Management Accounting Report: Strategies for EECL Growth and Finance

This report provides a comprehensive analysis of management accounting practices, specifically focusing on their application within EECL, a medium-sized manufacturing venture. The report begins with an introduction to management accounting, its core principles, and the essential requirements of management accounting systems, including cost accounting, price optimization, inventory management, and job order costing. It then explores various management accounting reporting methods such as budget reports, performance reports, and inventory management reports. The report further evaluates the benefits of these management accounting systems for EECL. The analysis extends to different costing techniques, including marginal and absorption costing, along with the advantages and disadvantages of budgetary control tools like flexible budgets, cash budgets, and purchase budgets. Finally, the report examines how organizations adapt management accounting systems to address financial problems and achieve sustainable success, supported by real-world examples.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1. Management accounting and essential requirements of management accounting systems................3
P2. Management Accounting Reports.....................................................................................................5
M1. Effective evaluation of vital benefits of explained MA-systems in case of EECL:..........................5
TASK 2..........................................................................................................................................................6
Calculation of cost by using different costing technique and methods of evaluation...............................6
TASK 3..........................................................................................................................................................8
Advantages and disadvantages of different types of planning tools used in Budgetary Control..............8
M2 Application of management accounting techniques to produce appropriate financial reporting
documents..............................................................................................................................................10
TASK 4........................................................................................................................................................10
P5. Comparison about the ways organizations adapt systems of management accounting for responding
problems associated with finance..........................................................................................................10
M4. Analysing how companies responds for financial problems and leading sustainable success........13
CONCLUSION.............................................................................................................................................13
REFERENCES..............................................................................................................................................14

INTRODUCTION
The term management accounting is used to characterize the structure of management
accounting, which can be described as a mechanism for providing financial reporting and
information to the management staff, primarily to assist in the judgment process. Consequently,
the strategic method of management accounting is used by the internal organizational employees,
which distinguishes it from financial accounting systems (de Lautour, 2019). To understand
various concepts of management accounting, EECL is taken. It is a medium sized manufacturing
venture. This research would look at a variety of topics, including managerial accounting and the
fundamental principles that distinguish different management accounting systems, and also
reporting methods and methodologies. Furthermore, the analysis report provides an overview of
the various financial forecasting methods as well as an assessment of how all of these
preparation mechanisms, as well as basic accounting processes, are used to address fiscal
problems. It also gives two examples of how major companies are using management-accounting
processes and structures to adapt to and address financial issues.
TASK 1
P1. Management accounting and essential requirements of management accounting systems.
Management Accounting: The implementation of experience and technical expertise in the
processing of accounting and financial reports for the reason of running a company and
improving profitability in business sectors is known as management accounting. It is
recommended to all corporate executives that they recognize their needs, analyze their risks,
schedule and monitor their businesses' knowledge that would help them handle their businesses
and improve their competitiveness.
Management accounting system: MA systems are frameworks that provide prompt reporting
and documentation of financial results on relevant data that is being used by businessmen and
interested parties for accounting and financial and judgment practices, as well as including
organizational performance assessments. MA-systems' main priority is to maintain cost
transparency and control, as well as to provide a good picture of the company's viability
(Taschner and Charifzadeh, 2020).

