Management Accounting: Systems, Techniques, and Planning Tools

This document provides an overview of management accounting systems, techniques, and planning tools. It discusses the essential requirements of management accounting systems and the methods used for management accounting reports. It also explores the calculation of costs using appropriate cost analysis techniques and the application of management accounting techniques in producing financial reporting documents. Additionally, it explains the advantages and disadvantages of different planning tools and analyzes their use in organizations.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1 Management accounting systems with essential requirements...........................................................3
P2: Methods used form management accounting reports.........................................................................5
M1 Benefits of management accounting system......................................................................................6
TASK 2..........................................................................................................................................................7
P3 Calculate costs using appropriate techniques of cost analysis............................................................7
M2 Application of management accounting techniques and produce appropriate financial reporting
documents................................................................................................................................................7
TASK 3..........................................................................................................................................................8
P4 Explain the advantages and disadvantages of different types of planning tools..................................8
M3 Analyse the use of different planning tools and their application....................................................10
TASK 4........................................................................................................................................................10
P5 Compare how organisations are adapting management accounting systems....................................10
M4 How responding to financial problems, management accounting can lead organisations................11
CONCLUSION.............................................................................................................................................12
REFERENCES..............................................................................................................................................13

INTRODUCTION
Management Accounting is a methodology that is used by administrators of various
corporate organizations to calculate, track, assess, schedule and coordinate their operations in
order to achieve sustainable results. This project's main goal is to improve understanding of
management accounting and its relevance for success in business (Dewi and Wirama, 2019).
This report based on the Aj & Sons which is accounting Consultancy Company and provides
advice to different organization in regard their work, activities and systems. The company has
many clients and innocent drink also take advice from the company to conduct business activities
properly. This task includes numerous aspects including the presentation of management
accounting frameworks and reporting processes, the implementation of a variety of cost
estimation techniques and the use of budgetary analysis of planning resources. It enables
employees acquire different strategies so as to achieve maximum profitability. Furthermore,
various forms of budget can help manage their operations and aim to execute them in the correct
manner. In addition, this study also includes the analysis of how companies use that to address
the following issues.
TASK 1
P1 Management accounting systems with essential requirements
Management Accounting: It can be understood as the method that helps employees identify,
analyze, track, evaluate and predict the corporation's output in order to obtain maximum profits
in the long run. With the aid of this, internal users evaluate whether or not the team is operating
very well shape business choices for the future period. In Innocent Drinks, managers perform
management accounting on a daily basis so that they can know the true state of the company. It
also directs managers at the highest level in evaluating whether or not businesses are able to
achieve planned income (Garasyim and et.al, 2020).
Management accounting system: It directs interested parties to assess shareholder value that
can help boost business efficiency. In Innocent Drinks, administrators use them to keep a record
with each and every company operation in order to minimize the risk of current opportunities.
Various systems which Innocent Drinks management use are as described in the following:

Price optimization system: Many businesses use this system to set reasonable prices for their
goods in order to draw large numbers of consumers into the company. In Innocent Drinks top-
level executives use it to fulfill consumer needs by fixing the most appropriate rates for the
Smoothies sold to them. They also strive to achieve some profit and revenue optimization in the
long-term company goals with the aid of it. It is essential require for the organisation because it
can allow management to determine consumer reaction to various price points provided by the
employer for their goods.
Job order costing system: All the company organizations conduct various tasks and the costing
system for job orders is used to document all of them. Activities may be divided by their rank,
with the aid of it. In Innocent Drinks executives are using it to keep track records of various
procedures which are performed as per various client requirements. It's really useful for the
organisation since it can direct the managers to calculate costs differently by each and almost
every task. The essential requirement of this system manager can determine the productivity of
all operations and recognize certain workers that are not organizationally productive in order to
attain greater profits in future (Giorgino, Barnabè and Kunc, 2020).
Cost accounting system: This is the method which the company uses to monitor the amount
caused in the production market of products. Only with aid of it supervisors are able to identify
the cost from each and every unit their business manufactures. Organizations utilize it in
Innocent Drinks to calculate the costs associated with various cars built by the company. It also
assists them in allocating funds as per their needs to all agencies. The essential requirement to
institution's management teams as it allows them predict real manufacturing costs and company
profit-generating capacity.
Inventory management system: It is used mostly in design and construction organizations as it
lets executives keep a close eye on stock that is used for business processes. Management uses
Innocent Drinks to monitor their stocks and assess that the company has ample inventory to
perform organizational and executive operations in a consistent way. It directs companies to
assess the storage, warehouse or distribution of goods to customers. There are 3 major types of
inventory management systems that businesses may follow to suit their preferences.

