Management Accounting Report: Tech Limited Financial Performance

This report provides a comprehensive overview of management accounting principles and practices, focusing on their application within the context of Tech Limited. The report begins by differentiating between management and financial accounting, highlighting their respective purposes, audiences, and scopes. It then explores the importance of management accounting in decision-making, particularly for small and large firms. Key topics covered include cost accounting systems, inventory management, and job costing systems. The report further delves into managerial accounting reports, such as budget reports, job cost reports, and financial reports, emphasizing the importance of clear and concise information presentation. Task 2 focuses on preparing income statements using absorption and marginal costing systems. Task 3 examines different types of budgets, the budget preparation process, and the significance of budgeting in financial planning and control. Finally, the report discusses various applications of management accounting, including the use of the Balance Scorecard method to improve performance and address financial challenges, such as the reported loss of 1.5 million faced by Tech Limited. Overall, the report offers insights into how management accounting tools and techniques can be used to enhance business performance and achieve organizational goals.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
discuss the difference between the management accounting and the financial accounting. .1
2.Importance of Management Accounting.............................................................................1
3.Cost Accounting System.....................................................................................................2
4.Inventory Management System ..........................................................................................2
5.Job Costing System ............................................................................................................2
b).............................................................................................................................................2
1. different types of managerial accounting reports . ............................................................2
2.Importance of presence of information...............................................................................3
TASK 2............................................................................................................................................4
Preparing income statement considering absorption and marginal costing system ..............4
TASK 3 ...........................................................................................................................................5
a. Different kinds of budget....................................................................................................5
b.Budget preparation process.................................................................................................7
c.Importance of budget...........................................................................................................7
TASK 4............................................................................................................................................7
Different ways for the usage of Management Accounting.....................................................7
CONCLUSION................................................................................................................................8
REFERENCES ...............................................................................................................................9

INTRODUCTION
Management accounting is a process which prepares the reports assigned by the managers
and accountant and it helps to provide timely reports and accurately in short time period as well
as long time period. This report show how the budget helps in making the report accurate. In this
there are many other approaches are also given which help to make good and better decision and
achieve the goals to run company faster. It also depicts the different budget and how they help to
make business or the company run in better and fast way (Ax and Greve, 2017).
TASK 1
discuss the difference between the management accounting and the financial accounting
Basic Financial Accounting Management Accounting
Purpose Show financial position Helps in decision making
Requirement Compulsory Optional
Primary Audience External like investors,
regulators, tax authorities
Internals like management and
decision makers
Focus On past transaction Decision make for the future
Scope Widen and broaden the
company
Narrow per segment product
etc. as needed
Reports Summarize the reports about
the financial position
Show detailing report related
to the information
Information Monetary only Monetary and non monetary
both
Time Phrase Statements are prepared at the
end of financial year
According to the need of
management
2.Importance of Management Accounting
As management accounting is very useful in small a well as big firms. In Tech limited
company also . The main importance of management accounting is that it help in decision
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making which help to achieve the future goals and run the company in better way . we can see
that in small business the owners and managers are faced many decisions every day and by the
use of management accounting the information which we use in our operations are converted and
produce repo main importance of management accounting rare which help in maximises the
profit and greater competitive advantages. Management accounting always help to determine the
aim of the company as it clears that what our company needs and find the route through which it
can reach the goal. If the owner make easy to take the judgement and helps in several plans and
policies.
3.Cost Accounting System
Cost accounting system is mainly used by the firms to know the rates of the product and
to show the profit, stock valuation and controlling of the cost.
Actual Cost Accounting : It records the product cost which include actual price of material,
actual cost of the workers, actual expenses incurred during distribution of the product.
Normal Cost Accounting : It is used to derive the price of the product. This show the direct cost
of a product as well as standard rate too.
Standard Cost Accounting : It shows the difference between the expected cost and the actual cost
. Standard costing involves the creation of estimated cost for some or all the activity .
4.Inventory Management System
Inventory management system is the running process of moving products into and out of the
company's location. Tech limited also manages their inventory on the basis as the order is place
and ship order out to customers. It tracks the product that where it is go and where is the need of
that product, whether the product is in good condition or not and lastly the product is actual in
the destination point or not.
