Management Accounting Report for Tech (UK) Limited

This report provides a comprehensive analysis of management accounting principles and practices, focusing on the case of Tech (UK) Limited. It covers key concepts such as distinguishing management accounting from financial accounting, the importance of management accounting information for decision-making, different costing systems, inventory management, and job costing. The report also delves into the preparation of income statements using absorption and marginal costing methods, the various types of budgets and their advantages and disadvantages, the budget preparation process, and the importance of budgeting for planning and controlling purposes. Finally, the report examines the balanced scorecard as a strategic management tool and explores how management accounting can lead organizations to sustainable success.

Management Accounting report for Tech (UK) Limited

Contents
Introduction.................................................................................................................................................3
Task 1..........................................................................................................................................................4
a) Explain the following terms.................................................................................................................4
b) Presenting financial information.........................................................................................................7
Task 2..........................................................................................................................................................9
You are required to prepare income statements for the month of September using;............................9
I. Absorption costing and.........................................................................................................................9
II. Marginal costing methods...................................................................................................................9
Task 3........................................................................................................................................................11
a) Different kinds of budgets and their advantages and disadvantages:...............................................11
b) The budget preparation process including determination of pricing and different costing systems
that can be used....................................................................................................................................11
c) The importance budget as a tool for planning and controlling purposes..........................................12
Task 4........................................................................................................................................................14
P5 Balanced scorecard...........................................................................................................................14
Reference..................................................................................................................................................18

Introduction:
Due to the increased advances in technology and the failure of major US companies, businesses
are utilizing accounting information systems to manage themselves and their employees
effectively and efficiently. Managerial accounting is much more hands on than financial
accounting. While financial accountants take the receipts, ledgers, records from the past year
and assemble the required documents to show the company’s profit or loss and health the
managerial accountant works side by side with operations managers in directing money towards
different activities to make larger profits. Managerial accountants have a lot more freedom to be
creative with their processes and work product. There is an explanation of how the data
obtained from an information system can be used by management to support their business
decisions.

Task 1:
a) Explain the following terms:
I. Distinguishing Management Accounting from Financial Accounting:
Financial accounting focuses on the external stakeholders. That is, they prepare financial
statements which are issued to customers, shareholders and suppliers while management
accounting has an internal perspective. The information provided in management accounting
such as variance analysis is useful to managers while making decisions regarding the strategy of
the company.
Financial Accounting uses the Generally Accepted Accounting Principles (GAAP) which must
be adhered to when preparing statements. On the other hand, management accounting has no
framework or principles that are to be followed. Different organizations use different
techniques.
Financial Accounting relies on historical information as the financial statements are prepared
for the previous periods whereas managerial accounting uses present and future information for
example when preparing budgets. Financial statements are prepared for the entire organization
while managerial reports are prepared for various departments and divisions in the organization.
Financial Accounting requires that financial statements are issued at the end of each fiscal year
while managerial reports are issued frequently, for example weekly or monthly. It is mandatory
for listed organizations to issue financial statements but that is not the case with managerial
reports.
Managerial accounting is much more hands on than financial accounting. While financial
accountants take the receipts, ledgers, records from the past year and assemble the required
documents to show the company’s profit or loss and health the managerial accountant works
side by side with operations managers in directing money towards different activities to make
larger profits. Managerial accountants have a lot more freedom to be creative with their
processes and work product. The financial is bound by strict rules about what reports and
documents must be produced, and how those numbers need to be tallied up. On the other hand