Cost accounting system: This method is concerned with prices, and it has the potential to both
reduce costs and boost productivity. Supervisors will use this framework to figure out how much
each commodity would cost to finance their investments. Businesses use this framework to
calculate the cost of all of their goods in order to determine their quality. This is critical for the
institution's expense analysis and mission preparation. In the case of EECL, a device like this
makes it easier and more convenient of costs and manages them effectively. Its basic criteria
include careful cost documentation, monitoring, and distribution, as well as an adequate
definition of several classifications.
Price optimization system: This system is concerned with determining the efficient prices and
costs of products generated by an enterprise in order to increase demand for its goods. It's also
important for businesses to set the best rates while keeping a profit margin. This system will
provide EECL with applications that are aimed at assessing the slight and significant effects of
market changes on commodity demand. This scheme necessitates the use of interpretation
instruments and theoretical approaches to define crucial causes and adjustments that have arisen
as a result of price hikes for its various goods, as well as setting prices to achieve comparative
advantages (Hutaibat, 2019).
Inventory management system: It is the mechanism that manages and monitors the purchasing,
use, and storage of products used by an enterprise in the production of products that it sells. The
inventory control system at EECL successfully tracks amounts in storage locations and
guarantees that administrators have enough knowledge to make informed trading decisions. The
essential requirement of inventory management system that keep close track of sufficient stock
and control rearrange levels in Innocent Drinks' warehouse, as well as to categories supplies and
inventory management in order to deliver appropriate products to production locations on time.
Job order costing system: This is a special yet necessary mechanism that all companies, such as
EECL, use to assign expenses to their main job-processes in order to improve transparency. This
system is useful in understanding how much costs are expended for a given job-process in
corporate organizations like EECL. The proper classification of all company job-processes and
the assignment of various costs to those recognized job-processes are essential requirements of
this scheme.

P2. Management Accounting Reports.
Management accounting report: Various types of approaches are used in an
organisation for management accounting reporting, that is described as the compilation of
financial as well as non variables obtained from the corporation's accounting reports. EECL
prepares separate management accounting records for handling organisational maintaining track
of employee activities. The below are some of the approaches that assist Innocent Drinks'
administrators in producing management accounting reporting:
Budget report: Since it is focused on planning and sharing budgets for other business agencies,
this approach is critical in management accounting reporting. Budget analyses are produced at all
in EECL as a moderate company and assess the firm's results. Managers will use the study to re-
negotiate deals with manufacturers and retailers, improve job incentives, and cut costs. It also
encourages management to focus on increasing future demands and cutting costs in order to save
revenue.
Performance report: It is a detailed statement that analyses the results of certain tasks in
relation to their performance over a set period of time. EECL's financial managers use budgets
effectively to compare real spending with receipts against planned budget factors and either list
or correct the facts on the results report. Managers use the study to forecast potential demand for
smoothies and juices and adjust prices appropriately (Nyamwanza, Madzivire and Madzivire,
2020).
Inventory management report: It is a list of current stock that distils details including the
volume of remaining stock, the items that are sold the most and the quickest, segment results,
and other information relevant to supply activities and performance. It is critical to maintain
inventory levels as accurately and efficiently as possible in order for EECL to expand
effectively. The corporation's buying manager is responsible for maintaining correct stock ratios
in order to produce and market product variations. The monitoring system keeps track of
payments including inventory distribution to various agencies, as well as their outcomes.
M1. Effective evaluation of vital benefits of explained MA-systems in case of EECL:
MA systems Evaluation of Benefits/advantages
Cost Accounting System It benefits for EECL because it allows managers to reduce total

output costs while still acting as a data type source it increases
prices.
Inventories Management
System
It provides a competitive benefit to the business by reducing
waste of material, damages, and fraud, as well as lowering
inventory costs. This allows for more considerations to be
allocated, resulting in higher stock processing and storage
expenses.
Job order costing system This allows Innocent to create transparency inside job systems by
properly allocating costs and justifying them.
Price-optimisation System For an organisation to meet sustainable sales targets, it is
desirable to determine acceptable pricing points for its various
product lines and to maximise market demand
TASK 2
Calculation of cost by using different costing technique and methods of evaluation
Cost: It applies to the price that must be charged in order to get a good or service. In
industry, expense refers to the numerical value of capital, actions, risk taken, resources missed,
supplies, period and unit use in manufacturing, and goods or services distribution. To analyse
expense to file income statement, finance manager of EECL uses following methods:
Marginal costing: Marginal accounting is a cost estimation method in which time fixed costs
and contingent costs are paid for variable cost is charged and taken off completely against
payment. The method is used in EECL to analyze situations where breakeven point is equal to
operating expenses. It entails increased costs associated with generating increased production
units.
Absorption costing: The other method of cost analysis is to collect all costs associated with
manufacturing a single commodity. Managers of EECL use the methodology to take into account
existing financial and also income tax documentation.