5.Job Costing System
A Job costing system is sum up the information related to the cost which related to the
particular product. . It needs three type of information like related to direct material,direct
labour, and overhead . Once if the job has been completed a the system should be close to set the
job costing otherwise strong loss will be face by the employees and managers too and to attract
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the employees they should be charge overhead according to the need . (Cooper, Ezzamel and
Qu, 2017).
b)
1. different types of managerial accounting reports .
Lets summarize them :
1. Budget report : In Tech Limited company the budget report is mainly use as it show
whether the company has enough budget to spend or not so its necessary to present the
report . Budget report can be make weekly, monthly its all depend on your expenditure
only. The owner and the managers of the Tech limited company can also use budget
reports to provide incentives to employees. If the managers or the owners cannot find
method to trim the cost, future budget may be increased and the company may be in loss.
So proper budget report should be made.
2. Job cost reports : the another report is Job cost report, it help in show the expenditure for
a particular project finance by the company and then they match with an knowing value
so can evaluate the profitability of the company. Job cost reports analyses that particular
project whether it is in progress side for the company or not.
3. Inventory and manufacturing : Tech Limited also present report of their inventory and
manufacturing products. As it is necessary to know the exact amount of selling and
manufacturing of their product and what is the process of their product during shipping,
warehousing and retailing. This reports shows the item such as inventory waste, timely
may be hourly or weekly labour cost or overhead cost.
4. Financial Reports : These reports are made at the end of the financial year because the
overall transaction during the year can be seen by this report only. Under this report each
head is shown and number of categories shown in the profit and loss account and balance
sheet and by this report only owner can finalize to show the company actual financial
report .
2.Importance of presence of information
Yes, the presence of the information is quite important . Because making the reports
complex will slows down your reputation and takes your too much time of understanding . Its
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just requires t disclose the information systematically instead of presenting it in complex form.
The reports should not be in rigid form. As only single reading person can understand it quickly
and use of numbering should be must and calculation should not be in tough method as ine takes
too much time to solve it (Zhou, 2017). The transaction and accounting which show in the last
financial statement should be in easy and understandable form . The user should have the level of
knowledge related to the business and and in general they should be create the willing to use
more and more data. (Covaleski, Dirsmith and Samuel, 2017).
TASK 2
Preparing income statement considering absorption and marginal costing system
Profitability statement as per absorption costing method
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TASK 3
a. Different kinds of budget
There are many types of budget which Tech Limited company used , some of them are as
mention below:
1. Cash Budget : cash budget determines whether the cash inflow is on timely basis or not
and it managing the working capital of the business. It has both advantages and
disadvantages
Advantages are :
 it help in minimizing the cost and maximize the profit .
 It help to coordinate the activity of all the department
 it help to improve the communication power and establish the relation between the
employee and the staff.
Disadvantages are :
 its success only depends on the cooperation of the staff and the employees.
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 Its quite expensive to handle a cash budget.
 It can take a long time to achieve the goals.
2. Master budget : the master budget is the sum of the company's budget which include the cash
fund of different firm with different activity. (Németh and Németh, 2017). It is affected by the
different factors such as : sales, working capital, operating expense, income source etc.
Advantages are :
 it gives a complete scenario of the company in single budget.
 It identify the problems and plan ahead.
Disadvantages are :
 it is lack of specificity which means that company would not be ale to determine the
spending during the month.
 It is difficult to read and update because of many categories and numbers that are include
in the budget.
3. Static Budget : static budget will be stable throughout the year such as sales volume and
revenue ratio ,change in its fixed budget.
Advantages are :
 it is so easy to execute and then to follow.
 No need to update it regularly..
 This budget allow the company to see that it might be overestimating and
underestimating.
Disadvantages are :
 it lack of flexibility.
 It cant provide any additional resources to help
 the impact may be negative for the company's revenue stream.
