Management Accounting Systems: Costing and Planning Tools

This report provides a comprehensive analysis of management accounting systems, reporting methods, and techniques, with a focus on their application in a real-world scenario involving AJ & Sons, an accounting consultancy firm, and their client Innocent Drinks. It explores various management accounting systems such as cost accounting, inventory management, price optimization, and job costing, highlighting their essential requirements and benefits. The report also examines different methods for preparing accounting reports, including budget reports, accounts receivable reports, and inventory management reports. Furthermore, it evaluates the integration of accounting systems and reporting with organizational processes, discusses costing techniques like marginal and absorption costing, and analyzes diverse management accounting techniques. The report concludes by addressing the advantages and disadvantages of planning tools and how organizations adopt management accounting systems to respond to financial problems, ultimately leading to sustainable success.

Management Accounting

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1. Management accounting with different types of systems..................................................................3
P2. Methods for preparing accounting reports.........................................................................................5
M1. Benefits of systems with their applicability......................................................................................6
D1. Evaluation of accounting systems as well as accounting reporting that are integrated with
organizational processes..........................................................................................................................7
TASK 2..........................................................................................................................................................7
P3. Calculation of cost with distinct costing techniques..........................................................................7
M2. Diverse management accounting techniques..................................................................................11
D2. Financial reports that accurately apply and interpret data...............................................................11
Task 3........................................................................................................................................................11
P4 Advantages and disadvantages of different types of planning tools..................................................11
M3 Use of planning tools and its application for preparing and forecasting budgets.............................13
Task 4........................................................................................................................................................13
P5 Organizations are adopting management accounting system to respond financial problems............13
M4 Management accounting can lead to sustainable success................................................................15
D3 Planning tools for accounting respond by solving financial problems.............................................16
CONCLUSION.............................................................................................................................................16
REFERENCES..............................................................................................................................................17

INTRODUCTION
A method for recording, reviewing and reporting operating costs and activities to make
financial decisions known as accounting for management. Focusing on all reporting of financial
and maintaining it in an efficient way is essential for the organization, so decisions can be taken
easily (Appelbaum, Kogan, Vasarhelyi and Yan, 2017). To better understand the concept select
AJ & sons which an accounting consultancy firm. The recent lock down due to COVID-19
impact on the businesses and they are closing their offices and start working online. At this time
many clients wants to taken consultancy advice from company to smoothly run their business.
The client of innocent drink, a company that makes smoothies and juices sold in supermarket,
coffee shops and different other juices. The firm advises them to apply management accounting
systems and reports to operate their business effectively.
Various concepts will be addressed in this article, such as management accounting and its
necessary criteria, types of management accounting framework, types of approaches that could
be used for financial performance and cost estimation using specific techniques to achieve
income. Furthermore, the strengths and drawbacks of the preparation methods and how they are
utilized for budget are monitoring and administration accounting systems which are used to react
successfully to fiscal challenges to be addressed in this study.
TASK 1
P1. Management accounting with different types of systems
Management accounting is concerned with laws relating to accounting details in order to
take strategic decisions. It's being used by every institution's administrators who efficiently
acquire, evaluate and track the financial details to preserve the productivity.
Management accounting system is the critical evaluation of financial reports which
corporations use to assess and analyze their system for organizational behavior purposes. This is
also used to handle situations such as investors and shareholders coming out of the company. All
companies would like to operate their company by decision taking, so they use various forms of
accounts management solution. In addition to making management decisions, it considers
different measures and financial reporting that are adopted by industry (Bawaneh, 2018).