P2: Methods used form management accounting reports
Management accounting report: It is the method of documenting all the financial records in
contrast to the different customers for the internal customers. Within this process manager
produces various report types that make the business assess organizational or operational
research and develop plan to ensure goals and business objectives. Managers use various
monitoring techniques in Innocent Drinks to assess the company's internal results.
Accounts receivable aging report: This report contains unpaid invoices, which will be
organized according to the year. It can be used for those companies that deal extensively with the
credit period, so they have to establish account receivable report although all borrowers are
really hard to remember. Company rapidly recognizes the defaulters who have not yet paid their
receipts, with the help of this report. Management utilizes this current obligation at Innocent
Drinks to classify their lenders and overall defaulters (Godil, Kashif and Sarwat, 2019).
Cost management accounting report: This report contains the cost of each item needed for
manufacture. It covers the cost of the projected materials, labor and other overhead costs. Since it
can build more strategy with the aid of this manager to will each unit value of the item. Drop the
costs go up competition and also profitability and then further leads to the corporation's
improved selling price. In Innocent Drinks, director analyses all practices and reduces
undesirable practices that do not yield any kind of benefit
Performance report: This study covers both individual results as well as organisation. Now this
results will be measured on a yearly basis and it will enable the management must make their
future financial decision. Innocent Drinks' manager analyses the work performance as well as
how to execute the expenditure to achieve their mission. With the aid of this study, managers
adopt different plans and make strategic decisions that help achieve business goals and priorities.
In addition, it enhance the probability of monetary incentives that the management has
determined according to their success (Holm and Ax, 2020).
Budget report: This report also called the internal document that the upper executive uses to
measure the organization’s income or expenditures. It also assists in evaluating the
organizational functions efficiency. Executive contrasts the company's real output with that

expected in the fiscal quarter. The management examines the effectiveness in the light of
Innocent Drinks but if it is lower than anticipated then the director must build more strategies to
accomplish the objective & targets. If the final experience is positive, the organisation may
attempt to sustain its efficiency or boost effective result.
The Innocent Drinks manager improves their operational efficiency or gross profit with the aid of
all the above listed analysis techniques. It also allows achieve company goals & priorities.
M1 Benefits of management accounting system
Innocent Drinks utilizes different management accounting systems. With requirements, all
of them profit as continues to follow:
Management accounting
system
Benefits and application
Price optimisation system In Innocent Drinks price management system is used by
management to set reasonable prices for things such that
consumer demands can be achieved.
Cost accounting system Innocent Drinks administrators use the cost accounting system
as a means of measuring the expense of automotive research
operations so that income can be measured.
Inventory management
system
To control inventory and keep on top of it administrators at
Innocent Drinks utilizing inventory management system as it
allows to properly performing the all operations management.
Job order costing system In Innocent Drinks job order costing system is being used by
management because it is useful to keep record of success of
all tasks conducted as per customer requirements.

