Table of Contents INTRODUCTION..........................................................................................................................3 TASK 1............................................................................................................................................3 P1 Management accounting and essential requirements of various management accounting systems........................................................................................................................................3 P2 Various methods used for management accounting reporting..............................................4 M1 Benefits of management accounting systems.......................................................................6 TASK 2............................................................................................................................................7 P3 Calculation of cost and income statement using absorption and marginal costing...............7 M2Applicationofmanagementaccountingtechniquesandproductionofappropriate financial reporting documents...................................................................................................10 TASK 3..........................................................................................................................................10 P4 Advantages and disadvantages of various planning tools....................................................10 M3 Analysation of use of various planning tools and their application on budget...................11 TASK 4..........................................................................................................................................11 P5 Ways in which organisations adopt management accounting systems to manage financial problems....................................................................................................................................11 M4 Ways in which management accounting helps in reducing financial problems................13 CONCLUSION.............................................................................................................................14 REFERENCES.............................................................................................................................15
INTRODUCTION Management accounting refers to a function that contains a number of different tasks and activities. Collection of data, analysing the data and reporting the financial information that is obtained from various business operationsare various activities included in it. Implication of managementaccountingcanbeseenoninternalaswellasexternalfunctioningofan organisation(Fleischman and McLean, 2020). The following report takes into consideration Innocent Drinks that is a medium enterprise manufacturing and selling smoothies and juices. In current pandemic of COVID 19 the business is facing some losses. The following report includes various ways in which business can make better use of the financial resources that are available with them. Various ways to increase the financial resources are also discussed in report. Along with it calculation of cost with different techniques, benefits and drawbacks of budgetary control and different management accounting systems are also discussed. TASK 1 P1 Management accounting and essential requirements of various management accounting systems AsdescribedbyInstituteofManagementAccounts,Managementaccountingis incorporated with functions such as planning, analysing as well as creation of financial reports that are used by management to gain assistance while in process of effectively implementing different organisational strategies. There are a number of different functions included in management accounting. The Key functions of management accounting are: Providing data:Management Accounting incorporates of all the information that is related to a number of different functions of business activities. The information available helps all other functions of business to run smoothly. They help different managers of all different functions in organisations to plan, control and then take decisions. Analysing and interpreting data:An analysis is conducted on the data collected in order to provide relevant statements so that decision making can be supported with the help of it. Methods for Communication:The information which is gathered and in management accounting and analysed is then required to be communicated efficiently in order to make sure that every one in the organisation is effectively working towards a common goal and objective.
Facilitating control:ManagementAccounting also helpsis successfully managing various expenditure of business in order to control all of those expenses which are not necessary and can be avoided or controlled up to to maximum limit possible(Hutaibat and Alhatabat, 2019). There are a number of different accounting systems available which can be effectively used by organisations to manage the functions of their accounting. Some of such common accounting systems used by Innocent drinks are mentioned below: Financial accounting system:The main objective of this system is to maintain financial accounts in order to collect the feasible data of various different transactions which consists of debit and credit of account balances in order to specifically create income statement, profit and loss, cash flows and other financial statements that are required. Tax accounting:This system majorly focuses on managing taxes. All the rules and regulations in this are governed with the help of an Internal Revenue Code while preparing for tax returns. The tax accounting system is very helpful in making calculations in order to deal with various government interventions. System of Cost accounting:This is a system that can be effectively used by Innocent drinks in order to find out an estimated cost of various products that will be produced by the company. This also helps in deciding the profits margins of product and maintaining it for a longer period of time. It will also enable business in different stages of production in order to efficiently manage their wastes. System of Management accounting:System of management accounting is helpful in measuring and evaluating processes in order to timely communicate various information to managers in an organisation. The reports of organisation are also prepared based upon various financialactivities.ThiswillallowInnocentdrinkstomanagealltheirexpenditures appropriately. P2 Various methods used for management accounting reporting Management accounting reporting is referred to a process in which preparation of different reports that is to be used by managers in future for decision-making process takes place. Below mentioned are various methods of management accounting reporting: Inventory Reports:In the following report various information about inventory is provided in order to make sure that inventory availability is matching the demands of customers.