Cost accounting system: Managers use this method to analyze expenses related to
production and company practices with a view to improving productivity. This has an important
criterion for recognizing the additional spending and removing those costs when making goods.
Innocent drink's management utilizes this accrual accounting to learn the actual price of cement
and manufactured goods that are being used in building. Maintaining the costs and reducing
unnecessary costs through using cost accounting method is essential to all businesses. Thus it is
important that all organizations are using the cost accounting system and obtain real operating
costs in the enterprise of businesses. The essential requirement of this system that to set cost of
different products and services as per the organizational requirements.
Inventory management system: This system is used to monitor or track inventories that
are kept in warehouses. Its minimum necessities has as it works to control track of all inventories
that determine that content is in storage since it is not. Innocent drink's supervisor maintains
track of all products through a database that allows check the performance of specific stock. In
addition, it is necessary to recognize the under-stock and over-stock situation at the office and
consequently sell the goods (Datar and Rajan, 2018). The essential requirement of this system to
track the inventory at different levels from raw material to finished goods.
Price optimization system: This is also referred to as data methods that businesses in
various industries use to assess how consumers react to external service and product prices.
Prices are very important variables which motivate customers to buy certain items / solutions. In
the company, it has an important obligation to set the cost of goods and services that able to
stimulate buyers. Through using that same method, which satisfies customers and achieve
desired targets such as licensing authority, the Innocent Drinks manager control the price of
Smoothies and other products. The essential requirement to ensure they can chose the best prices
of the goods and services. Innocent Drinks supervisors are utilized to guarantee this occurs.
Job costing system: It is another stated method used to track job-by-job income and
expenses to improve work-by-job productivity. In many other terms, it is a tool that is being used
by managers to monitor production work costs rather than operation cost. It has critical criteria
including no company can stay on top of the expenses of and job because without that network
administrator, retaining data that is more important to organizations. Innocent Drink's financial
accounting costs to different employees that help control corporate expenditures and make

important decisions to efficiently conduct business activities (Georgantopoulos, Poutos and
Eriotis, 2018). The essential requirement of this system to assure about jobs in regard to arrange
the company effectively.
P2. Methods for preparing accounting reports.
A report which administrators schedule along with scheduling, legislation, progress
monitoring and business decision-making practices recognized as management accounting
reports. It supports in maintaining both money and non - monetary bank documents and then turn
these to valuable business information. This report includes organizational data, details, and
operational knowledge. The key aim behind such study is to evaluate the efficiency of the
company and implement modifications to boost efficiency. Accounting reports are compiled by
the director of innocent drinks, which helps to make more educated business sector decisions and
improving company efficiency. There are mentioned different types of accounting reports such
as:
Budget report: This is significant document within which a company organization's
economic performance is described. Budget report is the important specific document used by
executives to equate the programs total budget with existing projects to raise the selling price.
This aims to establish the overall budget for all expenditures and profits involved. Management
should set projected budgets for development in Innocent Drinks, and contrast them with real
budgets that actually indicate how much company wants to invest. In fact, it supports
administrators provide better benefits for workers, cut expenses and execute plans that preserve
profitability (Gomez-Conde and Lopez-Valeiras, 2018).
Accounting receivable report: Every economy depends on financing, so it's critical that
they plan deferred revenue account reports. This process helped hold creditors details and also
payment terms that specify when lenders must reimburse the balance owed. This report breaks
down the final balance in different periods of time, help companies to recognize the debtors and
find distribution identified issues as well. Innocent Drinks, for example, is a processing business
that produces building materials and markets them exclusively on lease and money to
manufacturers and consumers. It requires 30 days, 60 days and 90 days of credit, and maintains

