Management Accounting Assignment | Innocent Drinks Ltd
Added on -2021-02-21
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ManagementAccounting
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1. Management Accounting and its systems:.......................................................................1P2. Management Accounting Reporting:...............................................................................3TASK 2............................................................................................................................................4P3. Preparation of income statement with Absorption and Marginal Costing:......................4TASK 3............................................................................................................................................6P4. Budgetary control and planning tools:.............................................................................6TASK 4............................................................................................................................................8P5. Financial problems and solutions:....................................................................................8CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................11
INTRODUCTIONManagement accounting that is also known as managerial accounting is a branch ofaccounting which provides financial content and material to the internal stakeholders foreffective decision making regarding daily activities. It is useful for internal operations whichenables completion of functions like planning, organizing, staffing, directing and controlling(Schaltegger, Burritt and Petersen, 2017). The alternate name is managerial accounting and isentirely different from financial accounting. The information is used in formulating policies andplanning within the organization. This assignment is about Innocent Drinks Ltd. Whichmanufactures JOJO juice which is famous in UK. In this report, meaning of managementaccounting systems, its types, conclusion, reporting systems and its kinds together with itsimportance. Along with this, calculations of marginal and absorption costs, benefits andlimitations of budgetary planning tools, identification & explanation of money related issues.TASK 1P1. Management Accounting and its systems:Managerial accounting can be defined as an overall process or set of activities thatidentify, measure, accumulate, analyse, prepare, interpret and communicate the information thatcan be utilised by the management to evaluate, plan and control the operations of anestablishment to ensure the accountability and appropriate use of its finds and resources. Thisprocess of accounting also includes the preparation and presentation of accounting reports forother stakeholders such as creditors, tax authorities, governmental regularities and shareholders.It includes both the financial and non-financialdata as well which are used in making decisionsby the managers. Management accounting system is works as an outline or structure that comprises numberof techniques, tools and methods applied to do evaluation of operations of entities. It has numberof systems which have been elaborated below:Inventory management system: This system is used to maintain by overseeing finishedgoods and raw materials from the point of supply chain to the final delivery to customers(Takeda and Boyns, 2014). It performs number of functions which are necessary for tracking theavailability of stock within the organization. With the use of this, Innocent Drinks can controlcosts related with inventory for creating positive outcomes. There are many challenges that are1
faced by a manufacturing company in keeping details regarding existing stock, raw materials,suppliers etc. Hence, this system is developed in a way in which the difficulties may be removed.This system aids in managing centralised track of every assets by giving their specifications. Cost accounting system: This accounting system is a process followed by themanagement to ascertain cost of each product that is being produced. The other name of thesystem is product costing system that assists an organization to manage and have better controlon the costs associated with manufacturing goods. It has two branches viz. Job costing andprocess costing. Innocent Drinks can use this to estimate actual costs which have been incurredin producing its products (Bryer, 2013). It is also used in profitability analysis by estimatingcorrect cost of the product. The information in this assist an organization to determine final valueof raw material, degree of completion and stock of saleable goods. which are reflected infinancial statement. Price Optimization system: This system is about assessing the appropriate and rightprices which should be invest in products or services of a company. It helps an organization indetermining different prices for variety of goods by considering demand and willingness ofcustomers. It helps in estimating price of products at different levels of demand which is thecombined with costs and inventory levels for better outcomes. There is a particular processwhich is followed in this system. Hence, Innocent Drinks can use this to fix right price of thejuices according to quality and composition so that sales can be increased. Job Costing system: This system includes procedure of cumulative data and informationregarding costs attributed to a particular service task or manufacturing process. Job costingsystem is useful in assessing cost of a specific product or service and provide chance to measureit with the standard in order to find the gap. This information is provided to customers in order toreceive the payment from them. This system is fruitful in production of heterogeneous productshaving characteristics different from each other and there is a particular cost for every item.Costs are categorised into direct material, direct labour and overhead which are used to findactual value of the goods (Maskell, Baggaley and Grasso, 2017). From the matter presented above, it can be concluded that accounting method used by theinternal management is a broad process that includes numerous activities for helping themanagers in making decisions to be implemented within the organization. Furthermore, there aredifferent kinds of systems having their individual utility. Hence, one or more than that can be2
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