Detailed Management Accounting Report for Tech (UK) Limited

This management accounting report analyzes the financial situation of Tech (UK) Limited, a retail business facing losses in the mobile telephone and gadget market. The report distinguishes between management and financial accounting, emphasizing the importance of management accounting information for decision-making. It covers key areas such as future forecasting, investment return analysis, variance analysis, cash flow management, and productivity improvement. Different cost accounting systems (actual, normal, and standard costing) and inventory management systems (FIFO, LIFO, ABC analysis) are discussed. The report also presents various managerial accounting reports, including external, internal, and enterprise reports. It further includes income statements and an analysis of the Balanced Scorecard approach for addressing Tech's financial problems, comparing it to other management accounting approaches. Desklib provides access to this and other solved assignments for students.

Management accounting report for Tech (UK) Limited
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Contents
Introduction.................................................................................................................................................3
Task 1..........................................................................................................................................................4
a) Explanation of management accounting and the essential requirements of management accounting
(P1, M1 and D1).......................................................................................................................................4
b) Presenting financial information.........................................................................................................8
Task 2..........................................................................................................................................................9
P3: You are required to prepare income statements (M2, D2)................................................................9
Task 3........................................................................................................................................................13
P4: In report including (M3, D3)............................................................................................................13
Task 4........................................................................................................................................................16
Referring to Tech’s current financial situation, explain ways by which the Balanced Scorecard
approach suggested by the auditors can be used to respond its financial problem and compare this
approach to another management accounting approach used in another organisation of your choice
...............................................................................................................................................................16
Conclusion.................................................................................................................................................18
Bibliography...............................................................................................................................................19
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Introduction:
Tech (UK) Limited is in huge losses doing business in mobile telephone and other carry-on
gadgets in UK on retail basis. The current situation of the company that is being reported by the
managers but there is lack of financial and information due to which the decision making is
getting affected. A report to evaluate such financial information is to be made where the use of
Management Accounting system, management Accounting report, balanced scorecard approach,
ABC analysis, variance analysis has to be reported to the team. Here is the brief report of all such
requirement for the company.
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Task 1:
a) Explanation of management accounting and the essential requirements of management
accounting (P1, M1 and D1):
I. Distinguishing Management Accounting from Financial Accounting.
The preparation of financial information and providing such information to various business
managers so that such information can help them in making decision is called as Management
Accounting. Management Accounting reports and Management Accounting prepares is for the
internal management team. Management Accounting provides the users with the where position
of the company and the user here at the part of the internal team. The purpose behind
Management Accounting report is to help to management and the various departments so that we
can provide them various result of their department for the Welfare of the company. (Vitez,
2018).
Financial accounting reports the outsiders of the company that are investors, suppliers etc. to
show their company’s actual position to them. Particularly every year financial accounting
reports have to be generated as they are compulsory as per the requirement of law. For
preparation of financial accounting reports various accounting standards in accounting policies
have to be kept in mind and the financial reports shall be complied with all such requirements.
(Vitez, 2018)
II. The importance of management accounting information as a decision making tool for
department managers.
These are discussed below:
Future forecasting – accounting systems helps in deciding the future while considering decision
making. (Vitez, 2018). Future forecasting is very important for a business as such forecasting
helps in analysing various reports and provides what actions the company should take in the
future so that such decisions are fruitful for the company. Management accounting report helps
in making in forecasting of the future and helps the managers to make decisions regarding the
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business. With the help of past results and trend analysis the managers can forecast the future
and such forecasted future is helpful for them in decision making.
Analyses investment return- For the management to make a decision which involves heavy
investment, the rate of return for such investment has to be calculated, so that the company can
analyse weather such investment is beneficial for the company or not. Not only this when there
are more than 2 investment that the company has to do, it helps in calculating rate of return of all
such investments available and provides the managers with the best. Rate of return the amount of
earnings that the company will be provided with when the organisation invests in the investment.
