Management Accounting and its System

This report provides an overview of management accounting and its system. It discusses the various methods and tools used for management accounting reporting. The report also highlights the benefits of management accounting system and its application in making strategic decisions. It further explores the calculation of income statement using marginal and absorption costing method. Additionally, it discusses the merits and demerits of planning tools used in budgetary control. The report is based on the financial consultancy firm AJ and Sons and their client Innocent Drink, who faced financial problems during COVID-19.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
LO1..............................................................................................................................................................3
P1 Management accounting and its system.............................................................................................3
P2 Various method used for management accounting reporting..............................................................5
M1 Benefits of management accounting system and application............................................................6
D1 Critically evaluation of managerial accounting system and accounting reports.................................7
LO2..............................................................................................................................................................7
P3 Calculation of income statement by using marginal and absorption costing method..........................7
M2 Application of management accounting techniques........................................................................11
D2 Application of financial reports and interpretation of data...............................................................11
LO3............................................................................................................................................................12
P4 Merits and demerits of planning tools used in budgetary control.....................................................12
M3 Use of planning tools and its application.........................................................................................13
LO4............................................................................................................................................................14
P5 Management accounting system are adopting by organisation to respond financial problems.........14
M4 Management accounting help to respond financial issues...............................................................16
D3 Planning tools are useful to solve financial problems that lead a sustainable success......................16
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................18

INTRODUCTION
Management accounting plays an important role in every company, and then after reviewing
both accounts and financial reports means making strategic decisions. It supports a organization
with financial reports and recommendations for the successful business operations by ensuring
consistent management and financial documentation (Dekker, 2016). This report based on the
financial consultancy firm AJ and sons which provide good financial advice to their Clients. One
of client Innocent Drink face the financial problem during COVID – 19 that time company
provide the suggestions to use management accounting systems and reports to effectively run
their business. This report's main aim is to clarify the requirements of management economics
and its method. The report would include different subjects including such form of accounting
management, program, procedures, and accounts reporting. In addition, this study will also
provide resources for preparation that help value all the partnership assets and solve financial
difficulties. The accounting method is also beneficial in maintaining a profitable company.
LO1
P1 Management accounting and its system
In order to make financial choices, management accounting is the basic information of
every group that provides to include inner financial reporting, documentations. This includes
business strategies for the lengthy period and for the brief period by maintaining appropriate
final records and reports. This is important to analyze related costs, target targets, make or buy
decisions, schedule, prepare budgets and monitor budgets.
Accounting management system the system for monitoring reporting operation and
presenting account statements relevant to a company. For example, Innocent drinks are a
financial accounting business that manufactures final statements, so administrators might use
documents regularly. It could be used by private entities including creditors, investors and
financial regulators. Innocent drinks follow various aspects of financial management system
offered below-
Inventory management system: This involves an inventory levels-level monitoring software
application, deliveries, inventory, and services and products delivery (Englund and Gerdin,
2018). This is primarily used throughout the manufacturing industries, and aims to establish a

registration form, input materials invoice, and other industrial documents. It's also the record-
keeping method of semi-capitalized assets and based on an analysis. Innocent Drinks Director
uses this program to retain information up to date and facilities given to consumers including
such insurance contract, loan number, and rental assets etc.
Job costing system: This method is used to distribute and recover cost of production for a
specific unit produced. This also includes multiple products that have varying prices, and should
be adequately and efficiently handled. For Innocent drinks, director or administrator make note
of the expense of any time and getting financial details necessary for business processes.
Employments are distributed depending on the job that allows to independently handle economic
activities and details. Costs are allocated as per the work method throughout this system, which
helps to reduce the company's costs (Jbarah, 2018).
Price optimization system: This system known a company's numerical simulation which
attempts to identify the responses of the buyer regarding various brand and product costs. In
particular, it's being used to assess the best prices of goods and services to allow banks
competitive. Any business seeks to achieve the highest services and products rates which will
improve the amount of clients and improve the business earnings. Innocent Drinks Company
charges the client a fair rate of interest or payment through receiving economic and advisory
services that will help increase sales. In Innocent Drinks Business, customers are expanding
quickly to really get financial services since it offers high quality service and investment advice
that is essential from each organization.
Cost accounting system: A program is maintained to monitor the costs that happened when
making goods. This includes the location, description and overview of fixed and variable costs.
In many other terms, this is a method that is used to measure the exact price of the goods for
benefit estimation and reducing costs. Innocent Drinks Executives follow this method to
understand the full expenses spent on workers and to make budget decisions. This also aims
people clarify in which an organization can spend by lowering costs to really get full profits (Lay
and Jusoh, 2017).

