Accounting Management: Principles, Systems, and Financial Planning

This report provides a comprehensive overview of management accounting principles, systems, and their application within an organization, specifically focusing on Associated British Foods (ABF). It explores the role of management accounting in strategic decision-making, resource allocation, and performance evaluation. The report details various management accounting systems, including inventory management, job costing, price optimization, and cost accounting, highlighting their benefits and drawbacks. Different types of management accounting reports are described, emphasizing their importance in maintaining accuracy and relevance in decision-making. A practical cost analysis technique is presented, comparing absorption and marginal costing methods. Furthermore, the integration of management accounting within an organization is discussed, emphasizing its role in enhancing competitiveness and facilitating effective pricing strategies. The report also outlines key management accounting functions, such as data provision, analysis, and policy formation, and concludes with recommendations for sustainable processing and ways to address financial problems. Desklib offers a range of similar resources for students.

ACCOUNTING
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
PART 1............................................................................................................................................3
Explaining the principles of management accounting ...............................................................3
Explaining role of management accounting and its system ......................................................4
Describing different types of Management accounting report....................................................6
Presenting calculation of cost analysis technique........................................................................6
Explaining the management accounting integration within organization...................................9
Describing management accounting functions.........................................................................10
PART 2.........................................................................................................................................10
Explaining three planning tools along with its advantages and disadvantages........................10
Describing the ways in which firm can deal with financial problems......................................13
CONCLUSION..............................................................................................................................14
Recommendation......................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is concerned with the summarizing, analysing and
communicating & interpreting the financial information in effective manner. In the current era,
management accounting play important role in gaining competitiveness by gaining crucial
financial information for decision making. The current report is based on the Associated British
Food which operates in manufacturing organization and focuses on food processing & retailing.
Present report is based on providing information regarding principles & role of management
accounting, Management accounting systems and reports will be included in present report. The
practical example regarding cost analysing technique will be involved in eh current case study.
Integration of management accounting with organization and benefits of functions will be
emphasized in present report. It will give emphasis on three planning tools and its advantages
& disadvantages, ways to deal with financial problems and recommendations to gets sustainable
processing will be included.
MAIN BODY
PART 1
Explaining the principles of management accounting
Management accounting is concerned with measuring and interpreting crucial financial
information for taking strategic decision. Management accounting comprises few principles
which play crucial role in ensuring accuracy and smooth functioning of organisation. These
focuses on designing & compiling, use of return on investment, integration,utilization of
resources, etc.
 Influence is associated with communication which reflects insights about strengths so
that decision making procedure can be exerted effectively (Mahmoudian and et.al.,
2021). Sound communication and critical information makes integrated procedure.
 Relevance is one of the crucial management accounting principle that gives valuable
information that gives ability to the organization to be in position to have strategic
decision. It is associated with providing data regarding past, present, future events by
including all external & internal through focusing on all financial and non monetary
data set.

 Management accounting links organizational procedure with its core model and makes
possible to accomplish the larger number of opportunities so that higher value principle
can be implemented.
 Credibility principle helps in making the decision procedure that a permits entity to
develop the significant proceeding of ideals, governance and interpersonal commitment.
It provides assistance in deriving proper trustworthiness and credibility so that
stakeholders can be attracted. These are are principles of management accounting.
Explaining role of management accounting and its system
Management Accounting (MA) play crucial role in providing crucial information to
organization so that proper decision can be formulated. There are ways in which MA can can
contribute significantly in achieving objectives of Associated British Foods (ABF). There are
various reasons for which organization can execute MA into operational practices as it allows to
develop short as well long term planning, deriving crucial information for decision making,
allocating and optimization of resources, etc. Management accounting contribute in controlling
the irrelevant aspects via identifying and eliminating them so that proper efficiency of
manufacturing procedure can be derived (Weetman, 2019). In current era, MA plays significant
role in sharing relevant data so that strategic decision can be made. Financial accounting is
used to track operation so that knowledge regrading financial health can be obtained whereas in
MA both monetary and non money factor are included.
Management accounting system can be sued by Associated British food to ensure that
all crucial aspects are involved into decision making procedure. There are four types of of
management accounting system which involves job costing, inventory management, cost
accounting and price optimization.
Different types of Management Accounting Systems (MAS)
Inventory Management System (IMS) helps in assuring that all inputs, work in process
and finished goods are managed and control effectively. Associated British food (ABF) can sue
this system of management accounting to ensure that it can meet market forces such as demand
and supply. This system contributes in ensuring that manufacturing procedure is conducted
effectively so that customers demand can be met.
Job Costing System (JCS) is useful in assessing the cost associated with each task so
that its share in achieving success can be identified (Allain, Lemaire and Lux, 2021). It is