managerial accountants have freedom to be trying new approaches to planning, in fact
businesses that have bold and aggressive planning and controlling may have a higher potential
for success.
II. The importance of management accounting information as a decision making tool for
department managers.
Accounting allows a business to determine what its plans are for the future, in my last class
when we had to show a three-year financial statement of public company, it allowed us to
compare previous data of three years to see if a company is doing good, this is exactly what a
business should do to stay ahead. Businesses use financial accounting to show the health of its
financial statements throughout its company and outside the company. So, basically, they
monitor previous years by conducting a financial statement using receipts, ledgers, records, and
anything that can help show where the company is profiting or losing money. Managerial
accounting takes on what is in front of them; if there’s a problem they figure out how to fix it.
For example, if a company is struggling in one area then the business must figure out how to
direct funds to set area to increase profits. In my personal opinion, I feel managerial accounting
has more complicated responsibilities than a financial account would, but that is because
financial accounting has to follow GAAP while managerial does not. They both share the same
goal, to ensure the company is doing its best, and to find ways to improve where they are the
weakest.
Management accounting has multiple roles within the business. Managerial accountants need to
be able to plan, direct, and control a business. They can be used to make business models and
related budgets. The plans that the accountants make must be shared and communicated
throughout the business. These are normally disbursed in the form of reports to the employees
of the business. The most important aspect of the management accountant is the reports and
communications that they disburse throughout the company. It is imperative for the employees
to know and understand how the business is doing. For example, I work for a bank. Most
people don’t realize that banks are rated on how much money they take in and how much
money they can to generate with new accounts. To keep track of this month reports are made
for each branch. The employees are then able to focus on the points of the business that needs

to be improved. For instance, say my branch was doing well in everything but Checking
account openings. We would then be able to push to open more accounts.
Accounting systems can produce all the financial documents used by the owners, managers, and
controllers of the company. The report requested would be based on the type of information
collected and who the report would benefit. The purchasing department may need a report that
details customer usage. This would help them plan and forecast what is needed for inventory
purposes. The inventory department would use reports that detail the locations of products and
quantities on hand. The financial team would use reports that detail the financial status of the
company. Managers need to be aware of all that happens in the business. In order for them to
make decisions they should be able to know how to retrieve necessary information and how to
read that information. This is way different than financial accounting. Managerial accounting
uses the reports that the financial accountants create and must relay and use the information to
order product, increase sales, and disburse information to employees on how the company is
doing.
III Cost accounting systems (actual, normal and standard costing):
Standard cost refers to the budgeted or planned cost. Also, it is portrayed as the foreordained
cost, a normal cost, evaluated future cost, conjecture cost, and a planned unit cost. Actual cost
refers to the amount of money paid to acquire an asset or a product. When it comes to handling
inventory, the actual cost is more passive in that it accepts whatever the inventory cost may be.
On the other hand, the standard cost is more active method and it permits the standards cost of
the goods to be assigned as they move via the system. Based on the weight of merits and
demerits, the standard cost is preferred to actual cost by many companies since it enhances
companies to manage their costs (Scarborough, 2015).
Normal costing is a costing framework that is another option to real costing. The overhead
distribution can happen progressively as items are made or as administrations are conveyed.
IV Inventory management systems:
Information management systems have been on the rise. With computer use and automation on
the rise, the need to have information systems has been seen to be one of the greatest trends in

the world. Inventory management is a significant information system that helps to track stock in
an organization. Most of the users and people who install inventory management systems want
to achieve the need to have an understanding of the flow of stock in their organization. The
system is necessary to record the stock and have an analysis of the workflow of the system. It
will help to show what can be improved and what needs to be done to have a competitive
advantage for the owner of the business. It is important to have these issues put in place in the
entire working of the system.
V Job costing systems:
Job costing is defined as a system used for assigning specific manufacturing cost to a specific
product. Normally, job costing system is usually employed when the products manufactured are
significantly different from each other. However, when products are identical or almost
identical, process costing system will probably be employed. Each individual product is a job.
In addition, services provided are also considered a job. A job cost sheet is used to truck the
number of jobs and the job information such as labor, material used and total job cost summary.
Most companies prefer applying manufacturing overheads to jobs, rather than the actual cost.
This is so because, actual overhead costs have a tendency of fluctuating from month to month
causing increased amounts of overhead cost to jobs. In addition, actual overhead cost are only
available at the end of the month or year. Although some managers prefer knowing the cost of a
job when it’s done, some prefer knowing the cost earlier. As a result, they employ normal
costing. By having an accurate job costing process, a business is able to calculate the exact
expenses associated with a particular job.
b) Presenting financial information:
I. Different types of managerial accounting reports:
The varied report discussed over here are as follows:
Sales report: the sales report provides information about sales units, revenues and other things.

