Management Accounting Report for Tech (UK) Limited

This report provides a comprehensive analysis of management accounting principles and practices, focusing on their application within Tech (UK) Limited. It explores key concepts such as cost analysis, budgeting, and the balanced scorecard approach, demonstrating how these tools can be utilized to make informed decisions, improve efficiency, and drive sustainable success. The report also delves into the differences between management accounting and financial accounting, highlighting the unique role of management accounting in supporting internal decision-making processes. Through practical examples and case studies, the report provides valuable insights into the importance of management accounting in today's business environment.

Management Accounting report for Tech (UK) Limited
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Contents
Introduction:................................................................................................................................................4
Task 1 Report:.............................................................................................................................................5
A) Explanation of management accounting and the essential requirements of management accounting
system which entails:...............................................................................................................................5
1. Distinguishing Management Accounting from Financial Accounting:................................................5
2. The importance of management accounting information as a decision-making tool for department
managers..................................................................................................................................................6
3. Cost management systems:..................................................................................................................7
4. Job cost systems:.................................................................................................................................7
5. Inventory management systems:..........................................................................................................7
b) Presenting financial information:............................................................................................................9
M1 Evaluate the benefits of management accounting systems and their application within an
organizational context............................................................................................................................10
D1 critically evaluates how management accounting systems and management accounting reporting is
integrated within organizational processes............................................................................................11
Task 2........................................................................................................................................................12
a) Calculate costs using appropriate techniques of cost analysis to prepare an income statement using
marginal and absorption costs................................................................................................................12
M2 accurately apply a range of management accounting techniques and produce appropriate financial
reporting documents:.............................................................................................................................16
D2 Produce financial reports that accurately apply and interpret data for a range of business activities:
...............................................................................................................................................................17
Task 3........................................................................................................................................................18
a) Different kinds of budgets and their advantages and disadvantages..................................................18
b) The budget preparation process including determination of pricing and different costing systems
that can be used.....................................................................................................................................21
c) The importance of budget as a tool for planning and control purposes..............................................22
M3: Analyze the use of different planning tools and their application for preparing and forecasting
budgets..................................................................................................................................................23
Task 4........................................................................................................................................................24
a) Balance scorecard approach...............................................................................................................24
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M4 Analyze how, in responding to financial problems, management accounting can lead organizations
to sustainable success............................................................................................................................26
D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to
lead organizations to sustainable success...............................................................................................27
Conclusion:................................................................................................................................................28
References:................................................................................................................................................29
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Introduction:
The major aim of preparing this report is to analyze usage and significance of management
accounting and tools for making accurate and successful decisions. This reading will be going to
explain various methodologies and types of management accounting systems, importance of
management accounting reporting in the context of Tech UK limited. This report will explain the
features of cost techniques and analysis in order to measure transparency and reliability to
manage the business and they're objective to get long-term achievements. This report will
provide knowledge about balance scorecard as decision making management tools which will
help the reader to assess the capability of the company to decisions and attain effective meaning
outcomes through this; it will also include a description of budget and their significance of
budgets in the company.
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Task 1 Report:
A) Explanation of management accounting and the essential requirements of management
accounting system which entails:
Management accounting is a profession which helps in managing, observing and inter-
relating all the things related to business activities. It is a study of collecting managerial,
financial and operational data, evaluating the systems and make standards related to that in
order to make effective decisions within the management. Management accounting is
essential to be adopted by the company to maintain working environment and decision
capability stable.
1. Distinguishing Management Accounting from Financial Accounting:
Basis Financial Accounting Management accounting
Nature Financial accounting is the
tool which is utilized by the
company to manage financial
activities.
It is flexible in nature which is
used in the company to manage
decision making possibilities.
Objective The major objective of
adopting financial
accounting is to define
accuracy and transparency in
financial accounting and
records (Legaspi, 2014).
But management accounting is
adopted in the company to make
various kinds of decision more
flexible and accessible.
Scope Financial accounting has a Management accounting is not
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wide scope in the
organization because it is
mandatory to be utilized
while producing financial
and annual reports.
compulsory for the company and
management to be adopted due to
its limited scope in the company
(Lunkes, et. al., 2013).
