Management Accounting: Planning Tools and Financial Strategies

This report delves into the role of management accounting in addressing an organization's financial challenges, using Innocent drinks as a case study. It covers essential principles like accounting management systems, reporting structures, and costing methods. The report examines various management accounting techniques, including inventory management, price optimization, job costing, and cost accounting systems. It evaluates the benefits and applications of these systems, highlighting their importance in controlling expenses and enhancing financial performance. Furthermore, the report analyzes different planning tools such as budgeting and budgetary control, discussing their advantages and disadvantages in managing financial resources and achieving sustainable success. The document concludes by emphasizing the importance of proactive financial strategies and the correct application of accounting methodologies to overcome financial issues and contribute to organizational growth.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................4
Task 1...........................................................................................................................................................4
P1 Management accounting and essential requirement of different types of management accounting
.................................................................................................................................................................4
P2 Different methods uses in management accounting..........................................................................5
M1 Benefits of management accounting system and their application ..................................................6
D1 Evaluation of various system and reports integrated with organisation process ..............................7
Task 2...........................................................................................................................................................8
P3 Cost calculation using appropriate techniques of analyses to prepare income..................................8
Task 3.........................................................................................................................................................10
P4 Advantages and disadvantages of different planning tools..............................................................10
M3 Uses of different planning tools and their application ....................................................................13
Task 4 ........................................................................................................................................................13
P5 How organizations are using accounting system to respond financial problems..............................13
M4 How management accounting can lead organisation to sustainable success..................................16
D3. Evaluation of the ways planning tools respond appropriately to solve financial problems as to lead
sustainable success................................................................................................................................16
CONCLUSION.............................................................................................................................................17
REFERENCES..............................................................................................................................................18

INTRODUCTION
Management accounting, which is also commonly known as managerial accounting, is a
method that deals with financial data collection and involves authentic leadership of this detail.
This is used for strategic planning and decision-making by the inner managers and other
stakeholders. This study focused on the crucial role of management accounting in addressing an
organization's economic challenges (Bedford, 2015). This report based on the Innocent drinks
which is manufacturing company and deal into ice cream and juices. The study covers principles
such as accounting management systems, reporting structures, and costing methods that are
being used even more in the implementation of management documents. This also requires
management techniques with their strengths and budget management limitations. Furthermore,
financial issues that are overcome using processes and correct accounting methodology are
addressed so that enterprise can contribute to measurable development.
Task 1
P1 Management accounting and essential requirement of different types of management
accounting
In present period, management accounting has grown over time and its principles allow the
internally and externally stockholder to gain the valuable information about the business's results
within a year. As it is a structured method of capturing and retaining useful knowledge regarding
firm's success over brief amount of time.
Inventory management system: Inventory management system is a type of system that
monitors stock in factories and also checks the accessibility of raw resources, properties and so
on. This program is very beneficial to companies of all kinds, particularly those engaged in
designing. That is why it monitors the quality of material product as it goes into the
manufacturing system and monitors the commodity until it is sold. In summary it can be assumed
that this program assists in the control of the distribution chain. Innocent drink implements this
stock control program that will be of benefit to them as it solves the supply management issue.
Price optimization system: Price management program allows an enterprise to establish a
price range that is appropriate for both business and consumers alike. It includes of different
techniques that help to take into account different demand for goods and services by amount of