Production report: this report provides information about products and units costs and also
analyzes volume level also.
Inventory report: this report depicts information inventory level and inventory costing. This
report provides large information as to what level of inventory need to be maintained and what
costing must be done.
II. Why is it important for presenting understandable information?
Managerial information is that information which provides large information regarding business
figures and interpretation. This information is required for managerial decisions making and for
business forecasting. These information must be simple and easy language so as to make it
possible for everyone to understand.

Task 2:
You are required to prepare income statements for the month of September using;
I. Absorption costing and
II. Marginal costing methods

Task 3:
a) Different kinds of budgets and their advantages and disadvantages:
Operational budget, they are created on weekly and monthly basis they show the operation of
an institution and show how expenses and incomes are run. The constraint of this financial plan
is that it may not give the achievable spending then static spending plan, as a result of the
spending time frames included before the incremental period are not looked.
Cash flow budget this shows the flow of money in a business, this helps the company determine
how it is gaining profits or losses. Cash spending plan predicts the measure of money required
by business to finish its transitory and quick duties by not utilizing overdraft and advance.
Organization takes after this strategy to check the degree of credit deals. The fundamental
weakness is to depend on the figure. it utilize income one year to mastermind money for the
following year where there consumptions are not settled, incomes and money streams will
continue as before levels.
Static budget it is a fixed budget it never changes and not altered at all by anything. Static
spending plan can show better the organization benefits and expenses while organization played
out the fluctuation investigation. One of the greatest drawback it has absence of adaptability. In
the event that a firm set up spending plan on a specific deals and the business expands it is
difficult to add additional assets to keep up.
b) The budget preparation process including determination of pricing and different
costing systems that can be used:
Public and private sectors use different accounting practices and have different goals in their
business operations. Private and public budgeting depends on the financial management targets
of the owners and shareholders of a company. In public budgeting, budgets reflect the
stewardship and accountability of tax revenue.
Planning is a management process in both public and private sectors. It defines goals for future
direction while outlining the mission and resources available to achieve the targets. In both

public and private budget preparation, planning is one of the main tools used in the
management process. Private sectors prepare budgets to predict operating results while the goal
of the public sector is balancing budgets. In public budgeting preparation, mandated assets have
to match with expenditure (Becker, 2014). Receipts of public money such as fees or taxes are
used to balance the budget. In an unbalanced budget in the public sector results to thereduction
of services being offered and an increase in taxes or loans to fill the deficit. In the private
sector, if the forecast profit is low, strategic measures are taken to increase the profit, for
example, streamlining of company objectives.
c) The importance budget as a tool for planning and controlling purposes:
Budget is majorly useful as a planning and controlling purpose. As a planning tool, budget
forecasts regarding sales, production and other set of things. These things aid in forecasting all
about useful numbers and factors which must be achieved. As a controlling device, budgets are
used for measuring variances. There are large number of variances which occurs as the forecast
number differs from the actual number.
There is a fundamental difference in strategies used in private and public budgeting. A budget is
a tool used in the management process where private and public budgeting serves different
purposes using different accounting methods. Budgets are used to focus a company towards set
goals and offer accountability in financial management. Different strategies are used to assess,
review and investigate a budget in public and private budgeting. The different strategies are
because of the demographics of revenue sources in public and private budgeting. Budgeting as
a financial operation depends on stakeholders’ objectives and results.
Budgets may be used for the creation of a positive effect on the people who are employed in a
company but also it can have effects which are negative in the attitudes of the employees.
M3 Different planning tools:
Both public and private sectors have different objectives depending on their goals and business
operations. Financial objectives of each sector contribute to the budget preparation strategies. In
the public sector, the financial objectives are toin the best way deliver services to clients while
expenses are at the authorized limit. A balanced budget is reached at if projected services were
offered using the authorized amount. Private budget preparation objective is to reduce costs and

