Management Accounting Practices

This assignment delves into the core concepts and practices of management accounting. It examines various management accounting techniques employed by companies for planning, controlling, and decision-making. The content explores the role of management accounting in different business contexts, including its significance in performance measurement, cost analysis, and strategic planning.

Management Accounting

Table of Contents
INTRODUCTION........................................................................................................................................3
TASK 1.........................................................................................................................................................3
a) Definition of management accounting and comparison between management accounting and
financial accounting.................................................................................................................................3
b) Types of management accounting system ..........................................................................................7
TASK 2.........................................................................................................................................................7
1. Using absorption costing method .......................................................................................................7
2. Using marginal costing method...........................................................................................................8
TASK 3.........................................................................................................................................................9
a) Type of Budget and there advantage/disadvantage.............................................................................9
b) Process of preparing a budget...........................................................................................................10
c) Pricing strategies of the business ......................................................................................................10
TASK 4.......................................................................................................................................................10
a) Balance score card approach.............................................................................................................10
1. Use of balance score card for intensification and responding to the financial problems..................11
2. Use of balance scorecard in order to improve the financial governance...........................................11
CONCLUSION..........................................................................................................................................11
REFERENCES...........................................................................................................................................12

INTRODUCTION
Management accounting is a managerial tool for making the success of organisation. It include
all such report which are prepared by the manager so that they can estimate the actual resources which
are available in the organisation (Wajeetongratana, 2016). Management accounting is a process which
involves policy making, setting the rules and regulations and working as per decided procedure so that
business can utilizes there resources effectively so that they can accomplish there future goals. It also
help help the manager to allocate the funds in appropriate way so that such fund can be used in future as
per need. By following management accounting approach, it make smoothing in operational; activity, in
this way such accounting techniques increases the efficiency of any organisation. Management
accounting and there different approaches such as costing methods help the manager to estimate the
appropriate cost of unit so that manager can determine the actual cost of the products and work
effectively.
In this research report, IMDA Tech Limited is taken as new established company, which can
produce different mobile chargers for specific mobile set and phones. It also describes the various
techniques which are followed by IMDA Tech Limited (UK). In this report it describes the concept of
management accounting make comparison with financial accounting and it also explain the role of
management accounting as business decision making tools which department manager can use to take
right decision in different department. It also describes the various costing system so that manager can
estimate the cost of unit by making effective calculation. This report also describes the budget and
process for setting a right budget by using different pricing strategies. This report explain the balance
scorecard which are blueprint of the company's success and there use to make effective control for
developing the effective strategies in an organisation.
TASK 1
a) Definition of management accounting and comparison between management accounting and financial
accounting
To: Line Manager, Imda Tech UK Limited
From: Management Accounting Officer
Date: 26 May 2017
Subject: Importance of management accounting and difference from financial accounting.
Management accounting is a managerial process which include various management function
such planning, organising, staffing., controlling, directing, motivating etc. so that firm can
accomplishes there goals by using the management function. All such kind of strategies are execute by

the manager so that organisation can increases there efficiency and set there standard. Management
accounting also use the information, facts, data which are reliable and accurate in nature and considered
as improving managerial tools (Vosselman, 2014).
Making comparison between management accounting and financial accounting
Basis of Comparison Management accounting Financial accounting
Meaning/Concept Management accounting is a
managerial function of making
effective plan, organisation of
each activity, directing the work
by the employer and making
effective control on each task
and motivate to the employees.
Management accounting can be
done by using all the
information, facts and arranging
them in a appropriate report
format so that each activities can
be estimate by the managers.
Financial accounting is a
financial process which includes
all the financial activity such
preparing a company's financial
statements such profit and loss
account, cash flow, statements of
affairs etc. so that managers can
determine the company's actual
position at the end of the
accounting period.
Requirement in organisation or
not?
Management accounting is a
process which include the report
of each and every informations
and facts so that it can estimate
and increases the organisation's
capability. So that it is not
necessary to approaching
management accounting process
because this accounting
techniques is followed by the
company as per there need.
Financial accounting is an
essential tool for any
organisation's growth. It include
preparing of financial statements
such income statement, balance
sheet etc. In this way every
business organisation should
maintain the financial accounting
approach so that they can
estimate the company's actual
position.
Objectives The main objective of Imda tech
limited is to make effective
control in business operational
The main objective of using
financial accounting is to know
the actual position of the

activity. For example: If Imda
Tech Limited wanted to grow in
market, manager should control
ion the resources and allocate
them as per the need in various
departments.
company that in which position
the company is stand in the
competitive market. It also
estimate the company's financial
position whether the company is
earning profit or facing the loss
during the accounting period.
Format By making decision as per the
management accounting, there
are no specific accounting rule
because all the decision are taken
as per the mangers need, in this
way in management accounting
format are not specified for any
business enterprise.
Financial accounting is an
accounting approaches which
used specific format for making
financial decision. It requires
income statement, balance sheet,
cash flow statements etc. which
are specific and all the
transactions are recorded as per
the international accounting
standards.
Information In management accounting it
includes all the monetary and
non-monetary values, which help
the manager to take a right
business decision. For example:
Imda Tech Limited make full
records of all the company's
expenses which are in monetary
term and it also make full
records on labour turnover which
are non-monetary term in an
organisation.
But financial accounting only
records all such transaction
which have there monetary value
(Vakalfotis, Ballantine and Wall,
2013). For example: Imda Tech
Limited, make full records of all
the transactions such as income
and expenses by making profit or
loss account, assets and liability
by making balance sheet and
cash transaction by making cash
flow statements etc.
Users By using management
accounting all the records are
prepared by the company's
But in financial accounting, all
the statements such as income
statements, balance sheet are