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In Innocent drinks this report willconsist of various information including overhead cost per unit, labour cost as well as whatever wastage have formed the part of inventory. This is also helping organisation to effectively reduce its wastages and any burden that is put upon organisation due to improper management of inventory(Geddes, 2020). Job cost Report:This is a report that is used by organisations in order to identify various expenses that are incurred by organisation. This also helps an organisation to effectively increase the financial efficiency of organisation. With increasing efficiency in each job the overall result of project can also be made more profitable. The evaluation of wastage that is conducted by organisation can be managed in order to control overall cost. Account Ageing Reports:In the following report all the details regarding credit transaction is maintained. This detail is then used by managers later on in order to analyse the amount that is required to be realised by their debtors. Innocent drinks can effectively use this report in order to develop collection policy and reduce total bad debts of organisation. Liquidity in organisations can also be managed with its help. Different objectives of financial statement P&L accounts:This is used to understand the criteria of net profit in organisation. In this at the end of year profit or loss that business have to face is derived. Cash flow statement:In this statement the position of cash in business is mentioned in detail along with all the inflows and outflows of cash. Cost of products sold:In this information related to cost of the products that are sold in market are done. Balance Sheet:This is a financial system in which liabilities and assets are evaluated at the end of financial year. Types of system of management accounting Price Optimization:In this system determination of prices as per the product of company is done according to the demand that is fluctuating in market place. In innocent drinks this is used in order to tailor the prices of product as per the demand of customers(Matsuoka, 2020). In this various techniques such as initial pricing, discount pricing, promotional pricing etc. are used. System of inventory management:In this process various costs are maintained with the use of technological processes. The changes can take place within different processes of production in it. Innocent drinks can use it to reduce cost and also make optimum use of resources.
Job costing system:In this system determination of price of all the individual product of an organisation is done. It will effectively help Innocent drinks to keep record of expenditures based on units costs. M1 Benefits of management accounting systems Systemsofmanagement Accounting BenefitsApplication on Organisation (Innocent Drinks) Cost AccountingCostaccountingishelpful while policies and procedures tomanageoverallcosts (material,labouretc.)are calculated. Innocentdrinkusesthis system to calculate fixed cost perunit.(perbottleof smoothie) Inventory systematicInventory system can help to reducethestoragecostsof inventory. Maintenanceofstockin innocent drinks is organised as per the expected demand. Thisalsomakesraw materialsavailableasper demand. Job CostingJob costing is effectively used todetermineprofitof individual jobs or projects. Innocentdrinksusesjob costing to calculate cost of different products. Price OptimizationDeterminationofpricesof products based on demand of customerscanbecalculated which will help in maximizing profits(Taschnerand Charifzadeh, 2020). Innocentdrinkusesprice optimization in order to keep acheckontheirpricesas well as costs.
TASK 2 P3 Calculation of cost and income statement using absorption and marginal costing Cost refers to the total amount that is used to produce any product which is required in monetary terms. In order to calculate costs a number of resources are used which includes raw materials, opportunity cost, labour and so on(Pasch, 2019). Various methods such as marginal costing and absorption costing are used to prepare income statement from the data gathered. Marginal Costing:Marginal costing is an efficient technique to understand variable as well as marginal cost that have occurred in production of one additional unit of product. When producing in high quantity variable cost might change total cost as well. Whenever there is increase in units for production changes can be reflected on marginal costing. Absorption Costing:This is a method used to calculate the amount for production of one unit of product. It takes into account bot variable and fixed costs. Product cost is directly associated with accumulated cost in this method of costing. According to the figures provided for Innocent drinks below mentioned are calculation of absorption andmarginalcosting.Break evenpoint isalsousedin order to discussthe circumstance when no profit and no loss situation fro innocent drinks arises.