P2 Various method used for management accounting reporting
Accounting reports for administration are the overview of every company that includes
evaluating, hiring, managing and monitoring business processes. It is obvious that a business
company can't operate for a lengthy amount of time while observing performance assessment.
This offers financial information that might be useful in planning long term financial strategies
and managing the organization's costs (Lindholm, Laine and Suomala, 2017). Reporting can be
used to learn the regular, weekly and monthly company's operations which provide detailed
insights for decision taking. Innocent Drinks, for example, is a global corporation that conducts
financial information on a regular basis to leverage the available funds in industry. This
examples range makes choices that are both successful and growing. This manages and
maintains the organization's business situation which aims to attain the goals of the company.
What company prepares budget reports which are mentioned below:
Budget report: This is an independent study that the supervisor has written and used to equate
projected expenditure results with total performance or expenditures. While expenditures are
financial targets that rely on projections and hopes for the future. In addition, budget reports are
helpful in analyzing both expected and real enterprise financial results. Innocent drinks that
production employer offers financing to various sectors concrete way and annual budget reports.
Such reports allow managers to fix business-related issues and make the results in background
more effective and investigate the production targets. Supervisors should determine the
knowledge they expect and make choices.
Accounts receivable report: Such reports contain new credit notes and overdue customer
invoices. The ageing report will be the first method that providers or receiving persons use to
determine which receipts are awaiting for payment. Owner and auditor of Innocent Drinks will
use these documents to let us understand the unpaid cash flows, including such who’s being
supported with financial services. It would also help to identify the consumers which pay
gradually then by delivering banking institutions make those decisions for more expenditure
(Nitzl, 2016).
Performance report: This study is often compiled by company administrators who assist in
understanding how effectively or not the money being spent on business activities is being used.
Such reports are often published by government entities which use resources to provide reliable

impact on performance assessment. For example, Innocent drinks allow performance evaluations
to determine the progress of a project or expenditure that is made in the access to financial
services. Executives evaluated worker and company's success and made the right and correct
decision.
Cost managerial accounting report: The report is helpful in maintaining accurate accounting
expense documents including such cost of raw materials, labor costs, overheads and other costs.
In fact, these reports help to calculate the price of money management and the policy's execution.
Innocent Drinks Company is investing resources in shape to offer smoothies and create a
lucrative company. The corporation's boss determines the amount of service delivery and takes
the best choice to make a successfully synthesized (Otley, 2016).
M1 Benefits of management accounting system and application
The potential advantages of the accounting management systems are presented in a table
format as below-
Job costing system This will help Innocent Drinks key organizational all expenses as
provided to different sector, prepare financial report and preserve
customer information.
It would also hopefully avoid the duplication of functions when
the same work is replicated.
Price optimisation method Innocent drinks can also get details on the mood and wants of the
consumer depending on multiple rates and costs.
Allows with the lowest fees to rising the total revenue.
Cost accounting system Innocent drinks can determine process performance and can
therefore help result in a change.
This will also dramatically reduce costs for the sector.
Inventory management
system
Innocent Drinks corporate executives can boost stock order
quality and use this program.

D1 Critically evaluation of managerial accounting system and accounting reports
Management accounting system is useful for just about any company that makes
management decisions which can influence the actions of management. Accounting system
provides consistent and realistic financial information that will help to successfully create a
business. It requires the employees of Innocent drinks optimize the amount of capital invested,
and make good business decisions (Oyewo, Ajibolade and Obazee, 2019) A company operation
can be handled efficiently by implementing the planning and budgeting documents. Thus the, the
director of Innocent Drinks can make sound business decisions by adopting the accounting
management system. This would also contribute to making use of business costs and rates. Thus,
the supervisor of Innocent Drinks can render smarter business decisions by adopting the
accounting management system. This would also enable allow better use of an organization's
resources and costs.
LO2
P3 Calculation of income statement by using marginal and absorption costing method
Marginal costing: It covers overhead costs including such labor and supplies, and overhead
expenses including such payroll management and sales commission. This tends to boost and
lower production costs, and to assess the corporation's payment ability.
Costing of absorption: It involve measure all production costs by adding fixed and variable
costs. This is often referred to as a complete costing approach that helps to determine the
organizations correct costs when making goods.

