Management Accounting Report for Tech (UK) Limited

Management Accounting report for Tech (UK) Limited
1

Contents
Introduction.................................................................................................................................................3
TASK 1.......................................................................................................................................................4
TASK 2.......................................................................................................................................................9
TASK 3.....................................................................................................................................................12
Introduction...........................................................................................................................................12
Content..................................................................................................................................................13
Conclusion.............................................................................................................................................18
TASK 4.....................................................................................................................................................19
Conclusion.................................................................................................................................................23
REFERENCES..........................................................................................................................................24
2

Introduction
This report deals with the various fundamentals of management accounting which can apply to
the organisation so as to solve the financial problems and attain sustainable success. The
importance of the management accounting has been explained which can be used by the
managers for taking the strategic decisions in the organisation. Also, how the management
accounting is different from the financial accounting has been identified. The income statements
using the marginal and absorption cost has been prepared to evaluate the performance of the
organisation. With the benefits and limitations of the budget the proper procedure of preparing
the budget has also been highlighted.
3

TASK 1
A) Management accounting is the procedure of analyzing the cost and operations of the
business so as to prepare the internal financial reports which helps the managers of Tech
(UK) Ltd in taking the strategic decisions (Accounting Tools, 2017). Financial
accounting means analyzing the financial reports of the company to track the financial
tractions.
I)
Point of Distinction Management Accounting Financial Accounting
Focus It focuses on the decisions
which are to be made for the
future.
It focuses on the past to take
the decisions.
Scope The scope of the management
accounting is narrow.
Its scope is wide.
Primary Users Internal audience like
managers.
External audience like
investors.
Regulations GAAP and IFRS None
II) Management accounting information is the crucial part in the organisation for taking the
appropriate decisions. The results which arise from analyzing these statements will provide the
managers of the Tech (UK) Ltd an idea to plan their resources and profit margins accordingly
(Butterfield, 2016). Collecting the data from the various departments and then comparing those
with the actual or the budget one will help the organisation to enhance their performance
(Butterfield, 2016). The analyses of the reports can be done through various tools and techniques
some of which includes Key Performance Indicators (KPI’s), Benchmarks and balanced
Scorecard. The evaluation of the performance also helps in achieving the growth (Butterfield,
2016).
III) Cost accounting systems are a framework which is used by the organizations for analyzing
the cost of the products so as to predict the profit and valuate the stock. There are three cost
accounting systems:
4

Actual Costing: It means recording the actual cost of the products which includes actual cost of
material, labor and overhead incurred during the allocation of the resources (Ryckman, M. L.,
2018).
Normal Costing: It is the cost analysis tool which assigns the cost to the product including the
cost of the material, labor and overheads (Ryckman, 2018).
Standard Costing: It is the technique for analyzing the expected cost for an actual cost and then
analyzing the variance between both the costs (Business Dictionary, 2018).
IV) Inventory management system is the basic instrument for all the organizations which helps
in analyzing the inventory of tangible goods. This tool is basically used by the organizations that
manufactures and sells the finished and semi-finished goods in order to prepare work order and
other related documents (Kontus and Kastav, 2014). Inventory management system is basically
used by the large scale industries as this system is quite expensive and costly so the small scale
industries cannot afford it. This tool is used by the mangers in the organisation as it is highly
optimized and effective for the overall success of the business (Kontus and Kastav, 2014).
V) Job costing is an accounting method of tracking the cost for manufacturing the particular
product. Through job costing systems the accountant can keep a track on the cost of the goods
which are under production and can maintain the data which is relevant to the business
operations. The job costing forms includes the direct labor, direct material and direct overheads.
The projects such as construction use this tool widely to analyze and determine the cost. This
analysis is important for the company to determine the accuracy in the estimating system of the
organization which allows achieving the reasonable profits (Wilkinson, 2013).
5

B) I) There are various types of managerial accounting reports which are used by the
managers for analyzing the company’s performance (Sullivan, 2018). Some of which are:
Image: Types of managerial Accounting Reports
Source: By Author, 2018
Budget Report: This report reveals the actual performance of the company by defining
the variance between the actual and the predicted cost.
Job cost Reports: This report shows the expenses of the particular project. It identifies
the areas where the higher earnings can be achieved in order to gain profits (Sullivan,
2018).
Inventory and Manufacturing: These reports are used by the companies for making
their manufacturing process more efficient as this includes the wasted inventory, labor
cost and the overhead cost (Sullivan, 2018).
II) The information should be presented in the manner it should be understandable as it is
the evidence through which the analyses of the financial performance is measured by the
top level managers of the company. The information which is depicted by the financial
accounts is first measured with the actual performance and then the variance is
calculated. This variance shows the path to organizations for achieving the desired
objectives. If the information is not presented in the understandable form so it will be
difficult for the organizations to evaluate it take the decisions accordingly.
6
B u d g e t R e p o r t
J o b C o s t R e p o r t s
I n v e n t o r y a n d
M a n u f a c t u r i n g