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b.Budget preparation process
In Tech Limited company the budget preparation process include or use to determine of
pricing and different costing system. As the budget assumption needs to be update and then see
the whether the fund is available or not and and select the growth of the revenue . I t creates the
budget package also and then issue the budget package then it obtain the capital/cash budget
request ,it examine the capital budget request sent by the budget package and forward it to
senior management team .then the team update it and then review the budget and highlights the
mistakes and any limitation caused by the funding problems (Modell, 2017).then the team issue
the budget and then load the budget into the financial software, so that the company can create
the budget into the actual reports and this is the way budget preparation help in pricing the sale
and volume level and different costing system.
c.Importance of budget
The main importance of budget is to plan and to control the spending of the business. As
budget is an important tool to translate normal plan into reality and to achieve the goals in
better way . Since, budgeting allows a company to spend in limited way as if you dont have
money to spend and if you have the money then spend it according to the need.. If the company
has its own budget system then at the time of emergencies like get laid off we need a cash that
time our budget says what emergency amount we have to spend . A budget can build the
company reputation and have a close look of future too. A budget forces to map out the goals
and save our money for future and emergencies.
TASK 4
Different ways for the usage of Management Accounting
As tech limited company face loss of 1.5 million and now his auditor suggest them to use
Balance scorecard method . The balance scorecard is a planning performance of the management
team too or a half report that always have a look of the employees that what they did during the
whole day they keep monitoring on employees. It is a tool which is used to identify the working
performance and see the internal performance of the business and then convert them into the
external result.. Balance scorecard is basically become a key component of structures approach
corporate strategic management. As tech limited company use this method because this method
is not so complex and rigid and the basic need of the company is to encourages the identification
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of high level of financial measure (Qian, Hörisch, and Schaltegger, 2018). They also encourages
the identification of the customer as what is the basic need of the recent trend and are they fulfil
the need and the amount of sales is actually the sales which the company wants to sale . The
another plus point of balance scorecard and the quality which makes it different from other is
internal business process, what is the cycle time of the product and what is the unit cost and new
arrival of the product.
The main advantage of using balance scorecard method is that it helps in makes business
learning more and more and help in growth too and in this competition world one has to stay
with their new ideas and innovations. Balance scorecard help in reduce injuries and help in
increase the profit ratio. Whatever the data is collected by the managers is provide in numbering
form and it is gathered by the managers and the executive team only just to make a good decision
for the company and help them in the growth too. Following four perspective which makes
balance score card different from others and the usage of this is now increases day by day in
every big firms and they are : financial, learning and growth, internal analysis and lastly the
behaviour of the customers and what is the basic trend .this is the only reason why the auditor
told the company to use the balance score card and it is definitely successful in future and
achieve goals (Schaltegger and Burritt ,2017).
CONCLUSION
From the above report based on management accounting and it actually affect the
financial growth of the business or a company. We also conclude that different budget system
has their own importance and they help the business to run smooth and best way in the
competitive world. In this report we see that there are different approaches which help the
business to grow up again even if the company faces the loss and that is balance scorecard
method. As the reports gives all the information about the budget system and their advantages
and disadvantage also so we conclude which is best and in what way.
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REFERENCES
Books and Journals
Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational
culture compatibility and perceived outcomes.Management Accounting Research.34.pp.59-
74.
Cooper, D. J., Ezzamel, M. and Qu, S.Q., 2017. Popularizing a management accounting idea:
The case of the balanced scorecard. Contemporary Accounting Research.34(2). pp.991-1025.
Covaleski, M. A., Dirsmith, M.W. and Samuel, S., 2017. Analysing and interpreting qualitative
data in management accounting research. The Routledge Companion to Qualitative
Accounting Research Methods, p.387.
Modell, S. ed., 2017. The Societal Relevance of Management Accounting. Routledge.
Németh, K. and Németh, S., 2017. The Application and Role of Management Accounting and
Controlling Methods in Family Businesses–Experiences of an Empirical Survey.
In Management Challenges in a Network Economy: Proceedings of the MakeLearn and TIIM
International Conference 2017 (pp. 259-269). ToKnowPress.
Qian, W., Hörisch, J. and Schaltegger, S., 2018. Environmental management accounting and its
effects on carbon management and disclosure quality. Journal of Cleaner Production, 174,
pp.1608-1619.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Zhou, Z., 2017. 90. Framework and Development Trend of Management Accounting
Information System—Based on the Empirical Analysis of Guangju Energy Chemical Listed
Companies. Boletín Técnico, ISSN: 0376-723X, 55(9).
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