Management Accounting Systems and Reporting in Innocent Drinks

Management
Accounting

INTRODUCTION
Management Accounting refers to the use of different types of provisions so that the right
decisions can be taken by the managers after performing the required analysis and interpretation
of the financial data, facts as well as information (Abdel-Maksoud, Cheffi and Ghoudi, 2016). If
it is used effectively and efficiently by the management then it can help a lot in achieving the
desired short-term and long-term goals as well as objectives. It is the role of management
accountants to make sure that they can correctly use its methods. This can help a firm in
achievement of strategic advantage in the future time period. In this way it can grow
substantially in the market and can attain sustainable success. This report is based on Innocent
Drinks. It is a company which sells different types of drinks in the market. In this assignment,
focus will be made on management accounting systems, application of its techniques.
Additionally, the use of planning tools and comparison of ways in which companies use this data
to solve problems will be discussed as a part of this project.
TASK 1
P1: Management accounting systems
Management accounting- It is an important decision-making tool which is used
internally by the management. Different types of tools like budgeting, variance analysis, CVP
analysis and BEP are some of the main tools which are used under it.
Difference between Financial Accounting and Management Accounting-
Basis Financial Accounting Management Accounting
Information It makes use of only the
monetary information
available within a company.
It makes use of monetary as
well as non-monetary
information available within
the firm.
Users of information Internal as well as External
users use its information.
Only the internal users make
use of its information.
Reports It only makes use of
summarized reports.
It makes use of detailed
reports.
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Types of management accounting systems-
Cost accounting system- In this system, a detailed analysis of different types of costs of
the organization is done (Al-Mawali and et.al., 2018). In this way it can help the firms like
Innocent Drinks so that they are able to perform a specific analysis of their costs. This will lead
towards application of rectifying techniques so that these costs are reduced.
Essential requirements-
 Cost accounting system should help the management of companies to maintain the
records with the required accuracy. Therefore this can help the managers of Innocent
Drinks a lot because they will get the information which is up-to-date. When the
management of the company is able to ensure that it can maintain detailed records of the
costs then in this way it will be able to apply the techniques in a better way to reduce the
costs.
 Cost accounting system can help the managers of firms to reduce the costs effectively.
The managers of Innocent Drinks can be benefited from this and can maximize their
overall level of profits. This can be done by them when they are able to apply the
appropriate techniques to assess where the costs have increased so that they can be
reduced in an effective manner.
Inventory Management System- In this system, there are various methods like LIFO,
FIFO etc. which help the management of a company to properly manage the stock level
(Almasan and et.al., 2016). Records can be maintained by the managers if they are able to track
the inwards as well as outwards movement of the stock. In this way, Innocent Drinks can be
benefited because their managers will be able to manage the information related to the inventory
of the companies without problems and issues.
Essential requirements-
 Inventory management system must help the companies to make sure that they are able to
use the correct methods so that they are able to manage their stock well. In this way
Innocent Drinks can manage and maintain their inventory. In this system, the companies
are required to ensure that they maintain a computerized system to track and manage the
different types of stock items so that they are not mismanaged.
 Inventory management system should help the firms so that they are able to identify the
problems with their inventory valuation and can rectify it. This helps companies like
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