M2 Application of management accounting techniques
It has been known from the above analysis that accounting methodology such as marginal
costing and costing for utilization helps to evaluate correct costs and identify the business
earnings. Along with aid of accounting methodology and reports each employment base financial
statements including such trading and Profit & loss, balance sheet, report of inflow and outflow
etc. Accounting instruments receive investment research to inform in the preparation of financial
statement. Innocent Drinks Corporation provides investment resource and system to financial
information and records. This lets executives make smart decisions by cutting client expenses
(Richardson, 2015).
D2 Application of financial reports and interpretation of data
It can be noted that financial reports are the important part of any organization which
attempts to identify a company's bottom line and losses. Financial reports contain different
financial details which can be used by investors and stakeholders to calculate the business results

of the company. Every organization cannot neglect the financial statements, since they provide
reliable and correct details.
LO3
P4 Merits and demerits of planning tools used in budgetary control
Planning tools are instruments that help direct and advise what steps to take to make a
successful company. It is an accounting management instrument which determines how to
control expenditure and financial details to reduce costs and optimize profitability. Since
budgetary plan is a system which assists with finances to identify accountability and operational
targets and to compare budgeted and actual outcomes. For example, Innocent Drinks is
packaging business that provides management strategies to prepare financial reports every year.
This sets budgetary financial and output goals, correlates with real results and controls the
company operations as they are required (Rumens, 2016).
Zero base budget: In the current fiscal year, this budget is planned by organizations that
do not provide ant past knowledge that allows run the company. This budget ends with zero that
implies it doesn't have a base year that helps to identify the earnings of the previous period.
Innocent Drinks manager should plan zero base budgets to recognize the revenues or losses of
the financial year after keeping the rate.
Advantage: This budget lets Innocent Drinks better distribute the budget and money that will
keep the sales running. This is versatile and can be adjusted over the course of the year. Precise
information can be collected by planning this budget that also offers improved contact and
departmental collaboration.
Disadvantage: Strong man power turnover or number of workers is intended to submit this
budget. It is highly important for an ambitious budget as the planning of this expenditure is
critical for the company. Here's the lack of competence that Innocent Drinks manager can makes
it challenging to plan a zero budget. Because there is no foundation accessible, there is the risk of
needs support and easily exploited by knowledgeable managers and inclined towards
organizational short-term planning.

Cash budget: This budget is used for planning cash statements to maintain track of
financial transactions, which helps make income appropriately. After understanding the money
transfer, Innocent Drinkers will plan cash budgets and make more profits using the cash budget
Advantage: Innocent Drinks' planning of cash budget will improve its market situation and daily
price volatility, and generate better revenues. This affects the expenditure that's used by planning
the financial statement to achieve optimal income (Steccolini, 2019).
Disadvantage: These budges only offer cash gains estimates and do not have the required capital
needs. It is time intensive and budgetary risk-taking which can increase the profitability
Master budget: It is a dominant budget with all that accounts for all corporate divisions.
This is regarded as a yet another-year preparation report used by the government as a tool to
define priorities in preparation and organize assets to achieve these.
Advantage: It helps notify about the profits of a business organization and spending. The
overview of priorities and goals of an organization is specified in the long term plan
Disadvantage: A budget is planned for the entire business and no specific emphasis is provided
for a division Learning and daily upgrading is very challenging
M3 Use of planning tools and its application
Through the planning mentioned methods before, it has demonstrated that companies will
use their organization's preparation skills to find create future gains. By implementing the
strategic plan in the company company director, the organization issues have been addressed and
a projected budget can be set by analyzing all the knowledge that enables to efficiently make
strategic plans and improve business income. Innocent Drinks, for example , uses preparation
methods for dealing with money-related concerns that help tackle these problems and improve
the pace of development. This is crucial for organizations to concentrate on the future of their
company through formulating strategic targets that will help to sustain the increased revenues
(Vakhrushina and et.al, 2018).

