Management Accounting Systems and Techniques - Innocent Drinks

MANAGEMENT
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting systems...........................................................................................1
P2: Methods used form management accounting reports............................................................2
M1 Benefits of management accounting system.........................................................................3
TASK 2............................................................................................................................................4
P3 Calculate costs using appropriate techniques of cost analysis................................................4
M2 Application of management accounting techniques and produce appropriate financial
reporting documents ....................................................................................................................4
TASK 3............................................................................................................................................4
P4 Explain the advantages and disadvantages of different types of planning tools ...................4
M3 Analyse the use of different planning tools and their application ........................................6
TASK 4............................................................................................................................................7
P5 Compare how organisations are adapting management accounting systems ........................7
M4 How, in responding to financial problems, management accounting can lead organisations
......................................................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting is the activity where identification, analysation, interpretation
and communication function are to be performed by manager to achieve organisational goal.
Financial information are also provided under this process to top managements so that they can
take managerial decision easily (Armitage, Webb and Glynn, 2016). The company which is
selected for this report is Innocent Drinks. It makes smoothies and juices and sold in coffee
shops, supermarkets. It was founded in 1998 with headquarters in London, United Kingdom.
Various topics such as understanding of management accounting system,application of range of
management accounting techniques and use of planning tools used under accounting
management are covered under this assignment. Apart from the above topics, compare ways in
which organisation could use management accounting to respond to financial problems are also
explain in detail in the project.
TASK 1
P1 Management accounting systems
Management accounting is a technique used by experts to measure and evaluate the
process to make proper control over the management of the organisation. Information and
reports related to invoices, cash flow statement, balance sheet etc. are shared by finance
department with the managers of the company which helps in decision making process. Proper
recording of transactions with the help of using supporting document is to be maintained by
managers of Innocent drinks. It helps to take accurate decision to increase operational
efficiency of organisation. Deep analysation is to be performed by top management of company
for taking long term investment decision and also to evaluate the risk involved in the particular
investment (Bennett and James, 2017).
Various systems related to management accounting are also describe in detail as under.
Cost accounting system: It is a system mostly used by a manufacturing company to
estimate the product costing for profitability analysis, and to control cost. Proper valuation of
inventory along with their flow and estimation of different cost is also be consider under this
system. Various costing like fixed cost, variable cost, semi variable cost, etc. are to be calculated
for a product by managers of Innocent drinks to track the cost of product. Record of cost of
inventory is also maintained so it saves many cost in the organisation (Collis and Hussey, 2017).
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Essential requirements: Proper allocation and apportionment of cost is to be made in
the system as it become beneficial to identify idle time, idle cost so that managers can easily
ascertain the product cost at different level.
Inventory management system: It is used to track goods to minimize inventory waste,
and it also helps to analyse trend of stock. Innocent drinks use various methods like LIFO, FIFO,
weighted average etc. to manage inventory. Though there are different ways through which cost
of managing inventory can be minimized.
Essential requirement: It is beneficial to use this system in the company because it
reduces chances of stock loss. management of inventory can easily become possible (Cooper,
Ezzamel and Qu, 2017).
Price optimisation system: It defines the way customers will respond to different prices
for product. By providing best prices for each product Innocent drinks attract large number of
consumers. In this way the organisation achieve their target by providing satisfaction to the
customers (Dekker, 2016).
Essential requirement: By using this system buying pattern of the customer and their
preference for prizing can be easily understand by sales manager to capture market.
P2: Methods used form management accounting reports
Different type of reports are to be prepare by experts of different department so that
financial data can be analysed properly at anytime. As financial information are compiled under
the report so it helps top management of Innocent drinks to take appropriate decision for the
benefit of shareholders and customer. It also shows the financial position of the business over a
specific period of time.
It is mandatory for every organisation to prepare various relevant report regularly as per
their requirement some of these are as follows:
 Budget report: It is a document in which financial data are to be recorded to measure the
performance of the business by making comparison between the actual result with the
budgeted one. It is prepared by professionals in Innocent drinks for investors point of
view and the percentage of risk involved are also be mentioned in the report. The budget
report is used in the organisation is to determine which expenditure is high and and the
measures needed to do reduction in the prices of commodity. Reason of deviations are
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