TASK 2
P3 Calculate costs using appropriate techniques of cost analysis
Marginal costing: It is a system wherein variable costs are paid to value system and
fixed costs are charged off in total again gross expenditure of that time. This methodology
considers only cost factor as fixed costs. This strategy has the main objective of managing the
manufacturing profitability. It introduces this strategy by describing the total income. It's being
used to set the market value and Innocent Drinks can use marginal costing approach to measure
costs to identify the best sale blend (Islam and Managi, 2019).
Absorption costing: This cost-calculation approach considers both variable and fixed costs as
cost of the product. With this approach, the basic object of estimating costs is to demonstrate the
precision and fair opportunities of commodity costs. This method is more suitable provided that
it accepts a rational approach. This approach is used to accumulate factors related to a production
line and to assign them to specific goods.

M2 Application of management accounting techniques and produce appropriate financial
reporting documents
Management may use different strategies to learn from of the info supplied and display it in
organizational financial reports. The Management Accountant uses various strategies such as
financial planning, financial statement analysis, cost accounting, fund flow analysis, cash flow

analysis, marginal costing, normal costing, and such to find the details needed. Organization can
gain income from this research, resulting in a country's success in exchange. The organisation
can achieve expenditure and other projections with the aid of marginal costs and absorption
costs. An organisation can also use ratio model to estimate, schedule, organize, interact and
monitor different types of a business.
TASK 3
P4 Explain the advantages and disadvantages of different types of planning tools
Budgetary control: The mechanism used to manage budget excessive spending is
recognized as budgetary control. In Innocent Drinks, administrators use it to establish priorities
linked to results and finances which will be accomplished in the coming year. It directs them to
assign sufficient financial resources as per their specifications to various current organizational
divisions in order to be able to achieve organizational goals and objectives (Khalid, 2020).
Zero based budgets: It is a budget that administrators use to assign funds to various
business functions based on customer needs and criteria rather than the expenditure background
of the prior period. In Innocent Drinks, managers build a new zero-based expenditure for that
year to explain the expenditures for the same duration for tracking company's total results.
Executives then make calculated move to strengthen it if the company is unable to conduct the
operating activities adequately. For the companies both the benefits and drawbacks are as
continues to follow:
Advantage:
1. Through evaluating costs and difficult assumptions, the effectiveness and efficiency of
performing operating operations can be achieved with the help of a zero-based budget.
2. It supports all the predicted expenditures as it begins with a baseline zero where all
previous estimates are overlooked.
Disadvantage:
1. The implementation process is very complicated because it needs talented employees and
it is not feasible to sustain the expense of hiring professional individuals for all
businesses.

2. Zero-based annual budget process can be time consuming that leads in delayed
consequences (Kinnunen, 2019).
Master budget: A budget focused on the incorporation of various expenditures planned by
different organizational divisions. Cooperation with different things can be formed with the aid
of it. They are make, buy, sell and other activities. In Innocent Drinks master budget is designed
by administrators to provide the shareholders with brief reporting of financial so they can make
critical decisions. The benefits and drawbacks of this for the institution:
Advantage:
1. It directs managers at the highest level to collaborate from all divisions by reviewing their
expenditures.
2. It is regarded as the strong contact method that could be used by various business
functions.
Disadvantage:
1. Adjustments to a master budget are hard to produce. Only a minor shift involves a lot of
steps involving long explanations
2. When planning this management make guesses that may prove to be inaccurate or
insignificant over time and a typical lay person often finds it hard to comprehend.
Flexible budget: It is a budget that can be easily changed to some form of shift in
operational amount or operation, also known as variable budget. It includes standard-period
revenues and expenditures as a framework and forecasts adjust based on production adjustment
(Ostaev and et.al, 2019).
Advantage:
 It is simple to implement the current or potential operational conditions for adjustments
in income and expenditures.
 Reflect the effects of adverse circumstances which help to measure organizational and
managerial efficiency efficiently and reliably.
Disadvantage:

1. It presumed that fixed costs remained at all like that levels but that fixed costs are set
only up to a particular production amount.
2. It is more complicated, because more preparation is needed to track costs and change the
discrepancy between two periods.
M3 Analyse the use of different planning tools and their application
Planning methods play an important part in budgetary planning and monitoring. Forecasting
includes projected sales and cost forecasts, estimated residual income and outlet amounts and
other possible future adjustments. The use of various budgets is rendered within planning
techniques to display future predictions in a more approachable and simpler way. The knowledge
that these tools include has been used to make successful and appropriate decisions on several
activities. Innocent Drinks uses various budgets, such as zero base budget, master budget,
budgetary control, etc. to predict the consolidated financial statements. Zero base budget is used
to distribute funds among multiple agencies according to necessity in which a summary of all
other budgets is given at one position as master budget (Ratnaningrum and et.al, 2018).
TASK 4
P5 Compare how organisations are adapting management accounting systems
The business has numerous financial problems that have a detrimental impact on its
operations. There are numerous problems relating to Innocent Drinks that exist in the statement
of financial position some triggers including such budget problem and this issue happens if there
is not enough money to cover the debt obligations but this issue starts whenever expenditures are
higher than profits in the business. Risk management is also another issue that exists primarily in
businesses, as it is necessary to assess the threat associated with these activities and this
contributes to successful decision making. There are various strategies to fix this issue that are-
• Financial governance-Financial governance involves revenue growth management and this
strategy is useful for holding the cash in the business (Ravenda and et.al, 2019).
• Key performance indicator- KPI is a metric used to determine outcomes following standard
standards and to compare and interpret data.
Businesses solve these issues in their own manner and an illustration is being shown following

Basis Nestle Cadbury
Problems This business is experiencing the risk
management issue as the
organization is unable to predict the
precise element of capital associated
with a specific investment and risk
assessment and management is
necessary to make decisions about
any project that includes risk;
however the organization is unable to
implement any successful risk
management strategy in any manner.
This business may face the cash flow-
related issue and the business is unable
to sustain its working capital as they
produce luxury products which require
high price so cash outflow and flow of
money management is concerned to
provide correct margin profit and this
becomes an obstacle to improve their
competitiveness.
Identification
of problems
This risk management challenge can
be addressed by using KPI method
that is a methodology used to assess
organizational effectiveness and this
company promotes to do productive
work (Shichkov, 2018).
Financial governance is the mechanism
which can be used as the company's
strong strategy that can help manage the
company's financial position as it
controls that the operations take place as
per the corporate accounting
accessibility.
Uses of system This company can address financial
issues by using inventory
management system that will help
control the stock and sustain the
customer’s order that aims to
enhance the revenue and all the
operations.
Cost accounting framework is used to
fix issues that can help to define
working capital that improves efficiency
appropriately. It also follows the credit
requirements that can enable to earn
rewards on time, which improve
efficiency.

M4 How responding to financial problems, management accounting can lead organisations
The management accounting strategy is a technique that the corporation uses to monitor the
financial position of the company which really is important for sustained performance. Since it
offers vital information required for the decision-making process, it is crucial to make efficient
use of this tool in order to provide the management with correct information. The management
strategy incorporates two main success measurement and benchmarking methods (CHAN, 2020).
The main performance metric is a measure that measures organizational effectiveness as it is an
observable attribute that demonstrates whether efficiently the institution's target is accomplished.
CONCLUSION
It was inferred from the above study that management accounting is helping the company to
adopt different financial systems to improve organizational efficiency. There are advantages and
disadvantages of various methods the business makes are available because the company is
expected to do detailed review to achieve the advantages and eliminate the disadvantages.
Business faces numerous financial issues that affect both efficiency and performance in the
organisation. These issues can be overcome by means of powerful preparation methods like
benchmarking, KPI etc. There are different forms of costing methods such as absorption costs,
marginal costing that are used to calculate the real manufacturing costs so that the business can
minimize the expense and profitability and growth. Budget is an important tool that the
organisation uses to prepare its future expenditures which includes cash, flexible budget which
fixed budget.

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