Preparation of income statement by Absorption costing:
Preparation of income statement under marginal costing:

TASK 3
Advantages and disadvantages of different types of planning tools used in Budgetary Control
Budget: It is an individual's master financial plan that sets forward forecasts for customer order
as well as planned costs for a certain budget period. EECL financial forecasts suggest projected
budgets and budget properly for the coming year using previous budgets. It offers a mechanism
that system developed in evaluating strategies and priorities on a regular basis and establishing
good organizational guidance.
Budgetary control: It's a method for planning budgets for the future and comparing them to
current results to identify discrepancies. Identifying business priorities, organizing operations of
various organizations, the income by reducing duplication, consolidating monitoring systems,
and setting priorities of entities or divisions are all major goals of budget regulation. For
budgetary management at EECL, the below forecasting tools are used:
Flexible budget: Flexible budget refers to a form of forecasting mechanism that adapts to
adjustments in operation or output rate. The finance associate of EECL improves productivity
and still increasing profitability of this budget because it establishes expectations for actual

business effectiveness. Another use for the method is cost planning and management (Michiyasu
and Kojiro, 2019).
Advantage: Using flexible budget, EECL enjoys following advantages:
• EECL' financial manager can see the initial and current budgets because of the flexible budget.
• It aids in the reduction of expenditures by examining expenditures and revenues.
• It assists EECL's executives in preventing anticipated losses in the near future.
Disadvantage: Some of disadvantage of flexible budget are as explained:
• It is designed for a certain time period, such as half-yearly or yearly;
• It requires validity in varying costs, ignoring bulk commodity purchases, labor costs, and so on.
Cash budget: It is another planning tool that involves planned cash inflow and outflow
over a particular time span. In EECL, a cash budget can be used for financial planning to
determine when financial capital should be invested but where capital should be earned. It also
decides whether the organization has enough cash to continue operating normally.
Advantage: The below are some of the advantages of a cash allowance for EECL:
 EECL does not have to think regarding missed expenses or making payments.
 By having a cash budget so it avoids excessive spending and provides a clearer outlook
about how to use the available funds.
Disadvantage: The following are some of the disadvantages of using a cash budget:
• It restricts EECL's purchasing power as customers are constantly focusing on a cashless
society;
• It is dependent on previous year though forecasts for fulfilling filling material.
Purchase budget: This is a planning tool that involves the amount of inventory that the
company can purchase during the budget cycle. It simply matches the exact amount of troops
planned to be sold during a specified time span. The purchasing budget helps the EECL purchase

manager to know how many smoothies and drinks to sell in order to meet the corporate
accounting goals.
Advantages: The following are some of the benefits of a buying budget:
• The procurement department of EECL has more leverage over inventory levels to the purchase
budget.
• It also allowed the organization to respond as quickly as feasible to prevent losing buyers as a
result of delayed order fulfillment or longer processing times.
Disadvantage: Purchase budget has a few drawbacks, which are listed below:
• The preparation tool's future forecasts are based on historical results, and could turn out to be
inaccurate given the volatile circumstances, such as bad prediction, which may have a negative
effect on EECL's determination (Aifuwa, Embele and Saidu, 2018).
• Creating a procurement budget is a time-consuming process and often necessitates extra
personnel in order to obtain correct figures.
M2 Application of management accounting techniques to produce appropriate financial reporting
documents
Planning tools are used in the workplace to help employees transform their ambitions into
accomplishments. To prepare expenditure forecasts and plan for the long term, EECL employs
forecasting instruments like procurement budget, cash budget, and adjustable budget. Cash
budgets, for example, are used to estimate cash inflows and outflows for the next year.
Simultaneously, a procurement budget is used to provide projections for potential product
purchases.
TASK 4
P5. Comparison about the ways organizations adapt systems of management accounting for
responding problems associated with finance
Financial problem: It applies to a condition in which an organisation is unable to fund required
activities while still paying the bills on schedule. Capital leads companies to be too concerned
and stressed in this situation. Many businesses are going through a difficult financial cycle,