(mishra, 2018)
Analyses in variances- It is not always correct what has been predicted by the management and
what have been the actual results. The difference between the two gives the rise to variances.
Search variances are identified by the management accounting system and have corrected there
by the managers. Variances can be of two types that are positive variances and negative
variances. The management accounting system takes the advantage of the positive variances and
corrects the negative variances. There are various analytical techniques through with the
variances can be identified and corrected. Search techniques are part of management accounting
system and Management Accounting system help them in identifying the variances and to help
them in making decisions.
Aid in decision making process - For a production manager and production team it is the most
difficult to whether purchase or produce equipment. Such decisions are highly evaluated by the
company so as to ensure that the most out of the list can be taken by the company. Considering
the cost of both of the proposals is necessary for the company before making such evaluation as
what to consider. (mishra, 2018)
For evaluating the cost of both the proposal Management Accounting system is highly
recommended and is found most beneficial for the entities. One has to understand the
management accounting system and its policies and principles prove it becomes very easy for the
user to evaluate to proposal of making the products at home or buying it from outside. So as to
take the decision of making it or buying it management accounting system are very helpful.
(mishra, 2018)
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Ascertaining cash flows- The revenue growth of a company is totally dependent on the
projected cash flows that are being presented by the managers to the users of the company. The
information that has been provided to the manager of the company used to decide how the
evaluation of money and resources is to be done so that the company can be benefited with the
decision that the manager has taken. The manager can easily predict the cash flows and the
impact of the cash flow on the business with the help of Management Accounting system.
Management accounting system helps the manager by providing them with the information
which includes the cash outflow inflow for the business during the year. With the help of these
past results and trend analysis the managers can easily identify the cost that the company will
incur in the near future. (Vitez, 2018)
To improve productivity and profitability: In an entity the production process should be
evaluated as and when required. About the production process a production manager can give a
detailed analysis of the productivity that the companies is providing and if the user of the report
provided by the production manager is not satisfied with the productivity levels that has been
stated by the manager, productivity needs to be improved. The productivity can be improved
with a Management Accounting system through with such productivity can be increased. For
increasing the productivity of the company will have to consider the profitability as well as.
Earning that the company is making by selling the product produced by the company. The
profitability and productivity can be improved with the help of Management Accounting system.
(Vitez, 2018)
III. Cost accounting systems (actual, normal and standard costing)
When a product is made various costs related to the product occur in manufacturing such
product. Accounting of such costs is called as cost accounting system. (Vitez, 2018)
It can be further divided into:
Normal costing –In this system, actual material costs, actual labour and variable overhead cost
are calculated (Drury, 2013).
Actual costing – It ascertained actual cost which is incurred for production of products.
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Standard costing- The estimated general cost that the product will involve of various material
labour and overhead cost are called as standard costing.
IV. Inventory management systems.
Inventory management systems-
Various combination processes and Technology that is done for the maintenance of the products
and whether the products are available in stock on the company. Inventory management system
is useful in many ways as it helps in identifying the inventory that weather for the inventory has
barcode labels or other tags that are useful for identifying the stock. Inventory management
system includes in itself various tools through which the barcode labels can be identified and
scanned. Inventory management system is highly recommended where the stock levels are high
and to analyses high data level is necessary and to generate report on timely basis is
recommended. Inventory management system applies the inventory principles which are FIFO
method, LIFO method and ABC analysis.
Inventory management system does not let the inventory to fall below the minimum level and it
always keeps stock available so that the company’s staff may not run out. Whenever the
company runs out of stock it affects its position in the market so as to avoid this Management
Accounting system provides inventory management system which is basically very useful for a
business to maintain it stock levels.
V. Job costing systems
Job costing systems
The cost of a job is to be calculated is called as job costing. It is done for calculating the cost of
various completed job done for manufacturing of product. Job costing system provides feasibility
of various jobs. For the purpose of calculating cost of a product all the cost involved in the
various jobs are maintained in ledger and then are added to the cost of the product.