managers. So that only internal
users can use management
accounting in an organisation.
prepared so that all the internal;
and external user can use the
financial statements so that can
they analysis the actual position
of the company. For example:
Government can use the
financial statements so that they
can changers there taxation
policy of a company.
Time In management accounting
techniques there are no need of
making time for completing
there operations (Tappura,
Sievänen, Heikkilä, Jussila and
Nenonen, 2015).
But in financial accounting each
and every transaction are
recorded in the financial
statements at the end opf the
financial year. For example:
Transaction are recorded from 1
April to 31 March.
Auditing and publishing
requirement
By taking management decision.
there will no need of making any
statuary publication by the
auditor.
But in financial accounting all
the transactions and reports are
mandatory to be published and
audited by the statutory officers.
Importance of management accounting information as a tool of decision-making in departments
Management accounting is an important tool for making effective decision-making process in
the departments. By the use of management accounting method, it will help to analysis the cost of unit
of different sources. By measuring the cost of each unit it will help the organisation to work as per there
available sources and unit cost so that they can maximize there profit by minimising there cost. In this
case Imda Tech Limited can minimise there cost by determining the each cost of a unit so that they can
maximize there profitability (Suomala, Lyly-Yrjänäinen and Lukka, 2014).
Management accounting also plays an important role in each department so that they can
determine the best costing techniques so that they can analysis the appropriate cost of each resources. In
this way Imda Tech Limited can decide the right costing techniques among various techniques such as
job costing, inventory control costing system etc. In this way, department manager will decide the right
measuring tool of costing so that it can enhance the profitability of an organisation.

Management accounting includes the report opf every information which are related to
business operational activity. Inn this way, management accounting techniques provide the data for the
department managers so that they can estimate or analysis such information and take corrective action
as per the recorded data to increases the cap[ability of an organisation. For Imda Tech Limited use the
such data which are reliable, accurate so that they can measure there department's performance and
improving there activity to accomplishing the goals (Simons, 2013).
b) Types of management accounting system
Cost accounting system- To determine the actual cost in an organisation, cost accounting system
will be used inn an organisation. Cost accounting system mainly help the organisation to increases there
profitability. In this system actual cost, standard cost and normal; cost are determine to understand the
company actual performance. To calculating the actual cost, such calculation is based on there actual
value but in standard costing, the difference between variance and alternative cost are determined in it.
So that Imda Tech Limited firstly estimate the cost of unit so that they can increases the profitability and
make corrective action to improve there performance.
Inventory management system- Inventory management system is a inventory control computer
based system, in which order, sales, level of inventory, bills for the materials, purchases of material etc.
are recorded and managed by using computer based techniques. In this way Imda Tech limited can use
the inventory management system so that they can estimate the availability of the inventory so that it can
use for the future. for example: by using wireless tacking techniques, or identify the radio frequency of
inventories are used to estimate the actual position of inventories in an organisation (Schaltegger,
Gibassier and Zvezdov, 2013).
Job costing system- There are lots of difference products which are produced in an organisation
so that here, job costing system are used so that manager can estimate the position of the products and
used custom equipments so that all the products are produced in a same manner or in a same way.
Price optimising system- Price optimizing system concerned the services and products which are
given to the customers (Renz, 2016). In this the level of customers satisfaction as per the rendered
products for the given price are recorded in it. In this way Imda Tech Limited will maintain there
product's price by analysing the competitor's position and market conditions and make effective changes
in there price. This system is followed by the organisation because it increases the profit earning capacity
of an organisation.

TASK 2
1. Using absorption costing method
In this method, all the indirect expenses and direct cost are used for measuring the cost of the
products (Otley and Emmanuel, 2013). In this Imda Tech limited can use the absorption costing method
to for measuring the cost of there unit, which are as follows:
As per the above calculations it is determine that by using absorption costing company occur
profit or loss of -£375 and gross profit are recorded with 17500. In the absorption method company can
use fixed and variable both the cost for making the calculation.
2. Using marginal costing method
This method are used for preparing the financial statements of an organisation (Morales and
Lambert, 2013). The calculation of marginal costing is a s follows:

As per the above table is clear that company face the profit or loss by using marginal costing
techniques is -£2,875, because in this method only variable cost are taken in calculation. So in this way
it can be say that marginal cost is reliable as compare to the absorption costing method because in
marginal costing the profitability is higher than absorption method.
Reconciliation
TASK 3
a) Type of Budget and there advantage/disadvantage
Budget are the target in which company can set there task so that they can achieve there goals in
future. There are various type budget , which are as follows:
Capital Budget- The capital budget are those budget which include all the capital asset, cost and
expenses of a company. In capital asset it includes plant, land, building etc. (Lavia López and Hiebl,
2014).
Operational Budget- To determine the operating income and operating expenses of the company,
operational budget are prepared by the company. It include the day to day plan of all the expenses,
revenue and all type of overhead which manager can maintain and pre-determined for there operational
activity.

