).


壱Account Receivable Reports: This reporting system enables to analyse account
receivable reports vital in business by breaking functional paradigms down the
remaining balances of various clients within business into specific periods and for
also productively enabling managers to identify various defaulters as well. In case of
many defaulters Innocent drinks may also need wider complete transformation to
tighter credit policies, keenly working on as cash flow is critical to operation of
business analysis.

壱Cost managerial Accounting report: This managerial accounting report computes
analysis of costs of goods and services which are manufactured along with analysis of

raw materials costs, overhead costs and labour factors which are also added to cost.
This report offers various managers to realize final cost prices of various items versus
their selling price for analysing profit paradigms further within business avenues.
This is precisely highly important cost reporting method through which Innocent
Drinks will be able to get exact functional understanding of all expenses, highly
essential for better optimisation of resources within all business departments.
4壱Performance reports: This is also widely important cash management reporting for
creating review of performance of company as whole, as well as for each employees
where departmental performance reports are variably generated, Managers use this
performance report to make wide key strategic decisions about future of company
progression decisions, where performance related managerial accounting report also
offer certain capacity for reaching new goals within business. Innocent Drinks will
be able to vitally form vision and keep accurate measured functional parameters in
company production scenario, also yield focus onto new working goals within wider
technical innovation goals (Nielsen and Pontoppidan, 2019).
·PART 2
Income statement as per Marginal CostingParticulars April MaySales
Revenue(4000*14)56000(5000*14)70000Marginal Cost of Sales Variable Production
cost(4000*5)20000(5000*5)25000 20000 25000Add: Opening Stock
0(2000/6000*30000)10000Less: Closing Stock
(2000/6000*30000)10000(3000/6000*30000)15000 10000 20000 Contribution 46000
50000 Fixed manufacturing overheads 18000 18000Fixed Non-Manufacturing Cost 5000
5000 Net Income 23000 27000
Income statement as per Absorption CostingParticulars January FebruarySales
Revenue(4000*14)56000(5000*14)70000Marginal Cost of Sales Variable Production
cost(4000*5)20000(5000*5)25000Fixed manufacturing overheads 18000 18000 38000
43000Add: Opening Stock 0 16000Less: Closing Stock
(2000/6000*48000)16000(3000/6000*48000)24000 22000 35000 Gross profit 34000
35000 Fixed Non-Manufacturing Cost 5000 5000 Net Income 29000 30000

Reconciliation statement AprilMayProfit as under marginal costing 2300027000Add: Under
absorption of closing or opening stock 60003000 Profit as under absorption costing
2900030000
Interpretation: It can be inferred that the profit under the absorption costing is more
than that under the marginal costing which is because of the reason that in absorption costing
all the cost related to production is included in COP irrespective of fixed and variable cost.
Also, absorption costing method is used for the external purpose as well. Therefore, the
absorption costing approach should be used.
Budgeted production20000 packs Sales revenue(20000*60)1200000Less: Variable costs
Materials(20000*20)400000Labor(20000*14)280000Other variable cost(20000*12)240000Variable
administration and selling(20000*3)60000 980000Contribution 220000 Less: Fixed cost
Fixed cost 80000Fixed administration and selling 60000 140000Net profit 80000
Contribution margin per unit60-(20+14+12+3)11Contribution margin(11/60)18.00%Total fixed cost
140000Break even point (in units) 12727.27Break even point (in amount) 763636.36 Current
sales in units 20000Break even sales in units 12727Margin of safety (in units)(20000-
12727)7273Current sales 1200000Break even sales 763636Margin of safety (in amount)(1200000-
763636)436364
Units SoldSales RevenuesVariable CostsFixed CostsTotal CostOperating
Profit000140000140000-1400003181190909155909140000295909-
1050006363381818311818140000451818-700009545572727467727140000607727-
350001272776363662363614000076363601590995454577954514000091954535000190901145455
935455140000107545570000222721336364109136414000012313641050002545415272731247273
140000138727314000028636171818214031821400001543182175000
·PART 3
·Advantages and disadvantages of different types of planning tools used for budgetary
control
There are various planning tools used for budgetary control within business where
high focus on their usage and varied benefits, disadvantages are laid for enabling them into
company cost management structure. The planning tools within accounting are budgets, cost
volume profit analysis within business and pricing strategy where Innocent drinks have to

yield focus for leveraging wider working synergy within functional scope for generating
wider work paradigms.
Budgetary control
Budgetary control is planning tool used to plan and control organisation production, business
scenarios related to manufacturing and selling of products ,services to promote, coordinate
and communicate between various departments, for higher performance measures. Budget
plan shall enable Innocent drink to ensure company achieve its set target objectives and also
functionally obtain new working exploration fundamentals for stronger working scenario
within competitive edge where industry is competitively growing (Łada, Kozarkiewicz and
Haslam, 2020).


壱Advantages: Budget planning coordinates activities and translate various
parameters of strategic plans into actions by specifying resources, revenues and
various activities required to carry out strategic plan. It provides detailed excellent
working record of company where wide parameters of working avenues are focusing
to work onto best platforms. Improves resource allocation, requests are clarified and
justified by using this tool and also develops corrective actions through reallocation
parameters.

