Advantages and Disadvantages of Planning Tools for Budgetary Control

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Management accounting systems..........................................................................................1
P2: Management accounting reports............................................................................................3
TASK 2............................................................................................................................................5
P3: Calculation of costs...............................................................................................................5
TASK 3............................................................................................................................................8
P4: Advantages and Disadvantages of planning tools for budgetary control..............................8
TASK 4..........................................................................................................................................10
P5: Comparison of organizations and the way they use management accounting to respond to
financial problems......................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is an accounting technique in which the different provisions are
used so that the managers are able to take short-term and long-term decisions which can be
highly beneficial for the future time period for the organization (Abdel-Maksoud, Cheffi and
Ghoudi, 2016). For using it the managers are required to use their skills to analyse and interpret
in a much better manner by deriving out conclusions and recommendations from the given
financial data in a highly effective manner. This report will focus on Innocent Drinks. It is a
company which provides smoothies and other drinks to the customers in the market. In this
assignment, there will be specific focus on demonstration of understanding of various systems,
application of different techniques. Additionally, use of planning tools and comparison of ways
in which the firms can make use of the available techniques to solve financial problems will be
discussed as a part of this project.
TASK 1
P1: Management accounting systems
Management accounting refers to techniques used by the accountants to be able to ensure
that they are able to derive the conclusions and recommendations through the available financial
data in an effective manner (Al-Mawali and et.al., 2018).
There are various systems which are used in Management Accounting. An explanation of
these systems is as follows-
Cost accounting system- In it, there is an estimation of different costs which are
incurred in the organization. This allows the firms to be able to identify the techniques through
which the expenses can be reduced and profits can be enhanced. Thus in this way Innocent
Drinks will be able to identify the costs which are incurring in the firm and the appropriate
techniques which can be used to reduce them to allow the enhancement of available profits.
Essential requirements-
 It needs to include the ways through which the costs can be calculated and segregated
properly within the organization. Thus in this way the managers of Innocent Drinks will
be able to ensure that overheads are properly segregated in the departments of the firm.
1

 In it, there is a requirement that the costs are reduced by making the use of various types
of techniques. Thus the management of Innocent Drinks will be able to ensure that in this
way they can enhance the level of profits effectively.
Inventory management system- In it, there is an estimation of the various techniques
through which the stock items can be identified in an effective manner (Alam, 2017). By making
the use of this system, the organizations can manage their stock in a better way. In Innocent
Drinks, it can be used to identify the stock level for the purpose of facilitation of right
management.
Essential requirements-
 In it, there should be a system through which the items are tracked and managed in a
better manner. This will ensure that there is no loss of stock items. This will help
Innocent Drinks to manage its inventory.
 In this system, there should be use of different ways through which the costs of managing
inventory can be reduced. In the context of Innocent Drinks, this can help a lot in
maximizing profits.
Job costing system- This system allows the organizations to be able to identify their job
costs in a much appropriate manner (Gomez-Conde and Lopez-Valeiras, 2018). This helps in
identifying the job costs which are incurred so that methods can be used to reduce them. For
companies like Innocent Drinks this is very helpful as it helps in bringing out efficiency and
effectiveness.
Essential requirements-
 This system should have different methods through which proper management of job
orders can be ensured. For Innocent Drinks, this can be quite helpful.
 This method must provide the required help to the managers so that they are able to
maximize the profits which they earn through these orders. In Innocent Drinks, help can
be provided to the managers through this.
Price optimization system- In this method, the firms are required to properly optimize
the prices which they are charging by forecasting what may happen in the future time period
(Johnstone, 2018). In this way the management of Innocent Drinks will be able to decide the
prices which they can charge and thus this can help them to be able to achieve the goals and
objectives.
2