Cash Budget- This budget are prepared for the estimation of net cash inflow and outflow of the
company. It provide the details of all the cash related data for a specific time period. It al;so help to
estimate the actual cash acquirement in different departments so that it can be fulfil by the managers.
Financial Budget- This budget are prepare for arranging the financial resources in an
organisation. It also analysis that how much fund are require and in which area the fund is really require.
In this way proper allocation of budget are done with the help[ of financial budget (Hiebl, 2014).
Advantage of Budget
 Budgets provide relevant information of the resources, fund which help to maintain the
operational activity well.
 To analysis the company's power and threat budget are very useful (Kaplan and Atkinson, 2015).
 To appraise the performance of the business budget plays an important role.
 It also help to increases the profit of a company.
Dis-advantage of budget
 Budget are based on past and future estimation so that it can not predictable.
 It also make negative impact in business operational activity by taking wrong assumptions.
 It also take time and cost so that it is not considered as good (Fullerton, Kennedy and Widener,
2014).
 It also make difficulty to prepare a future plan.
b) Process of preparing a budget
Obtaining estimates- The first step is to estimate the ideas of sales, purchase, level of production
and expenses of the company. This idea can be done because it give the actual and current position of the
company.
Coordinating with estimates- In this step when the ideas are determined, than such ideas are
deliver to all the departments of Imda Tech Limited by using a appropriate mode of communication. In
this way company can determine the aim and objective which can be fulfil in future.
Implementing the budget plan- When all the ideas of sales, income, expenses etc. are deliver to
various department, then it will be execute or implement by the employees of such department by
analysis the available resources, labour, material in an organisation (Fullerton, Kennedy and Widener,
2013).
Reporting the progress- Inn this last step as per the above budget company provide feedback for
all the various department and also make some changes or alternation as per the need. Hence in this way
Imda Tech Limited can make there effective budget plan.

c) Pricing strategies of the business
Management accountant of Imda Tech Limited will set there product price as per the customer
satisfaction level. Business can use various type of pricing strategies such as absorption pricing, high-
low pricing, limit pricing, cost plus pricing , premium pricing etc. and set there product price. Company
also analysis the market position time-to-time and also examine there competitor pricing strategies so
that as per the above factor they can set there prices. Imda Tech Limited also launches new and specific
charger as per the need, want and preferences of the customers. In this way, accountant set there price in
such a way that company provide the products to there customers and satisfied them and also earn
profitability as per there strategies (DRURY, 2013).
TASK 4
a) Balance score card approach
Balance score card is a fundamental framework of a company which represent company's actual
position that company is working well as per the standard or not (Cooper, Ezzamel and Qu, 2017).
1. Use of balance score card for intensification and responding to the financial problems
IMDA Tech Limited use the balance scorecard so that company can analysis there actual
standard and determine the human resource, consumer perspective etc. after that they can make
innovative changes in there workplace. It is an important tool which was used by cited firm so that they
can measure there performance and take corrective action for improving there activity. As per the case
Imda Tech Limited is facing the loss of 1.5 million GBP so that cited firm give there support so that
company can balance there performance and overcoming there financial issues. In this way company
should adopt SMART objectives such as they try to increase there sales by 30% till the end of 2018 and
also increase there revenue by 35% (Brandau, Endenich, Trapp and Hoffjan, 2013)
2. Use of balance scorecard in order to improve the financial governance
Balance score card is an important tool that help to identify the issues of the organisation and
solving the problems of an organisation. Imda Tech Limited will focus on there customer's need and
preferences so that it can fulfil the customer's need and increases there profit. For example: Marketing
manager of the cited firm is planning to make conservation with the finance department that to allocate
more funds to the marketing section so that they can offer good discounts to the consumers and promote
the brand well.
Internal business practices are also in the balance scorecard techniques (Bodie, 2013). Balance
score card assist the Imda Tech Limited in reducing the gap between excepted and actual performance
and results. With the help of this approach cited firm will be able to accomplish it objectives easily.

CONCLUSION
From the above report it can be concluded that management accounting is an important tool for
taking right decision in the organisation. It help to achieve the goals and support the organisation to
solving there problems effectively. It is the method by which resources are effectively utilized and
allocate as per the need of an organisation. By using various accounting standard and costing techniques,
manager also choose effective costing techniques. It also help top minimize the cost so that it will
increases the profitability in an organisation (Armstrong, 2014).

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Online
Management Accounting: Concept, Functions and Scope. 2017. [Online]. Available through
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