The purpose behind job costing system used to analyses the profits of the company
understanding the cost of production and various overhead that weather they are below the
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projected cost or not, through which company profit can be easily ascertained. There are various
documents that are used in the job costing procedure which are-
Production order- it is a type of work order through which is the production manager is
authorized to produce the amount of products that are mentioned in the production order,
Cost sheet- for the purpose of recording various costs another document which is called as Cost
sheet is used it provides the detailed cost that are incurred during the production process. (Drury,
2013).
Job costing system has many objective that are to complete a product to maintain a separate
account for a product that involve specific job and the calculation of the job on the basis of cost
involved in each job. It helps management to provide price of a certain work that has been asked
by the customer on the basis of the cost incurred in the previous jobs done by them.
b) Presenting financial information.
I. Different types of managerial accounting reports.
1. Managerial accounting reports-
The managers in providing expertise in financial reporting and also it help to control
management in Planning and performance of management system. (Vitez, 2018)
Types of Managerial accounting reports-
External report- the report that the management prepare for the outsiders of the business is
known as external report. Involve external users which are shareholders, investor and creditors.
The answer ability of the company is not meant to the outsiders but the reports are to be provided
to them. Company provides reports through the medium of the income statement and the balance
sheet that the company provides to the registrar of companies at the end of every financial year.
(Vitez, 2018)
Internal report- the report that is meant for the different level of management internal is called
as internal report. Internal report is not public document and not available for the public they are
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there to help the department manager to understand the company's working and system. Reports
are meant for lower level, and top level management of the company. There is no access
compulsory requirement for providing such report their frequency depends upon the uses of the
company. Some of the examples of reports are changes in working capital, sales report, material
utilization reports etc. (Vitez, 2018)
Enterprise report- when all the departments are taken together as a single concerned and a
single report is provided is called as enterprise report. These reports are helpful in
communicating with outsiders and also concerned many activities relating to the business. These
enterprise reports are highly beneficial for the outsider and the outsider can invest in the
company with the help of these reports by making and interpretation of the financial statements
that have been provided to the user of the report. Enterprise reports are income tax returns,
employment report etc. (Vitez, 2018)
II. Why it is important for the information to be presented in manner that must be
understandable.
The accounting information that is provided to the users has quantitative and qualitative
characteristics. Such characteristics provide the user with the importance of the financial
information that is to be understandable by the user. Information provided is not understandable
to the user, its usefulness becomes of no use. Where the information provided is incorrect or
incomplete then it can hamper companies management system as information is required for
making decision and if the information is incorrect or incomplete it can lead to wrong decision
making. (Vitez, 2018)
Task 2:
P3: You are required to prepare income statements (M2, D2):
Marginal costing: And internal reporting tool which is a method of cost accounting and making
decisions by considering only for variable cost and ignoring fixed cost is called as marginal
costing. The purpose of marginal costing is to understand the changes occurred in the profit with
the increase in the volume of output. Marginal costing notes external reporting standards for the
company. (toughnickel, 2016)
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The disadvantage of marginal costing is that it becomes very difficult to separate all the fixed
and variable cost and many a time’s marginal costing can give misleading results. Usability of
marginal costing is lesser than absorption costing. Semi variable cost is considered fully without
eliminating the fixed Element and can provide wrong result.
Absorption costing: Calculation of a cost of a product by including all the cost whether variable
or fixed this called as absorption costing. (toughnickel, 2016)
Disadvantage of absorption costing is that it involved in the manipulation of profit as it includes
fixed cost which are done for the purpose of manufacturing a product or not. (Silva, and
Jayamaha, 2012).
The difference in absorption costing and marginal costing:
Difference between marginal costing and absorption costing is the involvement of fixed cost in
the calculation of the cost of the product.
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Analysis: The difference in the profit is because of the fixed cost involvement in the absorption
cost and not in the marginal cost.
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