maximize profit by increasing revenue. Selling more than predicted in the budget and spend
less in doing so seen as a success in the private sector. Both public and private sectors can track
their budgets through accounting in order to meet the set objectives.
(D3) Evaluate how planning tools lead to success
Formulation of the budget statement was also discussed. It is a report for the purposes of
accounting for managerial activities showing predicted figures of various expenses for the
entire period of the budget. It well summarizes the effects of money of the activities which is
budgeted for. A sales budget depicts the sales which are planned in units and the dollars which
are expected. A production budget depicts a number of units in a period which is to be
produced. A budget for direct material depicts the cost which is budgeted for the materials
which will require being bought in order to satisfy the production which is estimated in the
period.

Task 4:
P5 Balanced scorecard:
Techs will focus on increasing their earnings. The focus is to get the customers to increase their
total sales by at least 10%. And to get them to do so Tech’s will also have a website and offer
coupons for future purchases. By doing this it will increase the customer base by at least 30%
which in return will attain the objective of increasing the customers spending by 15%. Tech’s
would focus on increasing the profit margin by decreasing the expenses of operation such as
unwanted promotions in marketing and putting into play business abilities, such as networking
that is customer focus.
In any business satisfying the customer is important and critical to the company; they should
have the most respect throughout the business. In order for a company to succeed they must
have a strong customer relationship. With Tech’s we would be focus on building and maintain
a customer relationship with their loyal and dependable customers. Tech’s can reach this goal
by sending out weekly newsletters, having a staff that is knowledgeable to the products so that
they can better serve the customer, and also have a book buy back system set up to encourage
the customers to return. By doing this will aid Tech’s with accomplishing their goal of the 15%
increase in the customer base.
Tech’s will also focus on adding additional annexes to their facility so in the future it will
offer services for students but also to the general public. We will also have bonus offers for the
teachers, professors, and any one that is in the furthering our kids’ education. Taking this kind
of measure will aid Tech’s with increasing our customer base every three months by 15%.
Employing and creating a team of out of experienced Liberians or previous employers of a
bookstore that aren’t just knowledgeable but also as a goodwill of the bookstore would be a
potential risk hiring someone with no skills. Tech’s can discover their purpose and procedures
by putting this scorecard to use. Just to keep in mind a few of the main goals of Tech’s : To
keep improve customer base and to keep sale up and on an incline Tech’s would not only use

printed media to advertise but also electronic media such as the internet, and broadcast media as
well for an example the radio stations.
(M4) How responding to financial problems, management accounting can lead
organizations to sustainable success.
Accounting, as a financial controller, is used to ensure that expenditure is as per the approved
amounts by the legislative bodies. In public budgeting, spending is a higher priority rather than
the effects on asset values and liabilities. Private budgeting follows set and accepted principles
that guide how assets and liabilities values are shown on a balance sheet. The main emphases of
accounting in private budgeting are showing the financial state of a company and if there is any
profit made by the company. With different accounting principles between the public and
private sectors, auditing can be used to check is the set standards are followed.
D3 How planning tools for accounting respond appropriately to solving financial
problems to lead to sustainable success.
Proper decision is reached at if projected services were offered using the authorized amount.
Planning tools objective is to reduce costs and maximize profit by increasing revenue. Selling
more than predicted in the budget and spend less in doing so seen as a success in the private
sector. Planning tools can track their budgets through accounting in order to meet the set
objectives.

Conclusion
In the end, it can be concluded that management accounting is indeed essential for organization
management. Management accounting techniques provide enough information with regard to
assessment and interpretation of management information. Further, it can be assessed that there
is analysis of different costing techniques such as marginal costing and absorption costing
techniques. These techniques provide information as to profitability and inventory valuation as
well. Lastly there is interpretation of importance of budgeting techniques and there is also
ascertainment through

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