Accounting
compliance
Financial accounting is based
on the regulatory process of
accounting principle and
norms which is necessary to
comply with accounting
standards, regulations and
laws while making financial
statements.
In Management accounting,
accounting norms and regulations
are not compulsorily adopted, it is
just related to the operational
reports.
Interest It is basically used for
internal plus external both
users who have interest in
company’s financial status.
Management accounting is
generally adopted when its
compiled with only internal users
of consumption.
2. The importance of management accounting information as a decision-making tool for
department managers.
1. Pricing decision: management accounting is adopted by the company to determine
their product prices as per market trends and competition demand. Management
accounting allows the company to have competitive analysis and evaluate the market
condition. It is important for the company to monitor market changes and set prices to
increase sales volume.
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2. Investment decision: Investment decision can be taken by management accounting.
Finance department and managers adopt management accounting tools to measure
cost-effectiveness and accuracy of the financial terms of the company to meet its
long-term obligation. It allows the finance department to observe funds requirement
and make an investment decision.
3. Inventory decision: management accounting allows the company to review and
measure accuracy and the actual level of the inventory. It allows the company to
manage inventory and avoid risk part of under and overvaluation o
3. Cost accounting systems:
Cost management systems are used in the company to assess the product and their cost ability. It
is also known as product assessment system which measures cost-effectiveness and accuracy of
the product as per market review and demands. Cost management systems are basically adopted
to evaluate and monitor value and cost of the product in order to cut additional cost and
maximize profit.
 It monitors and evaluates cost assessment factors of those products which can be directly
assessed related to their cost.
 It controls cost and makes even sure that wastages of non-value products could not be
increased.
 It analyses the cost and revenue related to reaching the conclusion of maximizing profit
and benefits.
4. Job cost systems:
Job cost systems are usually utilized in the company to operate and manage each job and tasks
related to the product effectively. Job cost systems are known as process or job management
systems which is also adopted to understand reliability and effectiveness of cost for each job
process.
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 It allows the company to trace and monitor their every activity from production to sales
to measure cost and control risk factors.
 It indicates to measure funds requirements regarding resolving the funding problems
related to sales and budget through cost-based analysis in Tech UK Ltd.
5. Inventory management systems:
Inventory management systems are those systems which are used to measure and control
inventory and increase the storage capacity of the company. Managers of the Tech UK can easily
determine the price of the product and maintain production level by this inventory management
systems because this system allows the company to trace each activity related to the inventory
and company’s requirements.
 ERP systems and tools are utilized in the company to measure storage and level of
inventory in the company.
 JIT systems are used as inventory management system that allows the company to keep
records related to inventory inflow and outflow.
 These systems allow the company to control under and overvaluation of the inventory
and make a quick decision related to the production.

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b) Presenting financial information:
Various types and importance of accounting reports:
1. Sales report:
Sales report is managed and produced by the company related to sales activities and its
measurement. Sales report defines all activities related to profit and sales relationship in the
particular year. Sales report helps the company to evaluate market risks, trends, demands an
supply of the product through sales report. It helps them to not reporting past mistake so that
sales volume and profit could be increased (Legaspi, 2014).
2. Inventory report:
The inventory report is that report which includes all information related to stock inflows and
outflows in management. These reports are prepared at the time of production. Through this
report, the company can easily understand the production level and capacity to produce
additional units within the organization. Reports help them to revalue stock level and control
over and undervaluation condition of the inventories.
3. Performance Appraisal report:
Performance appraisal reports are made to define and measure the performance of the company
related to financial, operational and managerial tasks. Tech UK can easily measure the changes
in the performance of the company relative to the information included in the performance
appraisal report (De Jong, et. al., 2012).
4. Investment report:
Investment report is usually made in the company through finance department to indicate and
measure funds report and capacity of the company to meet long-term obligations, investment
report includes policies and possibilities for the management from investment could be made
easily and effectively. It allows the organization to prepare investment policies as per company’s
investment capabilities to invest in new projects.
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M1 Evaluate the benefits of management accounting systems and their application within
an organizational context.