useful in recognising the non significant aspects so that proper determination of price can be
exerted effectively. ABF can make proper ascertainment of profit margin to get higher
substantiality.
Price Optimization System (POS) of MA aid in determining the customers response at
changing price level in turn suitable strategy can be implemented. ABF can use this to
investigate that its customer are satisfied with offered price or not.
Cost Accounting System (CAS) provides proper ability to ascertain the proper cost so
that profitability analysis, inventory valuation and control can be exerted by Associated British
Food. It will allow firm to decline cost and estimate expenditures so that proper utilization of
available funds can become possible (Cost accounting system, 2021).
Benefits of MAS
Pros of IMS
ABF can derive the the different types of advantages by implementing IMS in
manufacturing process such as better inventory accuracy which allows to get higher efficiency.
Other benefits involves cost savings, avoiding stock outs and excess, decline risk of overselling,
better relationship with suppliers, higher productivity & profitability and larger customer
experience.
Benefits of JCS
It provides basis for estimating cost of similar segments of business which largely help
in making proper evaluation of cost (Maheshwari, Maheshwari and Maheshwari, 2021).
Associated British Food ascertain related expenditure at any stage, comparison can be made
with previous to identify lacking areas so that improvement can be conducted.
Advantages of POS
Associated British food can highly get benefited by conducting this step into its
operational practices. It involves time saving, market transparency, scalability and full control
over all functional areas which allows to get customers satisfaction.
Merits of CAS
The specified organization can be use this system to ascertain cost, measure and improve
efficiency, identifying profitable activities, fixation of price, cost & inventory control , etc. this
gives higher effective by reducing cost so that focus on crucial factors can be provided.

Describing different types of Management accounting report
Information should be relevant and reliable presented by these management accounting
reports so that higher accuracy & relevancy in decision making can be maintained. It should
maintain timeliness, comparability and understandability quality features so that higher ability
to form decision can be obtained by both internal s well external stakeholders.
There are variety kinds of reports which provides assistance in formulating crucial
decision. Associated British Food can use these report to achieve the ability to formulate
decision which can contribute in having proper road map for attaining success.
 Budget reports are usually taken into procedure as it allows to do critical in measuring
company performance so that meeting unforeseen circumstances can become possible.
ABF can prepare budget report so that proper conducting can be done.
 Account Receivables ageing report helps in analysing credit related policies of ABF so
that efficiency of collecting funds from customers can be evaluated. It becomes possible
to analyse the lacking areas so that suitable action can be implemented.
 Performance report are very useful in analysing how effective employees are
contributing their efforts (Types of management accounting reports, 2020). It makes
possible to identify crucial aspects that are declining potential of employees as well
comparing with earlier time can be conducted.
 Cost managerial report computes the cost of product manufactured by taking inputs
into practice (Urakova, 2021). Profit margin determination can be effectively done by
assessing the particular report into process. Other managerial reports involves
competitors analysis, order information, and project reports which provides significant
knowledge.
Presenting calculation of cost analysis technique
Company has the following transaction for the month September which are as follows:
Particulars ( per unit ) Amount $
Selling price 50
Direct material 8
Direct material 5
Variable production overhead 3

Production unit 500
Selling of product 300
Fixed production overhead for 400 units 4000
Fixed selling expenses 4000
Fixed administration 2000
variable sales commission 5.00%
Working note 1:calculation of production
cost per unit
Direct material 8
Direct material 5
Variable production overhead 3
Fixed production overhead 10
Total production cost 26
Calculation of variable cost
Direct material 8
Direct material 5
Variable production overhead 3
total VC per unit 16
Working note 2: For absorption for marginal

Opening inventory 0 0
Production 13000 8000
Closing inventory 5200 3200
Fixed production overhead
Fixed cost 4000
FOH absorbed (500*10) 5000
Over absorbed fixed OH 1000
Fixed production overhead
Fixed cost 4000
FOH absorbed (500*10) 5000
Over absorbed fixed OH 1000
Income statement as per the absorption costing technique
It is the method which takes all the cost incurred on product like direct & indirect expenses.
From the below example it can understand properly.
Particulars Amount $ Amount $
Sales ( Revenue) 15000
Less: COGS
Opening inventory 0
Production 13000
Closing inventory 5200 7800
Over absorbed fixed OH 1000
Gross profit 8200
Less: Indirect expenses