lenders information. That organization’s management must maintain stricter accounting policies
for the aim of acquiring reimbursement at growth. Thus it is necessary for organizations to plan
trade receivables for ageing and recover the timely payments
Inventory management report: A report that is used to monitor the stock or maintain
sufficient information provided as the inventory management report. This study lets leaders
know how much inventory system they have had on order. For example, Innocent Drinks good
for beginners inventory control document on the raw materials used in making Smoothies such
as Fruits, ice creams and so on. It improves overall sales volumes and ensures that inventories
are correctly tracked by management teams (Heinzelmann, 2018).
M1. Benefits of systems with their applicability
System Benefits and application
Inventory management system This program is helpful to monitoring the stock and position
officials understand for all company. It is implemented by
director of Innocent Drink to learn about over inventory or
under raw storage facilities. This includes keeping track of all
inventories that are accessible in the business.
Cost accounting system This method offers an advantage in calculating cost and
promoting economic operation performance through reducing
expense. This is implemented by Innocent Drinks
management who lead in rising cost of raw materials,
managing supplies and also helping boost output.
Price optimization system It's important to set services and products rates that enable
consumers to purchase products. This implementation is
described as manager of Innocent drinks control the price of
hope cement that they manufacture and increase sales from a
company to purchase fruits (Hilorme and et.al, 2019).
Job costing system This system gives organizations broader advantages in
calculating money generated on specific employees, and
reporting relationships with because in particular industries.

Its usage is described as Innocent Drinks Manager dividing
costs into different departments in the manufacturing system
that aims to function efficiently.
D1. Evaluation of accounting systems as well as accounting reporting that are integrated with
organizational processes.
The accounting management method and documentation was combined with company
operations such as sufficient service. Accounting system is used to define and evaluate the
results, and reports are being used to keep all payments registered properly. Innocent Drinks
Corporation, for example, needs to sue stock control system to monitor remaining supply and
compile purchase orders for ordering appropriately. Price management program helps Innocent
drinks set cement and other cost of materials, and ability to spend information which helps align
with real budgets (Horvat and Mojzer, 2019). Often useful for Innocent Drinks is the cost
accounting system and task costing system to keep track of all costs and relevant jobs to preserve
money. The accounting method and reporting are also incorporated with the operational process ,
which supports to accomplish company objectives using both the processes and documents
TASK 2
P3. Calculation of cost with distinct costing techniques.
Marginal costing: The monetary value that is spent by institution on having extra sections of
outcome to generate profits considered as marginal costs. This analysis is used to measure the
volumes of output in which smaller numbers are measured for increasing amounts being
produced.
Absorption costing: Company uses this strategy which specifies all costs including variable
costs and fixed costs are known as unit costs. This is a decision-making process after
consideration of the higher overhead costs.

M2. Diverse management accounting techniques
There are various forms of accounting management methods, such as marginal and costing
methods for accumulation, and are used by companies to gain income. Marginal costing is a
methodology that organizations use to measure the benefit and aims to create financial reporting.
Businesses apply both method to investigate the earnings and preparing financial statements.
Innocent drinks employ marginal and absorption techniques to boost efficiency and performance
in preparing and presenting financial. These businesses use strategies that help to sustain
profitability by measuring revenue and expenditures that often contribute to business operations
(Jarwal, 2018).
D2. Financial reports that accurately apply and interpret data
The companies should use them so that they can implement as well as analyze the data
quickly and productively. And they will ensure that they can achieve significant aims and goals
avoiding complications and complications. It is very relevant in the sense of Innocent Drinks that
its executives are able to use the financial results to boost the total efficiency in the organisation
and thus gain a competitive advantage over competitors.
Task 3
P4 Advantages and disadvantages of different types of planning tools
Budget: This is a quantitative statement that for a stated amount of time reflects financial
projections of revenue and assets. It allows by approximating the costs for the company to earn
money. In many other sentences, budget is a financial comment that is planned in regard to
evaluate the destiny for a specified period. Every company, only with aid of this expenditure,
will plan a spending plan that allows realize the ramifications cost and benefits. Innocent Drink's
manager prepares spending plan with the assistance of last year's spending plan to really get
earnings (Lowe, 2019).
Cash budget: Generally, cash budgets are created by management practices on financial
performance after planning sales, spending and infrastructure sector which actually decide the
spare cash inside the company. Each form of budget illustrates cash inflows and outflows when
planning the financial plan. Its principal objective is to maximize market share and increase net
income. In Innocent drinks management builds financial statement by including both revenues