LO4
P5 Management accounting system are adopting by organisation to respond financial problems
For a company, accounting management strategy is important which helps to collect,
analyze and visualize accounting and financial knowledge to make a profitable business.
Economic difficulties contribute to the management of financial resources that exists in the
company. A corporation that faces financial challenges in operating a customer needs to follow a
financial management solution that can maximize provide well. Company faces low margin
situations in Innocent Drinks, since expenditure seems more than revenue. Organization will
concentrate on accounting major in this circumstance that will significantly lower expenditures.
Financial issues surrounding Innocent Drinks are addressed elsewhere here:
High spending than revenues: It implies that whenever the person invests less similar
amounts to the funds donated, therefore the business encounters a financial issue. Like Innocent
drinks business that offers mortgage and other investment banking and has not earned increased
profits, it confronts financial challenges that minimize its income through increased liability (van
der Poll and Mthiyane, 2018).
Cash Flow problem: It is growing funding difficulties that emerges in every business as
outflow is more than inflows. Like Innocent Drinks boss, there are more costs and less sales that
pose a money issue. Hence, the operating margin is getting down due to high corporate
expenditures.
Management accounting approach: It means determining, researching, collecting and
presenting customer information which assists in getting internal management strategic
decisions. Innocent Drinks manager receives strong accounting account information which
contributes to making successful business decisions. The firm applies various forms of
management techniques, such as
KPI: KPI is a management methodology that helps a business assess both worker and
organizational efficiency. It demonstrates whatever the workers and managers do to finish the
mission. For example, Innocent Drinks director monitors accountant and scaling factor and
obtains details regarding their success in the job. It aims to understand where savings and

expenditures are necessary to get even more income and returns. Such details help to efficiently
plan a budget.
Benchmarking: It is a tool which allows contrasting the corporate practices and results with
information from other companies. The founder of Innocent Drink uses this method to help and
assess the corporation's results to reach high targets.
Financial governance: This implies regulations and laws for solving the money difficulties
imposed by management or other jurisdiction. In addition, it requires processes and strategies
that businesses use to handle company information and to address financial issues that can occur
in a operating business. Because of Innocent Drinks company applies policies and processes that
support the internally and externally audit identify financial issues. Such initiatives help fix
financial challenges and keep income going (Walker, 2016).
Difference between Bentley motors and Aston Martin
Bentley motors Aston Martin
Problem: Bentley Motors faces a structural
cash flow issue which implies outflows are
higher than inflows.
Customers change their decision, since it takes
that long to resolve the sum of the mortgage.
Problem: Despite of increased taxation and
reduced sales, Aston Martin still faces financial
difficulties.
Expenditures are more than revenues which
reduce profits.
Approach: Bentley Motors uses accounting
management method to address these issues
that continue to test means valuing to
recognize the charging ability.
Approach: Aston Martin applies the KPI
method, which by measuring and assessing
output provides a solution to these problems.

System: In Bentley Motors management has
implemented a cost accounting system that
aims to assess all the depending on the
exchange costs that occur in business.
System: Aston Martin has implemented a
system of market optimizing, which includes
setting fair interest rates and legal fees.
M4 Management accounting help to respond financial issues
From the above discussion, it was established that an organization can overcome
financial challenges and achieve successful outcomes by embracing accounting leadership to
make these organizations productive. This will help to build policy and incorporate sustainability
problems, including monetary and non - monetary information. This will also promote the
organization's economic and geopolitical objectives and emphasis on implementing policies. The
use of marginal and normal costing can help to achieve efficient decision – making efficiency.
Managerial accounting will help Innocent Drinks prepare budget reports that include increased
amounts that would be helpful in making recommendations to achieve financial planning and
marketing (Youssef, Moustafa and Mahama, 2020).
D3 Planning tools are useful to solve financial problems that lead a sustainable success
Business Corporation uses strategy methods to define challenges and respond better to
them, that allows to achieve the organizational goals. It allows properly making a target and
managing a budget that improves the competitiveness and value of the firm. The administration
of Innocent Drink uses various forms of planning methods, such as zero base budgets, cash
budget and master budget that allows bettering establishing the investment model that
contributes to effective organization in a sustainable way. Money budget helps keep track of all
cash items, master budget is being used to maintain track of all transactions and zero base budget
is being used in small business programs that enable to resolve the payments.
CONCLUSION
From the above report, it can be inferred that various managerial accounting methods and
techniques allow the organization to retrieve and obtain the account statements from the

administrator and business management, which allows to efficiently operating a corporation.
Multiple issues were discussed including such marginal costing, absorption costing, forecasting
methods showing the organization's real expense and making organization profitable. It also
included financial issues which can be found by the use of the accounting management system.

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