Management Accounting and Systems: Analysis and Techniques

Management
Accounting

INTRODUCTION
Management accounting is a technique which is used for generating internal reports and
records so that information of organisational performance could be shared with internal
stakeholders. It helps to formulate decisions for future so that all the predetermined goals could
be accomplished. There are various benefits of it to all the entities and some of them are it
facilitates future decision making, helps to analyse current position of business etc. In order to
attain success, all the entities are required to assure that they are paying attention towards
formulating management records (Armitage, Webb and Glynn, 2016). It can help to reduce the
possibility of inappropriate decisions and strategies. Present report is based upon Innocent
Drinks which is a client of AJ and Sons an accounting and consulting firms. The trainee
accountant of the enterprise is asked by the client to generate management report. Present report
is focused with analysis of different elements in context of management accounting. These are
analysis of management accounting, some of the reports and systems that are related to it,
different techniques etc. Additionally, different types of planning tools applied in the procedure
of budgetary control along with comparison of companies on the basis of use of management
accounting to respond finance related problems is also discussed in the report.
TASK 1
P1 Definition of management accounting and description of essential requirements of various
types of systems used in it
Management accounting: It is a process which is followed by managers for analysing,
controlling and monitoring the progress of business. It helps to formulate strategic decisions for
future. In Innocent Drinks it is used by the management for making sure that all the decisions
which were taken by them are able to provide adverse or favourable results.
Management accounting is the procedure which is followed by the businesses for the
purpose of evaluating the reports that are generated by the managers for sharing detailed
information of operations with internal stakeholders. With the help of it, strategies are developed
by the managers for meeting predetermined business objectives.
The process which is focused by the management teams of businesses for controlling,
evaluating, determining and monitoring actual performance of business is known as management
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accounting. It is used by the senior executives of companies for the purpose of making sure that
they are dealing with all the organisational issues in systematic manner or not.
Management accounting system: Most of the entities use a specific framework for
assessing business performance and manage all the processes in organised way and it is called
management accounting system. While planning to attain growth it is very important for all
organisations such as Innocent Drinks to make sure that they are using different types of them so
that effective strategies could be formed (Caplan, 2016). There are various types of them which
are used in the entity. Some of them are discussed below:
 Price optimisation system: It is mainly focused with identification of best prices for all
the products that are sold by the enterprise to the customers. It is used in Innocent Drinks
for making sure that it is setting right price for the items that are sold by it to its
customers. The main requirement of this system for the company is that it can help the
managers to determine the price which will be able to facilitate the enterprise to meet the
predetermined goals such as customer satisfaction, higher profits etc.
 Inventory management system: In all the entities it is used to analyse that the goods
that are used for business activities is able to make items that are demanded by the
clients. There are three main types of it which are LIFO, FIFO and AVCO. The
companies where LIFO is used, managers use the recently purchased goods to make the
final product. When FIFO is used by the organisations then they use the earlier received
inventory to produce items (da Silva Nogueira and Jorge, 2017). If AVCO is used by the
enterprises then stock is utilised for carrying out business according to the average cost of
them. From all of them, Innocent Drinks is using FIFO method as it is a smoothies and
juice seller and if it will not use the previously bought goods for business then they may
become expired. One of the major uses of it for the entity is that it can guide to make sure
that sufficient stock is kept by the company to meet the requirements of customers.
 Cost accounting system: It is applied in most of the business entities to record the
information of expenses which are taking place because of the operational activities. It is
mainly used to make sure that the causes of all the expenses are identified. In Innocent
Drinks it is used by the managers for the purpose of keeping details information of all the
activities and costs that are taking place because of them. It is essentially required for the
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