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M2 Application of management accounting techniques and production of appropriate financial reporting documents Various accounting techniques can be used to maintain operations in financial reports in order to make sure that position of organisation in market is analysed to accommodate further decisions that are to be taken in organisation. When considering costing as a tool marginal costing can be used as compared to absorption costing as it takes into account both fixed and variable cost for calculating profits(Souza and Araujo, 2020). While calculating total cost of production this technique helps the manager to take various decisions. TASK 3 P4 Advantages and disadvantages of various planning tools Budget refers to a statement that contains various estimated future amount of revenues, liabilities, expenditures etc. in an organisation which is also for a specific period of time. It can be helpful for internal management and decision making within an organisation. Performance management is also made possible with the help of a budget. Budgetary control on the other hand refers to determination of actual sales as well as other figures for a pre determined period in an organisation. Various tools used in the process of planning budget are mentioned below: Flexible Budgets:This is a budget that is created and used to imply various controls over an organisation. It helps in effectively controlling various volumes as well as activities in the organisation according to their requirements and objectives. Innocent drinks can effectively use this method in order to keep a regular check upon all the figures of their revenues.ď‚·Benefits:This is beneficial for organisation as it provides the requirement of material and other resources for targetted sales volume(Dressler and Rachfall, 2020).This also allows possibilities to make required changes as per the requirement or changes in demand. In innocent drink it supports organisation to facilitate and understand the required quantity to increase their profits. ď‚·Limitations:There are some limitations attached to it too. They require competent and skilled staff in order to make sure that the employees are equipped enough to deal with the changes that is required to be brought in. the cost of flexible budget to an organisation
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is also higher than that of a regular budget. Also if certain financial disclosures are not made in various situation it could lead to the entire budget lapsing. Master Budget:There are a number of different budgets of lower level included in a master budget. It can be said to be a divisional budget which is then added up to form a single budget in which various different functions of different departments are combined together. This budget consist of various features including financial planning, cash flows, a budgeted statement for profit and loss account and so on. Innocent drink also uses master budget which is prepared for a period of one financial year.ď‚·Benefits:This budget also provides information for owners and other stakeholders in a summarised manner. There ate reflection made of all the expenses and revenues relation to different functions and departments in the organisation. This critically analyses all these functions of different departments and creates budgets for each of them to solve problems with in those departments(Ertl and et. al., 2020). ď‚·Limitations:Making changes in master budget can be troublesome. However, due to dynamic environment and changing situations organisations need to make some changes in budgets so that decisions could by taken timely in different circumstances. Master budget bounds from making those alterations. M3 Analysation of use of various planning tools and their application on budget A number of planning tools are available to an organisation so that the best fit for their functions and activities can be chosen. A number of issues regarding duplication or overlapping of processes is also possible. Innocent drinks used master budget and flexible budget to deal with any such situation. This helps in dealing with changes without having any effect on the overall organisation. TASK 4 P5 Ways in which organisations adopt management accounting systems to manage financial problems Financial issues are related to problems that are caused in an organisation due to unavailability of various financial resources. These are common issues which are often the results of various defaults in plans, inadequate plans, misrepresentations which are usually made
by financial manager or any other employee in financial department. Financial issues commonly faced by organisations are mentioned below: High expenditures for promotion:promotional expenses refers to all those expenditures that are made by an organisation in order to make their target customers aware about the new product or service they are going to launch in market. This is cost incurred to communicate the product and service in target market. When taking Innocent drinks into consideration there are a number of product launched by company in regular routine which is to be communicated to all of their customers. Marketing department requires high budget so that they can advertise products via television, radio, newspaper and digital media. They also need to adopt various promotional activities such as providing free samples which might generate customers for company in future. Benchmarking:This is an efficient tool that determines the effects and objectives