Management Accounting and Essential Requirements

Management
Accounting

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1 Management accounting and essential requirements of different types of management
accounting system........................................................................................................................3
P2 Different method used for management accounting reporting...............................................5
Evaluation of benefits of management accounting system and their application within firm.....6
LO 2.................................................................................................................................................6
P3 Techniques of cost analysis to prepare an income statement utilizing marginal and
absorption cots.............................................................................................................................6
LO3................................................................................................................................................11
P4 Advantages and disadvantages of planning tools used for budgetary controls....................11
LO4................................................................................................................................................12
P5 Comparison of Organisations adapting accounting systems for responding to financial
problems....................................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is essential for any organisation as it helps in providing both
qualitative and quantitative information to manager so that accurate decision can be taken for
growth and development of organisation. It helps in improving overall performance of firm,
support strategic goals and objectives, facilities decision making which contributed in effective
achievements of company goals. This report is about innocent drink that makes coffee,
smoothies and juices to be sold in supermarket in order to earned maximum profit margin.
Report has highlighted crucial information related to definition of management accounting and
its essential requirements of different types of management accounting system. It also discussed
about method used for management accounting and advantages, disadvantages of different types
of planning tool used for budgetary. At last, it compare and contrast the way organisations are
responding to financial problem by adapting management accounting system for sustainability of
business.
LO1
P1 Management accounting and essential requirements of different types of management
accounting system
Various account of company need to be effectively managed and controlled so that
manager can plan for future by taking accurate decision regarding operation of business. It
makes use of information related to cost of products and services, actual expense company have
incurred and profit earned during particular years (What Is Management Accounting, 2019).
Main difference between management accounting and financial accounting is that management
accounting offers information which helps manager while finance for external parties of
business. So on the basis of all such information and data manager of Innocent drink make
correct decision which could help in effective growth and success of enterprise. Essential
requirements of different types of accounting system for innocent drink can be illustrated as
follows:
Cost accounting system: It is one of the best accounting method that is applied or used by
innocent drink to measure actual cost of products that assist manager in analysis of profitability,
cost control and inventory valuation. There are two basic method which are used to allocate
actual cost to products of company such as traditional and activity based costing. Innocent drink

have make use of activity based costing to estimate actual cost or price of products of
organisation. It helps manager in understanding actual cost that company have incurred to
manufactured particular products therefore it add input cost or variable cost with fixed cost
(Machine, building). Thus, innocent drink manager can easily measures, record and control
financial performance of organisation by comparing actual performance with resulted output
(Endenich, Trapp and Brandau, 2017). Therefore, it can be stated that cost accounting system is
most useful concept of management accounting that contributed in effective management of
budget, financial performance, standard and marginal cost of business.
Job costing method: This is a type of techniques that is used in case good processed is highly
differentiated form each others. In another words, job costing is effective allocation of
manufacturing cost to batches or group of items or production job. Direct material, labour and
overhead are three basic information’s which are require or accumulate in job costing method for
benefit of firm. Therefore all such information is necessary for innocent drink because it helps
quoting accurate prices at which firm can earned reasonable profit or income.
Inventory management: Company needs to manage its inventory in order to timely supply
products and services to end customers. Inventory management is one of the system of
management accounts that helps manager of innocent drink to easily control, monitor and
oversees total amount of existing raw material, order in processed and finished goods. Inventory
is most important resources for any organisation so innocent drink through this system is able to
make best or optimum investment in resources of firm. Main function of inventory management
in innocent firm is creating purchased order, reallocation or disposable of resources (Fleischman,
Johnson and Walker, 2017). Thus, it contribute in preventing over and under stock of raw
material for benefits of organisation such as reduce in cost and fast delivery of services to
customers. So, it can be illustrated that various benefits of inventory management for firm is
improvement in workflow, inventory accuracy and bottom line.
Price optimising system: It is another management accounting system that helps manager of
innocent drink to understand the way customer will react to particular prices and channel used by
company to meet their needs. Essential requirement of price optimising system is because it
helps in attracting more and more customers and enhancing profitability of firm. Thus, it assists
manager to set best prices at which customers are motivated and interested to make purchased so
that firm can earned more profitability and market share.