Fixed selling expenses 4000
Fixed administration 2000
variable sales commission 750 6750
Net profit 1450
Income statement as per the marginal costing
It is the technique where variable cost is charged to units while fixed cost fro period is
completely written off (Azudin and Mansor, 2018).
Particulars Amount $ Amount $
Sales ( Revenue) 15000
Less: COGS
Opening inventory 0
Production 8000
Closing inventory 3200 4800
variable sales commission 750
Contribution 9450
Less:
Fixed selling expenses 4000
Fixed administration 2000
Fixed production 4000 10000
profit -550
Reconciliation of Profit figures

Profit under absorption 1450
difference in units of inventory* fixed
production overhead 2000
Profit under marginal -550
From the above table it can be articulated that for the month September profitability
from absorption and marginal are $1450 and $(550) respectively. On the basis of analysis it can
be articulated that abortion technique is more relevant than marginal as provides proper
information regarding production and variable. There is difference in fixed overhead which is
leading to provide negative figure profit under marginal The reason behind difference is that
company is selling less product as compared to units produced.
Explaining the management accounting integration within organization
MA play significant role in providing crucial approach for decision making as it gives
larger emphasis on inclining value. This pay attention on continuous improvement in company
through development and integration of cost management system. It allows to decline
production cost through having proper knowledge regarding the market forces through paying
attention on all functional area (Massicotte and Henri, 2020). Sales segment allows it to get the
appropriate action so that key insights about external factors can be derived. Finance function
with help of management accounting become able to recognise, allocate and optimize monetary
resources so that accomplishing objectives can become possible.
Competitiveness with help of MA system through considering different varieties of
report which gives ability to compare current performance with previous. Identifying lacking
areas through comparing previous with current helps in developing crucial improvement in
organization. It becomes possible to have significant pricing technique which become possible
by having price optimization in ABF. On the basis of this, it can be identified that reports and
system of management accounting aids in having integration within ABF.

Describing management accounting functions
There are various functions of MA which includes providing and modifying data,
communicating & analysing for decision making. The most important function of MA which
can be play in Associated British Foods is facilitating control through gathering qualitative
information. Other function s comprises planning, organizing, decision making, coordinating
and controlling so that objectives of business can be achieved (Besuglov and Crasselt, 2021).
Policy formation is one of the significant function that can be played by MA in ABF.
Coordinating and making reports with provided information are another functions of MA.
Various benefits can be derived which includes coordination, integration, accuracy, efficiency,
etc.
From the above report it can be concluded that management accounting and its system
play important role in attaining efficiency in business. There are different kinds of management
accounting reports. Cost analysis techniques like marginal & absorption helps in assessing
crucial aspects so that decision can be made.
PART 2
Explaining three planning tools along with its advantages and disadvantages
Activity based budgeting
It is concerned with recording, summarizing and analysing activities that lead to cost
fro the company. Associated British food can use this particular technique of planning fro having
ability to determine crucial activities which increases cost of firm.
Advantages Disadvantages
 It helps in evaluating the competitive
edge for eliminating existing
bottlenecks.
 There is higher consumption of
resources which involved larger
expenditure.
 This gives ability to improves
relationship by giving emphasis on
completing crucial commitments
made by ABF with its suppliers and
vendors
 It requires understanding as suitable
for short term only.

Zero based budgeting
It is concerned with preparing the budget from the scratch so that coordinating with
changing circumstances become possible. Associated British Food can can take this into
consideration as it provides various benefits as being part of alternative budgeting technique.
Benefits Drawbacks
 Associated British Foods can benefited
by applying zero based budgeting as it
will help in achieving accuracy &
efficiency.
 This particular procedure may be
expensive as it requires high level of
manpower which can be the biggest
drawback ABF can derived.
 There is possibilities of declining
redundant activities which can be
helpful in making decision and
reducing cost.
 Lack of expertise can be obtained by
implementing zero based budgeting
planning tool.
Capital budgeting
It is one of the crucial planning tool which can be used to determine organization's long
term investment. This largely share in achieving crucial information regarding investment
tactics so that proper managing can become possible. It can give certain benefits and drawbacks
Benefits Limitation
 Associated British Food can get
understanding regarding risk and its
effects so that proper evaluation can be
conducted.
 Higher uncertainty can lead to execute
wrong applicability which may
adversely influence the ABF growth.
 Adequate control over the expenditure
can become possible by applying this
technique.
 It is expensive as availability of
skilled employees is not easy.
PEST Analysis