that will be based upon other competitors in industry. This approach provides competitive benefit to individuals. When taking Innocent drinks into consideration company might face some situation of losses and then they might require to set up various benchmarks which might help to determine a budget for each department. This will set a standard and help organisation in limiting their expenses. Financial Governance:It is an effective method used by organisation in order to collect financialinformationwhichwillfurtherassistindevelopingaccountingrequirements. Authentication of data is also devised with the help of it(Aureli and et. al., 2019).Future decisions are made based on these authentic data and all these activities are managed wellso that no delay in decision making occurs. Expansion:it is often possible that expansion plans of organisations are not resulting in profits for organisation. Even after financial investments businesses do not succeed. Therefore businesses are required to deal with such situation and invest smartly. Comparison of two organisations of same industry: BasisInnocent drinksMars drinks IntroductionTheproductsofinnocent drinksincludejuicesand smoothies. These are available in supermarkets, coffee shops and such stores. 90% shares of Mars drinks deals with coffee business. The company have its operations in a number of placesincludingUK,Japan, France, Canada and so on. The
company are acquired by Coca Cola. companyapproximately consists of a workforce of 900 employees. Financial issuesDuetolock-downwhichis causedduetopandemicof COVID-19peopleare avoidingeatingpackaged products which have resulted in downfall for company too. Companyisfacing complications in meeting their overalltargets.Theirprofits are differing from plan due to incompletion of targets. Managementaccounting system Company needs to efficiently use cost accounting system so thatdistributionofcost includingfixed,variableand manufacturingcanbedone. Thishelpsiscalculating profits as well as revenues of the organisation. Companyusesinventory managementsystem effectively to make sure that theyreducecarryingcost whichischargedupon inventorythatcompany posses. Tools usedCompany can effectively use toolssuchaspromotion, budget controls in order to deal withtheproblemsthat companyisfacinginthe present scenario. Companies can effectively set up benchmarks and focus on attainingthembymaking proper utilisation of resources and making strategies for the same. M4 Ways in which management accounting helps in reducing financial problems Financial management effectively helps an organisation in estimating and forecasting their budgets. When considering budgetary decisions operational data is used by management accounting in order to quickly determine the situation and take essential steps. There are a number of other standard metrics that include present value, net present value, internal rate or
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return and so on which helps in determining the actual amount of expenses organisations can make. Financial planning when conducted properly also helps in decision making process within an organisation. CONCLUSION The above report helps in concluding that there are a number of options present for businesses in the field of finance with the help of which they can effectively increase their productivity. Various tools of financial accounting will help management of a business to deal with the problems that are coming their way. The pandemic caused due to COVID -19 is one such external factor that has resulted in a number of businesses facing losses. This makes it necessary for businesses to manage various aspects of financials and work on it in order to run business smoothly in this crisis. This helps in concluding that financial management is a factor that helps businesses to make best use of resources available and find out various ways to manage resources.
REFERENCES Books and Journals Fleischman, R. and McLean, T., 2020. Management accounting: theory and practice. Routledge. Hutaibat, K. and Alhatabat, Z., 2019. Management accounting practices’ adoption in UK universities.Journal of Further and Higher Education, pp.1-15. Geddes,B.H.,2020.EmergingTechnologiesinManagementAccounting.Journalof Economics and Business,3(1). Matsuoka, K., 2020. Exploring the interface between management accounting and marketing: a literature review of customer accounting.Journal of Management Control, pp.1-52. Taschner, A. and Charifzadeh, M., 2020. Management accounting in supply chains–what we know and what we teach.Journal of Accounting & Organizational Change. Pasch, T., 2019. Organizational lifecycle and strategic management accounting.Journal of Accounting & Organizational Change. Souza, G.H.C. and de Araujo PhD, J.G., 2020. Roles and Attitudes in the Management AccountingProfession:AnInternationalStudy.ManagementAccounting Quarterly,21(3), pp.1-9. Dressler, S. and Rachfall, T., 2020. Improved Learning Performance Based on a Flipped Classroom Concept—A Case Study Based on the Course Introduction to Management Accounting for Business Engineers. InFlipped Classrooms with Diverse Learners(pp. 183-201). Springer, Singapore. Ertl, C. and et. al., 2020. Ensuring the Success of Management Accounting Change in IT DepartmentsofPublicOrganizations.InternationalJournalofServiceScience, Management, Engineering, and Technology (IJSSMET),11(1), pp.142-156. Aureli, S. and et. al., 2019. Traditional management accounting tools in SMEs’ network. Do they foster partner dialogue and business innovation?.Management Control.