Management Accounting: Essential Requirements and Benefits

Management Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
A) Explain the essential requirements and their benefits for management accounting
system to function efficiently......................................................................................................3
B) . Discuss how management accounting systems and its report help support an
organisation like Lets Grow Ltd in making decisions.................................................................5
TASK 2............................................................................................................................................7
C). Prepare a cash budget for the coming six months ending in August 2020............................7
D) Use of cash budgets and its application for preparing and forecasting the financial position
of an organisation like Letts Grow Ltd........................................................................................9
E) Discuss how Lets Grow Ltd can adapt its management accounting system to be deal with
financial problems.....................................................................................................................11
F) Critically evaluation of the financial position of Lets Grow Ltd based on the forecasted cash
budget prepared.........................................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
MA is a wider concept which should be understood by all managers to strengthen the
organisation in which they work. This is a technique that helps internal stakeholders to determine
whether the organization is operating appropriately or not (Quilty, Cosentino and Bagby, 2018).
As with the support of this accountant they can make critical choices on the basis of internal
reports generated. This report’s main aim is to clarify the management accounting theory and its
implementation within the company. In this report, the company Lets Grow Ltd is selected to
better understand the importance of MA which is a manufacturing firm.
In this file, MA system with their essential requirement, MA reports and its importance is
discussed. In addition, costing techniques used to prepare income statement and determine net
profit. Report also covers; different MA planning tools are elaborated that use in budgetary
control and MAS importance in order resolve the finance problems.
LO 1
A) Explain the essential requirements and their benefits for management
accounting system to function efficiently.
Management accounting seems to be the combination of financial reports and documents
used to provide accurate and credible financial information for making profit. The manager of
the company must assess, collect and record the banking transactions by managing the financial
information and maintaining income (Singh and Verma, 2018).
Essential requirements of a good MAS
Reliable: All the system must be reliable so that information contain can be trusted in order to
make good results for increasing the company profitability.
Accurate: The system must be accurate as all the information must be reported as per the
accounting standard which eases the work of internal manager to make valuable use of the
collected information.
Timely: All the information should be gathered on regular basis within accounting report with
the support of different system so that not a single point of information gets missed out.
Relevant: This is main feature for every MA system as entire information must be correctly
related with the operation in order to reduce the chance of error and confusion within internal
reports.

MA System:
Inventory management system: This method is very important for all companies that
are trying to manage and properly track correct stock records. It is used mainly for the control of
the private sector facilities and goods and for the supply chain. Lets grow management uses this
method to classify products with the help of involving the chain of supply or market operations.
This was intended to offset the improved productivity from the production to the distribution,
inventory handling, processing and distribution (Weetman, 2019). This system's is necessity to
gather all the details about inventory and control and monitoring the level of stock with the aid of
technology in respective firm. This program benefits operating effectiveness in functional areas
which produces full results by reducing costs and maximizing sales and profits for Lets Grow
Ltd.
Price optimization system: This system is used as a quantitative analysis process that
clarified how a company should adopt the price strategy to optimize profitability. This approach
also aims to provide guidance in determining the tariffs that would be appropriate to both
industry and customers. As well as using this method Lets grow Ltd Increase and
develop appropriate rates that draw attention of consumers and improve productivity by trying to
set non-violent operating prices. This report involves maintaining an excellent business pricing
system which supports company to increase overall profit margin and maintain a decent price of
good that will be consequently selling throughout on the market. Moreover this program is also
use in Lets Grow ltd to evaluate the buying trends of clients and giving preference to price
ranges. In case if product costs are higher than consumers, they won't want to purchase goods.
Therefore, using this accounting method, it is possible for the sales department of the above-
mentioned organization to fix rates at a point where they can produce higher profits.
Cost accounting system: This is a technique of management accounting, that used
quantify reliable and correct costs from across all the operation within company. It includes the
process of recording, assessing, defining, summarizing and reporting needless costs to track. In
fact, something can be done to think about the real value of the various services and products.
This approach is used by manager of Lets Grow Ltd, to calculate the expense incurred
in growing manufactured product as well as to assess whether company is profitable or not in a
specific time period. By adopting the cost accounting approach business will cover the costs of
its activities and create a profitable organization. This system main obligation is to set cots for