Benefits of management accounting systems:
Management accounting systems are those systems that are used in the company to make
decisions as per company demands and requirements. It can implicate in management and in an
organization for taking sales forecasting, pricing determination, funds and other decisions in
order to maximize and manage productivity and profitability in the company. Management
accounting tools and systems are utilized by the company to manage all records and
documentation reports related to the financial, operational and budgetary activity (Lunkes, et. al.,
2013). It allows the company to evaluate their management and operation needs to rectify and
understand the situation. It provides a platform for the management to reduce the cost of their
products and make profitable decisions as per requirement and needs. Management accounting
reports and accounting systems are used which provides an accurate and perfect knowledge of
market trends so that company could reach the management effectiveness and profits.
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D1 critically evaluates how management accounting systems and management accounting
reporting is integrated within organizational processes.
Management accounting systems are taken as those accounting systems which are utilized in
measuring accounting accuracy of all records and documents to make transparent decisions in
this matter. It provides accurate, transparent and reliable information based on managerial and
financial activities of the company. Tech UK can figure out all changes in managerial and
financial performance in order to set organizational targets and achieve long-term benefits. The
company will be able to recognize future needs and threats so that risk can be measured to get
reduced and long-term productivity will be managed. Tech UK is the company which wants to
measure adaptability of management accounting systems to consider financial possibilities to
increase benefits and target opportunities for the management.
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Task 2
a) Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs.
(Source: Author, 2018)
Cost analysis techniques are used in the management to analyses cost-effectiveness and
transparency level to recognize funds and cash flow behaviour by reducing cost and maximize
profit.
1. Absorption costing:
Absorption costing is the costing method, which is described in the company ascertainment of
company’s production cost. In the technique, company use to measure total gross profit by
subtracting total production cost including fixed and variable cost of total sales and then selling
and other expenses will be deducted from the total gross margin.
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Marginal
Costing
Absorptyion
costing

Net profit by absorption costing £Amount £Amount
Salesvalue 52500
Less: Cost of Sales:
Opening stock 0
Cost of production 40000
Closing stock 10000 30000
(Under)/Over absorbed fixed prod. O/h -5000
Gross Profit 17500
Less: Selling Expenses
Variable sales expenses (5.25*1500) 7875
Fixed selling expenses 10000 17875
Net loss -375
2. Marginal costing:
Marginal costing is utilized by the Tech UK management of the company in order to measure
variable cost and effectiveness of cost of sales for total sales. In this method of cost analysis,
company use to ascertain variable cost to consider contribution then to get total net profit margin,
company use to reduce total fixed form contribution in order to measure profitability (Aurora,
2013).
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Net profit by marginal costing £Amount £Amount
Sales value 52500
Less: Variable costs
Stock at the opening 0
Cost of production 30000
Stock at the closing 7500 22500
Variable sales overheads 7875
Contribution 22125
Less: Fixed costs:
Fixed Production overheads 15000
Fixed Selling overheads 10000 25000
Net loss -2875
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M2 accurately apply a range of management accounting techniques and produce
appropriate financial reporting documents:
Costing analysis an techniques is the Tech UK Ltd is useful and based on financial and logical
demands of the situations. Company use to make profitability decisions which affect the
activities and financial strategies of the company. Marginal costing is one of them. Marginal
costing method is utilized in the company to measure and regulate cost-effectiveness and
behaviour of the company. Costing techniques are measurable and can be obtained as beneficial
strategies to ascertain the cost and revalue them as per situations demands. Absorption costing is
the method which is utilized to evaluate total cost of production expenses including both fixed
plus variable cost. In the valuation of the cost of the product, there are great differences between
both strategies. Closing stock valuation from marginal costing ascertains less in the comparison
of evaluating closing stock from absorption costing (Aurora, 2013).
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D2 Produce financial reports that accurately apply and interpret data for a range of
business activities:
Financial reports are prepared in the company by financial department. This report is managed
and produced to identify financial needs and keeping records of the company’s financial
activities and business regulatory bodies. Preparation of financial report will allow the company
to maintain records of accounting bodies and principles through which company use to make
further decisions based on sales, production, promotion and investment etc. (Aurora, 2013).
activities. Such report is based on a comparison between actual outcomes and planned behaviour
related to financial and operational activities of the company. Costing analysis techniques,
variances analysis techniques helps in measuring accuracy, relevancy and transparency from top
management to lower management level so that productivity and profitability of the company
could be increased.