which has an effect on their long-term viability and competitiveness. EECL is a business that is
experiencing financial difficulties, as detailed below:
Missed credit payments: The large amounts of goods are marketed to customers in order to
meet the demands of the final customer as soon as possible. EECL has a number of customers
who buy smoothies and beverages in bulk quantities on a consignment basis. As a result,
financial challenges occur as capital inflows are limited. Furthermore, customers can not pay on
schedule, reducing earnings and causing financial difficulties.
More sending than income: Company interests invest much more money on commercials,
sales, and publicity than they earn in order to win exposure in a dynamic environment. The
marketing staff at EECL did the same, exceeding their discretionary number to support or
promote the brand, resulting in a difficult financial situation (Kumarasiri, 2017).
Accounting approaches or techniques for resolving financial problems
Benchmarking: This accounting technique allows businesses to compare their company
procedures, procedures, plans, and efficiency indicators to those of the best firms in the market.
This can be seen as an accurate methodology by EECL administrators in resolving financial
analysing and interpreting methods used by other businesses to promote or sell goods with
insufficient resources. Furthermore, the procedure can assist the agency in addressing financial
issues associated with increased investment by introducing an appropriate approach that can
assist in marketing the brand under budgetary limits.
KPI (Key performance indicator): The methodology enables corporate companies to assess
achievement by measuring results in the hopes of achieving greater levels. In this strategy, EECL
managers will assess their financial situation and formulate appropriate plans for borrowers to
encourage them to make prompt payments, thus resolving the finance-related problem of missed
credit card bills.
Financial governance: It describes the process for collecting, characterizing, and monitoring
financial data. Financial governance described correct phases for gathering, monitoring, and
managing information with the aim of implementing action direction and legislation in a fixed
manner, allowing EECL's administrator to solve money difficulties.

Comparison among Innocent Drinks and Wilson's Juice Company
Base for comparison Innocent Drinks Wilson's Juice Company
Problem Sainsbury's accountants have
determined that they are
dealing with financial
uncertainty as a result of more
investment than earnings. As
a result, it is unable to reach
unprecedented heights for a
large consumer base.
At the other hand Tesco's general
manager, discovered that they had a
financial problem with missed credit
payments. Furthermore, the
administrators are still unable to
comprehend the amount of available
inventory because they made incorrect
choices due to the lack of knowledge
about borrowers.
Approach of
management
accounting
The problem of large costs
exceeding revenue can be
overcome by using a
benchmarking strategy. The
method can aid in
determining the tactics top
market players have used to
obtain prompt compensation
from creditors.
In the other hand, the KPI solution can
be used to address issues such as late
payments. The method would aid the
entity in identifying customers who are
causing inadequate market success and
instead introducing appropriate methods
to persuade borrowers to pay for the
goods they have taken out on loan
within a specified time frame.
Management
accounting system
To tackle a financial
challenge, cost accounting
schemes are an appropriate
management accounting
method. Supervisors can be
aided in allocating funds in
conjunction with marketing or
advertising strategies, as well
as performing other similar
In this situation, an inventory
management system is the better option
because it can keep up with the market
or inventory that customers have taken,
including date, address, and other
information. This scheme allows for
expense management and also the
imposition of extra fines on borrowers

tasks efficiently, thanks to the
system.
who refuse to make payments on time.
M4. Analysing how companies responds for financial problems and leading sustainable success.
Business challenges address financial issues by implementing appropriate management
accounting processes and methods. The corporation reacts to the financial problem of more
expenditure than earnings by using a benchmarking tool and a cost accounting scheme.
Managers will learn from the techniques being used by top firms and adapt them to generate
long-term sustainability using a benchmarking strategy.
CONCLUSION
The study concludes that management accounting is an important method for examining data and
advising corporate practises, as well as working to ensure the company's long-term performance.
Management accounting is only available to internal management teams. Its aim is to use
quantitative facts to create appropriate decisions and monitor operations, such as organization
operations. Management accounting processes, such as work costing and price optimization, are
combined with schedule, results, and other monitoring structures. Cash budgets, purchase
budgets, and other planning strategies are used in entities to adapt to financial challenges and
achieve long-term growth.
REFERENCES
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