and expenditures that lead to gaining benefit. No organisation can have an understanding of
inflow or outflow that is essential for making judgments through cash budget. Institution should
also use budget plan when operating an enterprise that require treatment appropriate choices.
Benefits: Cash budget is beneficial to all organizations, as it allows to efficiently manage all
revenue and expenditures inside the company. It only considers money transfers that contribute
to the quantifiable terms that can find things simple for organizations to make earnings (Nik
Abdullah, 2018).
Limitations: It's doesn't require anything else transfer of funds, as a result from which the
institution could not get accurate earnings even for moment. This can be detrimental to the
company because administrators are able to control the financial statement since they have
financial acumen.
Master budget: This is micro-total of division series budgets that are used for money
management for all groups. In Innocent drinks management makes forecasting of money
management, working capital and planned budget benefit by reviewing the master budget. It
covers all relevant data if it is monetary or not, and then takes decisions to reduce profits.
Strategic leaders use this spending plan to address the causes and have an optimized value. For
example, Innocent drinks choose to improve efficiency as competitiveness by assessing
organization’s revenues and expenditures then identifying challenges administrators face to
improve efficiency.
Benefits: It is an institution's superiority document which requires all transactions and
budgets to generate billions by addressing financial difficulties. Within a given moment it allows
to hit stage (Nishimura, 2019).
Limitations: It has some drawbacks, including shortage of subspecialty, which really isn't
common for businesses to fulfill such requirements; as a consequence they can't get specific
income. Since of the volume of payment this expenditure isn't simple to digest and review.
Operating budget: It is a prediction expenditure which includes potential income and
expenses. It's generally formed at the start of the year after executive team. This plan is used to
demonstrate projected level of operation for the whole year. This is a very valuable budget for all

organizations, because it reflects on organizational operations and successfully runs hem.
Supervisors use operating budget in Innocent Drinks which enables to successfully control all
operations management. The budget is sometimes used to take account of organizationally
bearing expenditures and revenue.
Benefit: Operational budget has capacity that infrastructure sectors within the business in order
to efficient outcome out business operations. This lets Innocent drinks keep a record of the whole
businesses to make revenue. In addition, it is equipped for financial commitments that give a
company potential to grow.
Limitation: It is time-consuming and cost-effective method that requires a lot of time and
money to plan operating budgets. This strategy is versatile where management can make
adjustments at a certain moment, since it does not display full reports (Nkundabayanga,
Tauringana and Muhwezi, 2018).
M3 Use of planning tools and its application for preparing and forecasting budgets
Planning resources are very useful to group that provides create future initiatives to develop
money. This serves to create the revenue models while using the master budget, cash budget, and
operating budget, which specifies how often income the company will gain in the potential. For
example, the manager of Innocent Drink used the previous section-mentioned plan to organize
events targets and achieve them in short time. The primary aim of planning these plans is to use
plans to predict earnings forwards. Analysis techniques also are particularly effective for
businesses that support and sustain profitability by managing the costs and expenditures that
arise when conducting financial operations
Task 4
P5 Organizations are adopting management accounting system to respond financial problems
There are various kinds of monetary issues that arise when operating a company are called
financial problems. Also at period of doing business operations, organizations can experience
various kinds of financial difficulties. So it's essential for organizations to concentrate on
financial difficulties and try to solve the problems. The key purpose of this business interest is to
recognize the challenges and figure out a way to address these financial issues. Innocent Drinks
is faced with different forms of financial issues, as mentioned:

Expenses are more than incomes: This is a diversification issue that can be addressed
across the entire industry by company. If people are spending too much and earn reduced profits
then they suffer financially. Any institution's executives have to concentrate on expenditure, and
create attempts to resolve it. For example, Innocent Drinks manger spends the money on the
procurement of raw materials for the preparation of cement, facilities, ads and every other things
where the organizational costs occur (Phornlaphatrachakorn, 2019).
Unmatched cash flow statement: This means that if all the statement of cash flows
operations do not suit then company will have to address financial problems. For example, there
seems to be a difference in financial statement among operational and financial operation,
attributable to Innocent administration company's financial mistakes. This institution's manager
reports that the corporation has money troubles and that the business earnings are constantly
declining.
Different techniques used to address financial problems that are as given below:
Benchmarking: This strategy is used to address the financial challenges that a company
has to face while a business is going. It enables to interact with other organizations and then by
evaluating details, important decisions are made. For example, Innocent Drinks uses this method
to deal with financial concerns and compare them with other companies to help recognize the
monetary errors that arise inside the company.
Key Performance Indicator (KPI): Company uses this methodology to recognize the monetary
and non - monetary output that is critical for organisation. This system offers organizational
internally and externally quality that helps to inform that practices have become money
difficulties for a business. Hence, it is the most powerful method that businesses use to recognize
the concern because of which company faces money difficulties. Innocent Drinks, for instance,
with financial difficulties as director, has accumulated monetary and non - monetary behaviors
which determine which behaviors cause financial difficulties. KPI is therefore successful
strategies which determine which monetary and non - monetary operations are moving slow and
how this allows to make the appropriate management decisions (Siska, 2017).
Financial governance: A way to compile, evaluate, plan, track and regulate financial operations
with an aim to solve money difficulties. It considered any theory, accounting procedures and

accounting that companies had to adopt in order to resolve accounting mistakes. In Innocent
Drinks, manager relies on these concepts and the economies of scale refer when accounting
standards, which attempts to solve the economic pressures of business operations.
Comparison between Innocent drinks and Quality drinks
Basis Tesco Sainsbury
Problem This organization’s monetary flow
does not suit, as it faces financial
problems. Although the economic
operation exceeds investment and
financing activities.
Such an organization has massive
costs as well as less profits, as a
result with which it faces
financial difficulties. Sainsbury'
revenues are routinely growing.
Identified problem Only with aid of KPI tool which
specifies monetary and non -
monetary operation, these needs
are formulated (Steccolini, 2019).
These problems are associated by
interacting with the other
organizations with the aid of the
Benchmarking method.
System used Innocent Drinks uses cost
accounting solution to predict
these funding difficulties which
allows justing getting the actual
value of the raw materials and
finished products.
The company should use stock
control solution to predict the
funding difficulties that allows
monitor the stock on schedule
and with reduced wastage.
M4 Management accounting can lead to sustainable success
Management accounting is being used by any company that supports to understand which
measures to take as to which one should not be to solve financial difficulties. Corporations are
using it to kindly update track of all activities and improve the income. The key aim of using
reporting in management is to make successful strategic decisions. Because of Innocent Drinks
maintains all records and expenses with the use of financial management that allows create the
greatest economic decisions. It also supports to recognize the financial challenges and tackle the
issues that contribute to the development of development in ways.

D3 Planning tools for accounting respond by solving financial problems
Cash budget, master budget and operating budget are the preparation methods that Innocent
Drinks Corporation uses to learn and solve financial difficulties. For example, managers invest
money on different things that aren't beneficial to the company because where its they system
solutions. Such organization’s supervisor has preferred to be using money, and the master budget
informs all necessary financial details to fix financial errors. Management can quickly generate
money by solving these issues, and therefore retain efficiency (Wilkerson and Bassani, 2020).
CONCLUSION
From the above-mentioned report it can be summarized that an organisation works
maintains all accounting and financial statements that helps strengthen income Management
accounting is important for all size companies, whether positive or negative, that tends to protect
all documentation of all economic activities and set targets appropriately. Management utilizes
strategy methods that help address the financial challenges and make good business decisions.
Marginal and total expenses is a methodology that helps firms measure income by taking into
account variable and fixed costs.

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