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Task 3
a) Different kinds of budgets and their advantages and disadvantages.
Budgets:
(Source: Author, 2018)
1. Master budget:
The master budget is those budget in which all budgets are prepared in a combined form. The
master budget can be produced including sales, production, operation all regular transactions
in one place. It is a combination of various types of budgets which helps the company to
manage and interpret effectiveness and accuracy of management and financial decisions
(Hassan And Ahmed, 2012).
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Operation
Budget
Sales
Budgets
master
budegts

2. Sales budget:
Sales budget are prepared in the management including all sales and selling activities of
the company. It includes sales activities, prices and profit effectiveness related to the
products. It is prepared monthly, quarterly and annual basis as per company’s
requirements.
3. Operation budget:
Operation budgets are those budget in which all information includes related to
company’s operational expenses and overheads. Operational budges includes all
information and facts of operating cost and profit. Such budgets are operated and
managed in order to reduce operating expenses incurred from wastages of non-value
projects.
Basis Advantages Disadvantages
Master budget In the master budget, all
budget is in a combined
format. Company beneficially
manages all facts, data and
makes a combined decision-
related in regards to achieving
organizational goals.
Master budget preparation
becomes hectic for managers
sometimes. Managers feel
difficulties in operating such
budget because it creates
uncontrollable era and situation
for the company.
Sales budget Sales budgets are useful in
managing estimated cost to
reduce it and increase sales
volume.
It measures sales and revenue
relationship of the company to
This budget focuses only on
financial data rather than
including qualitative data.
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increase the productivity of
the company (De Jong, et. al.,
2012).
Operation budget Operation budget is beneficial
for the company to measure
accuracy and transparency of
cost and operating overhead.
It allocates all operating
expenses perfectly to manage
and meet company’s
requirements.
Sometimes maintain the
accuracy level of operating
expenses through this budget
becomes impossible.
Managers feel sometimes hectic
to operate and manage operating
expenses due to its complexity
and critical process (Egbide And
Agbude, 2014.
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b) The budget preparation process including determination of pricing and different
costing systems that can be used.
1. Budget assumptions: in the management of budget preparation company has to make proper
assumptions about funding and additional spending while making a budget decision.
2. Review Bottlenecks: reviewing bottlenecks and determination of budget plans means setting
budget goals, strategies, the requirement of funds and spending and capital to spend in new
projects have to be decided (Raghunandan, et. al., 2012).
3. Availability of funding: in this process, the ability of the company and organisation should be
decided as per requirement and spending on the project.
4. Costing process & pricing determination: in this process, the company needs to determine
the cost of the project so that pricing strategies could be made and prices of the project could be
determined.
5. Creation and issue budget packages: in the process of creating a budget, the budget could be
created as per company needs, the company requires to monitor the budgetary process, actions,
funding strategies and control over extra activities to create a budget. The budget could be issued
by the organisation after evaluating drawbacks and make proper arrangement and adjustment
regarding such drawbacks (Raghunandan, et. al., 2012).
6. Budget Model: budget model are prepared in the business in order to possess long-term
obligation related to producing a master budget, capital budget etc. to measure accuracy and
transparency in the financial records.
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c) The importance of budget as a tool for planning and control purposes.
Preparation of budget is necessary for the business to regulate and control budgetary policies and
business activities. Through budget company makes plans, evaluating business transactions,
policies and implementing decision such as forecasting, management and production kinds of
decisions. Tech UK needs to produce a budget in order to increase work scope and taking
beneficial decisions regarding successful business. So preparation of the budget is essential in the
organisation to make effective relation and manage to target oriented possibilities within the
management. Budgets are prepared and help in comparable decisions with the actual results for
making relative outcomes to responding financial problems and maintaining sustainable growth
in the business (De Jong, et. al., 2012).
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M3: Analyze the use of different planning tools and their application for preparing and
forecasting budgets.