potential clients. The program makes it simple for the business to fix rates. Innocent drink senior
management uses this tool when identifying specific rates. This program will assist the industry
in setting a price that will help achieve the priorities and goals of the firm. This can also enable
ABC ltd gain a competitive edge across compared to the standard.
Job costing system: Job costing system presents a formula for measuring the unit cost for
each task. Within these organizations, that generate various kinds of products and services, this
sort of program is necessary. For such companies, the value of the system of every other item is
measured separately and if the variable cost per unit is large, it just aims to establish appropriate
cost management techniques. Innocent drinks take effective measures and can verify the price of
the component of every one of the goods (Brewer, Garrison and Noreen, 2015).
Cost accounting system: Cost accounting system provides executives with full expense
details that let firms develop strategic planning. This method operates in a similar way, first
tracking the cost in manufacturing, then evaluating it and allocating it to another item, and if the
risk is lower, however this system offers guidance to the highest price control strategy. This
system is used by Innocent drinks in cost control since this system allows a thorough cost
comparison after development.
P2 Different methods uses in management accounting
Accounting reports from the management are beneficial in preparation, decision taking
and measuring progress. Based on these documents several major decisions are made. These
documents are continually compiled throughout an accounting cycle. There have been some
specific records that are as follows:
Performance report: It offers a snapshot of the company's core results and also an
overview of every other individual employee results at the end of a specified time span.
Evaluating each staff member's output is very important to make sure potential association's
development and success. The study is useful in the early identification of defects if there would
be any time remaining with the client in the operation of the organization for appropriate action.
Innocent Drink prepares performance reports for the entire company and also for growing
individual in a quick and timely manner changed organizational learning and effectiveness
(Smith, 2015).

Budget report: Budget report is a form of document drawn up for internal purposes.
Within this report on the framework of these benchmarks there have been some defined core
principles which contrast the current outcomes with predicted performance. This report mainly
seeks to evaluate results. Each study contains an estimate of a single project's revenue or
expenditures and is intended for a limited time period. It is necessary to note that this study is
composed of financial information only. Innocent drinks reports on the budget to calculate the
economic results and to assist in the function as per the document.
Accounts receivable agin report: The study is usually prepared for those companies
who make almost all of their credit card purchases. When a product requires a payment
ecosystem with an entity, then the agreement will be published in this report by the entity.
Generally this study assists in determining the business's financial accounts. Use this study at
Innocent drink. This will make the organization confirm how often cash significantly benefited.
This will also contribute to making business cash flow as it is linked to obtaining cash
(Brustbauer, 2016).
Cost managerial accounting report: Cost Management Accounting Report is a study
that compares gross manufacturing costs to income received after net sales. The study covers all
forms of manufacturing costs such as price of goods, labor costs, cost of energy, price of labeling
and branding, etc. It also allows sum of all costs and measures sales volume number with price
since pricing all goods. It demonstrates not just whether income is gained. When sales quantity
seems more than price then it should be benefit and if cost is lower than sales quantity then it
will be client loss. This study is used by Innocent drinks to assess income and expenses.
M1 Benefits of management accounting system and their application
Innocent drink's supervisor implements various frameworks such that maximum
outcomes can be obtained for the company that promotes potential market development and
expansion. Every management accounting system has important benefits, which are described
below:
System Benefits
Cost accounting system  It helps executives to analyze and monitor the total cost
associated manufacturing products within business.

 It also helps organizations in assessing accurate selling
quantities for goods.
Inventory management system  Even with support inventory management team are able
to strengthen productivity and profitability of company
by retaining inventory.
 This program help to clusters amount of clear details of
stock because then manufacturing process keeps
happening (Quattrone, 2016).
Job costing system  With the help of this program administrators assess the
success of individual research performed inside an
entity.
 It provides comprehensive proof of cost including such
wages and expenditures that are included in particular
job in Innocent drinks.
Price optimisation system  This method allows an organization to set appropriate
cost of goods such that business can achieve benefit in
potential
 The pricing system help to business to broaden its target
market by offering right quality at reasonable cost.
D1 Evaluation of various system and reports integrated with organisation process
It has been analyzed according to the above mentioned reports and system and their
advantages which accounting report and system are quite important with each market
organization to develop their company and create public reputation. Because those report and
program benefit to documents and broaden company and increase income within a particular
year. All critical program and reports provides function content to control expense, overall value
owned by lenders and real or existing economic condition and position of business. Supervisor of
Innocent drinks uses cash budget in there managerial cycle as it is useful in estimating entire

