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Management Accounting of Imda Tech (UK) - Docx

   

Added on  2020-01-07

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Management Accounting

Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1 ...........................................................................................................................................4P1 Management accounting and its functions.............................................................................4P2 Types of management accounting system.............................................................................6TASK 2............................................................................................................................................7P3 Income statement using absorption costing and marginal costing methods..........................7TASK 3............................................................................................................................................9P4 a) Types of budgets................................................................................................................9b) Process of budget preparation...............................................................................................10c) Pricing strategies...................................................................................................................11TASK 4..........................................................................................................................................11P5 Explain what a Balance Score Card approach is and its implementation...........................11CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14

INTRODUCTIONManagement accounting can be defined as the allocation of financial data and directionto a particular company for its use which will also be helpful in the business development.Finance is the blood of any firm, which helps the entity to grow successfully in the market, andfor the proper management of finance it is necessary to prepare management accounting report(Ward, 2012). This report is based on the case study of Imda Tech (UK), who are the producersof mobile phone chargers and other gadgets. In this report various functions of managementaccounting, its types and methods, budgeting methods will be discussed. Income statement forthe Imda Tech will be prepared in this report. Income statement can be defined as the financialstatement, that helps in analysing financial performance of the company in a particularaccounting period. Financial performance is analysed with the help of summary, which showshow business incurs its expenses and revenues through non-operating and operating activities. TASK 1 P1 Management accounting and its functionsManagerial accounting or management accounting can be referred as the process ofanalysing, identifying, presenting and recording financial information which is used by theinternal departments or management for the process of decision making, planning and control. Incontrast to the financial accounting, management accounting is relation with such activitieswhich provide necessary information and reports to the internal users like entrepreneurs,managers etc. so that they can plan and control activities of business (Define ManagementAccounting. What are its objectives. 2016). Difference between management accounting and financial accountingFinancial Accounting Management Accounting It is in a specific format which is given byinternational accounting standards, in order tocompare the financial accounts of variousfirms. There is no particular format for the system ofmanagement accounting. Financial accounting is helpful for decisionmaking, investment making and in-creditratings. Management accounting is helpful in planning,recording and controlling activities in order tohelp in the process of decision making.

Information which is produced by financialaccounting is useful for the external users likebank, shareholders and creditors (Vaivio andSirén, 2010). Information which is developed bymanagement accounting is useful for internalusers like employees and mangers. Main focus of financial accounting is onhistory.Management accounting's main focus is onfuture.Financial accounting reports are prepared bythe department of finance. Management accounting reports are createdwith the coordination of each and everydepartment in an organisation. Importance of management accounting in decision makingManagement accounting is very helpful in the process of strategic planning. When ImdaTech is looking for making strategic decisions, for instance, development of the new product,expansion of business in other countries, acquiring other business, for all such decisions CIMAtrained accountant will help in providing advice. Various tools can also be used which will behelpful in the process of decision making, these can be like ratio analysis, forecasts (like varianceand cash flows) and budgets. Ratio analysis: It is helpful in the evaluation of the different aspects related tocompany's financial and operating performance like liquidity, profitability, efficiencyand solvency. Trends of these ratios are checked from time to time to know whether theyare deteriorating or improving. Forecasts: It can be done with the help of variance analysis and cash flow analysis.Variance analysis can be defined as the quantitative investigation regarding differencebetween planned and actual behaviour. It is also done for maintaining control overbusiness. Cash flow analysis helps in analysing cash inflow and outflow of the ImdaTech. Budgets: It can be termed as the quantitative expression of the financial plan for aparticular time. It includes planned revenues and sales volumes, costs and expenses,liabilities, cash flows and assets (What is Budgetary control?. 2017). Functions of management accounting

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