Analysis and evaluation of different planning tools:
1. Ratio analysis: ratio analysis is used in the business to regulate and measure solvency,
liquidity and transparency level of the company to achieve organisational goals. Ratio analysis is
the financial plan in which company is allowed to monitor the changes of financial performance
and communicate with interested users who have the interest of evaluating the financial position
of the company (Konsta And Plomaritou, 2012).
2. Cost analysis: cost analysis is the analysis, which company can utilise in measuring cost-
effectiveness, the accuracy of financial business activities. On the other hand, ABC analysis is
the costing techniques which are applied in the business to make all financial plans successfully
to attain long-term achievements. Cost analysis helps all department of the company to measure
and monitor business flexibility with the help of variable cost and marginal cost of total sales.
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Task 4
a) Balance scorecard approach
it is management tool which is utilised in the company in conceptualised manner. It is based on
logical, analytical statement which allows the company to regulate effectiveness and budgetary
control over management. It provides accurate and flexible knowledge related to the past
movement of the company it helps the company to continue conceptual framework for
identifying future threats and resources to make company’s work target oriented.
Importance:
1. It is the one which is used by the company to evaluate and generate more profitability to
manage all the systems to make beneficial decisions.
2. Balance scorecard is used by the company to determine pricing, progress, sales and demand
forecasting target to enhance productivity.
3. It allows the company to meet long-term achievements by attaining beneficial target and
objectives (Pereira, et. al., 2013).
Application of balance scorecard in managing company and responding financial
problems:
Balance scorecard is used in the Tech UK Ltd as a management tool to recognise adaptability of
financial strategies and process for long-term managerial and financial success. The company
uses BSC model in their entire department as decisions making tools to manage and evaluate
changes occurred in the performance and provide effective knowledge about business pattern and
growth. Balance scorecard manages four outcomes which are related to company’s key success,
that are
1. Learning outcomes: BSC is utilised in the business to set effective learning outcomes by
setting and determining progressive benchmarking to make accurate decisions.
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2. Customers relation: customer Relation can be easily managed by the company by using BSC
methodologies for the execution of plans and setting goals for customers to identifying their
needs and demands (Bukenya, 2014).
3. Business-oriented: BSC helps the company to become business-oriented by accepting various
kinds of targets such as evaluation of business activities, organisational goals, setting business
benchmarks by corporate governance and setting plans to lead towards business success
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M4 Analyze how, in responding to financial problems, management accounting can lead
organizations to sustainable success.
According to the above lines, management accounting is adopting and their systems are installed
in the business scenario which helps in responding sustainable growth and reduce risks of the
company. Tech UK needs to utilise a right and accurate collection of information, data and figure
out accuracy. It helps the company to fix and set their priorities to achieve success and improve
their market performance. The company sets KPI’s, benchmarking and control and regulate
budgetary projects to lead towards sustainable growth. Management accounting systems help in
making business decisions, sets accurate goals to make successful achievements by determining
prices of products, control over inventories, sales forecasting and other related decisions can be
taken through management accounting systems (Zaleha Abdul Rashid, et. al., 2014).
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D3 Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organizations to sustainable success.
In the Tech UK, application of management accounting systems and reports are beneficial plus
effective to be determined and evaluated for getting long-term success in the business market.
Planning tools can be taken as a medium of financial sustainability such as variance analysis,
cost analysis, standard costing and process costing etc. to control future threats and effectiveness
(Zaleha Abdul Rashid, et. al., 2014). Tech UK needs to planning and setting strategies which
allows them to regulate and produce accurate financial statements and reports. Such kinds of
management accounting systems are beneficial for the company to assess and set business
priorities and get long-term achievements.
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Conclusion:
The major aim of preparing this report was to analyze usage and significance of management
accounting and tools for making accurate and successful decisions. This reading explained
various methodologies and types of management accounting systems, importance of
management accounting reporting in the context of Tech UK limited. This report has also
explained the features of cost techniques and analysis in order to measure transparency and
reliability to manage the business and they're objective to get long-term achievements. It has
provided knowledge about balance scorecard as decision making management tools which
helped the reader to assess the capability of the company to decisions and attain effective
meaning outcomes through this; it has also included a description of budget and their
significance of budgets in the company.
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