amount, account receivable reports allow the management to reinforce the credit strategy and
gathering information (Granlund and Lukka, 2017).
Task 2
P3 Cost calculation using appropriate techniques of analyses to prepare income
Absorption costing: In this approach all fixed costs are known as commodity costs in
relation to variable costs. This excellent illustration and equal cost of each commodity and hence
more obviously demonstrates the absorption of all costs such as level of manufacture, cost of raw
materials, etc. Financial statements of Innocent Drink business can be seen here for deeper
understanding of this process through using absorption costing tool.
Marginal costing: According to this methodology the whole cost improves in
manufacturing of additional unit cost of production. Through the appropriate assessing of
production revenue is to decide the greatest decision for a business organization that help to
accomplish the full benefit. Marginal costing is a monetary system by which extendable payment
are convicted to cost items and the total fixed elements to the invention describes is engraved off
during filled against both the feedback for such a time frame (Otley, 2016).

Task 3
P4 Advantages and disadvantages of different planning tools
Budget: This is well-defined calculation of expenditures and income for a comprehensive
period of time span. A financial plan is generated by an establishment's managers and
administrators by using previously gathered figures and current business drifts. This is an
articulated report that encourages for executing managerial occurrences in a suitable effort to
accomplish the planned goal.
Budgetary control: Budgetary control is alluded as the procedure via which institutions
organize spending plan for long term and start comparing that spending plan from current ability
in attempt to discover out the differences, since no occur. Through contrasting the expenses and
revenues with real ones, the leadership of an organization help to find out differences and
therefore suggest proactive strictly increasing with little pause (Hall, 2016).
Planning tools for budgetary control: Each company uses many planning resources to
manage its activity and functioning. The main purpose of using various planning tool for
budgetary controls is to lower the number of resources consumption and achieve cost potency.
Innocent drinks also makes use of make and receive preparation devices, some of which are
discussed as below their advantages and inconveniences:
Master budget: A master budget integrates all of the lower budgets inside the company
and transforms everything into one annual budget, so they can get a detailed summary of your
company's expenditures. The master budget incorporates the HR, advertising, and all other
departmental budgets to generate an aggregate cohesive budget. Typically, firms generate a
master budget annually. The one year budget preparation document covers all other schedules; it
corresponds with the financial period and could be divided into divisions that further, into
periods
Advantage:
 The master budget is deemed among the most essential planning methods for an
organisation. When preparing, top-level management addresses the overall performance

and the assets and liabilities performance of a company. Of this, the financial plan has
been used.
 Master budget tests the efficiency of the company as a whole. It assists in different
departments monitoring and sets up individual departments responsibility. It improves the
effectiveness.
Disadvantage:
 The division series staff is pushed for the accomplishment of goals despite it having
logistical problems in obtaining the very same.
 The master budget is not simple to alter. To add, adjust or delete minor adjustment needs
a number of measures in the whole budget (Kerr, Rouse and de Villiers, 2015).
Zero based budget: These types of budgets primarily allows an organization to explain
all expenditures and authorized it with each particular model to business. The principles
essentially start from either a Zero base such that each market feature of Innocent drinks can be
analyzed for its expenses and requires. Effectively, the administration must start from the
beginning and examine at every project as well as every occurrence to decide if it is worth
investing the corporation's money. The company also will establish out spending plan targets.
Advantage:
• It tends to boost the extreme weather of workers at each and every stage since great deal of
work is needed from each stage to fulfill expenditures.
• With all the help of ZBB corporation is capable of bringing efficiency of the business climate.
Disadvantage:
• The key downside is to emphasize short term gains to the detriment of long term objectives.
• It also gives demoralized to employee as budgetary control requires longer energy.
Capital budget: It is described as the method which is used by corporation in order to
decide that potential acquisitions of current cost this should approve and which can only be