壱Disadvantages: Major problems occurs when budgets are applied mechanically
where it may also demotivate employees because of lack of participation and also
employees will not understand reason if not brought under clear view. It creates
various competition for resources and politics where rigid budget structure reduces
innovation at lower levels making it impossible for obtaining money for various
dynamic business demands which may impact flexibility of decisions.
Cost volume profit analysis: This cost volume profit analysis can be understood as
managerial accounting procedure which analyses impact of how sales volume are
analysed , product cost on operating profit within business considering operating profit
where it is affected by changes to fixed costs, variable costs. Cost volume analysis shall
enable Innocent drinks to generate wider functional innovation scenarios and also
develop stronger working scenario where company will be enabling new profit scenario
(Căpu?neanu, Topor and Marin-Pantelescu, 2020).

壱Advantages: This planning tools enables ease of calculation and use of various
standard formulas where numbers can be changed quickly by analysing the changes in
variables where breakeven points helps mangers to estimate future spending
parameters and how production will impact business. It also enhances volume of
sales for achieving the various profit working fundamentals where sales can be
achieved for reaching the profit targets.

壱Disadvantages: It only takes into various account period specified, after which the
period results may be also unreliable for business which may decline working
efficiency of Innocent drinks further. It can also be understood that separation if
total cost into variable cost and various fixed cost in parts is not easy for business
mangers to do, it also assumes that all costs are fixed however there are mixed costs
that changes production metric. The assumption that assumes sales remain constant
which may negatively bring on sales production functional parameters and also
demand of products changes over time.
Pricing strategy:
The price strategy is value placed on product or service, arrived at by set of various
complex calculations and researches for wide understanding, risk taking which shall be
strongly focus within business scenario where Innocent Drinks will enable to generate
budget planning specifically where pricing strategy is an important tool. It considers amount
segments, ability to pay , varied market conditions and competitor actions where input costs
are used focusing for specific customers and against business competition within industry
parameters. Pricing policies such as inclusive premium, business finance penetration,
economy and pricing within business sets its varied prices of goods , services where
business managers have to strategically decide pricing objectives such as survival, quality
product leadership (Petera and Šoljaková, 2020).


壱Advantages: Customer base pricing looks how target customer is willing to payf or
determining ideal price and allows management to know gross margin costs where
demand pricing allows management to optimise prices.
4壱Disadvantages: Management pricing is not fixed where cost base pricing may lead to
products being priced competitively, by not taking into account overall profits and
how much response are customers giving for willing to pay.

4壱Comparison of two organisations are adapting management accounting systems to respond
financial problems
There are various accounting systems within working operations which companies need to
frame for functioning with high efficiency during challenges concerning to finance, where
innocent drinks uses cost accounting system and Vita Coco uses price optimization
accounting system. Vita Coco is also one of the strong competitor coming within drinks
industry and exploring various new organic healthy drinks such as coconut water that is
natural and fat free, potassium free and packed with nutrients. The company uses specialised
management accounting methods for sustainable success where management widely focuses
to take all stringent parameters of innovation and employees be part of discussion. Financial
problems within company are worked on by enabling various paradigms of working actions
and also to generate stronger working actions within business paradigms. Vita Coco has
wide range of consumer goodwill also propagating stronger working innovation among
business aspects, clear working innovation within business horizons and also focusing for
using best calculative techniques. Whereas Innocent drinks on other hand is less focusing to
bring on important aspects of use of new cost accounting methods and scenarios have not
actively focused for bringing on wider working goals. Innocent drinks have to generate more
flexible working parameters of calculative decisions, stronger working innovation and
develop smarter understanding among business goals.
·CONLUSION
The report can be concluded with detailed explanation of how management
accounting works within business scenarios for reaching out to wider competitive new
functional innovation within cost accounting goals within company. Report concludes
innocent drink financial accounting elements usage and brought up analysis of how new keen
scenarios of wider capabilities can be achieved among business scenarios (Jakobsen,
Mitchell and Trenca, 2019).

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·REFRENCES
Books and journals
Abernethy, M.A. and Wallis, M.S., 2019. Critique on the “manager effects” research and
implications for management accounting research. Journal of Management
Accounting Research, 31(1), pp.3-40.
Căpu?neanu, S., Topor, D.I., and Marin-Pantelescu, A., 2020. Management Accounting in
the Digital Economy: Evolution and Perspectives. In Improving business
performance through innovation in the digital economy (pp. 156-176). IGI
Global.
Cescon, F., Costantini, A. and Grassetti, L., 2019. Strategic choices and strategic
management accounting in large manufacturing firms. Journal of
Management and Governance, 23(3), pp.605-636.

Fleischman, R. and McLean, T., 2020. Management accounting: theory and practice.
Routledge.
Jakobsen, M., Mitchell, F., and Trenca, M., 2019. Educating management accountants as
business partners. Qualitative Research in Accounting & Management.
Łada, M., Kozarkiewicz, A. and Haslam, J., 2020. Contending institutional logics,
illegitimacy risk and management accounting. Accounting, Auditing &
Accountability Journal.
Nielsen, S. and Pontoppidan, I.C., 2019. Exploring the inclusion of risk in management
accounting and control. Management Research Review.
Petera, P. and Šoljaková, L., 2020. Use of strategic management accounting techniques by
companies in the Czech Republic. Economic research-ekonomska
istraživanja, 33(1), pp.46-67.