Management Accounting Concepts and Practices

This assignment delves into the core concepts and practices of management accounting. It examines the definition, functions, and scope of management accounting within various organizational contexts. Students will analyze real-world examples and case studies to understand how management accounting techniques inform strategic decision-making, performance evaluation, and cost control.

Management Accounting

Table of Contents
INTRODUCTION........................................................................................................................................3
TASK 1.........................................................................................................................................................3
a) Definition of management accounting and there comparison with financial accounting and also
explain the management accounting as a decision-making tools ...........................................................3
b) Types of management accounting system..........................................................................................7
TASK 2.........................................................................................................................................................7
1. Absorption Costing..............................................................................................................................7
2. Marginal costing..................................................................................................................................8
TASK 3.......................................................................................................................................................10
a) Types of budget and there advantages/ dis-advantage......................................................................10
b) Process of preparing budget..............................................................................................................11
c) Pricing strategies................................................................................................................................12
TASK 4.......................................................................................................................................................12
(A) Balance Score card and use of balance score card to identify and responding to financial problems
...............................................................................................................................................................12
1. Use of Balance score card in identifying and responding to financial problems .............................12
2. Use of balance score card in order to improve the financial governance..........................................13
CONCLUSION..........................................................................................................................................13
REFERENCES...........................................................................................................................................15

INTRODUCTION
Management accounting is a process which includes all such information which help the
managers to accomplish there goals. It include all the information and decision which is related to the
policy making process, procedures etc. that help the manager to all the funds in an organisation.
Management process includes the managerial functions such as planning, staffing, controlling and
monitoring process that manage all the activity in an organisation. By the help of management
accounting is also make smoothing the activity, so that management accounting is essential for the
business. Inn this research report IMDA Tech (UK) Limited is taken, which is a producer of the different
mobile chargers. There main function is to provide specific charger of the mobile and telephone and also
create different gadgets for the UK retail outlets.
This report describes the role of management accounting by explaining there concept in an
organisation. It also gives the importance of management accounting by comparing with the fiscal
accountancy. It also describes the role of management accounting as a decision making tool in an
organisation. In this report different budget are describes and it also represent the advantage and dis-
advantage of such budget and pricing strategies which affect the organisation's operational activity. By
using the marginal cost and absorption method, it also helps to analysis the cost and net yield of the
IMDA Tech (UK) Ltd. This report also highlight the financial problems and describes the role of
organisation to resolve such problems effectively(Vakalfotis, Ballantine and Wall, 2013.).
TASK 1
a) Definition of management accounting and there comparison with financial accounting and also
explain the management accounting as a decision-making tools
To: Imda Limited, Line Manager
From: Management Accounting Officer
Date: 20 May 2017
Subject: Management accountancy significant and its deviation from the financial accounting
Management accounting includes various managerial functions such as planning, staffing,
organising, controlling and monitoring the activity within the organisation. In this way all this strategies
make the business operations effectively and smoothly. Management accounting also supplies the
information, and facts which are reliable so that it can help the effective work for the organisation.
Difference between Financial and Management Accounting
Basis for Comparison Financial Accounting Management Accounting

Meaning Fiscal accountancy is a process
which consider all the financial
activity such as preparing the
financial statements such as
profit and loss a/c, balance
sheet , cash flow, ratio analysis
etc.
In management accounting, it
includes all the managerial
functions such as planning,
staffing, controlling and
motivating the workers in an
organisation, so that it can help
the organisation to work with
there great efferents or
accomplish there goals in future.
For example: Such information
which is helpful to decision
making, analysis the cash flow
by using appropriate data etc.
Necessary in organisation For every business organisation,
financial accounting is useful
and essential. For example:
Imda limited also require to
maintain there financial
statement to analysis there actual
position at the end of the
financial year.
But management accounting is
not necessary for every
organisation. As per the need of
the manger or activity,
management accounting can be
done. For example: If Imda
limited's managers wanted to
know the data and information
related to the resources, in this
case they can maintain the
management accounting so that
they can analysis the position of
resources in an organisation.
Objectives/Motives The main motive to make
financial accounting to get the
actual financial position of the
company, so that it will help to
all different kind of interested
This main objective is to make
an effective managerial control
in an organisation. For example:
If Imda Ltd manger want to
analysis the records, than

parties. For example: If the
shareholders of Imda limited
wanted there financial position
because there motive is that as
per determining the company's
position they can decide how
much capital investment is
beneficial for them(Schaltegger,
Gibassier and Zvezdov, 2013).
managers can use information for
effective business planning.
Information Financial accounting includes
information which is fully based
on monetary term. For example:
If Imda lit choose to take
financial accounting in there
work, than they only includes all
those items in there balance sheet
which are expressed in the
money value.
But in management accounting,
it requires both monetary and
non- monetary value. For
example: In management
accounting, it make full records
of company's all expenses and
income which are expressed in
money term but is also make full
records of resources which are
come and out from the company.
So that such resources are
expressed in non-monetary
value.
Format Financial accounting requires
balance sheet, income statement
such as profit and loss account,
which follow there specific
accounting rules.
In management accounting there
is no specific accounting rules
are followed, because in
management accounting all the
decision are taken by the
managers as per the need. So that
in management accounting there
is no formate provision for
planning process etc.
Users All the statements which are But management accounting is

prepared by the financial
accounting are used by all the
internal and outer users. For
example: In internal users it
includes managers, employers
etc. and outer users it includes
Government, Shareholders etc.
only done by the internal parties
of an organisation, so that it is
only used for the employers,
employees and managers etc.
Time Frame Financial accounting are made at
the end of financial year or
accounting year. For example: 1
April to 31 March is considered
as a accounting period of an
organisation(Wajeetongratana,
2016).
Management accounting not
required any time frame for there
operations. Whenever the
manager feels that there is
necessary of making
management report they can use
management accounting in any
time.
Establishment and Auditing
Requirement
There are the provision that
financial accounting must be
published and audited by the
statutory auditor.
In management accounting there
is no requirement to making any
publication and auditing of the
report.
Importance of management accounting information as a decision making tools
Management accounting helps to analysis the cost of each resources so that managers can
determine the actual usage of resources, after that they can allocate the cost in different areas as per the
need of the departments. In this way, managers can minimize there cost so that they can maximize there
profitability. In this case IMDA Limited always check there cost in such a way that it was effective or
not for the organisation.
Management accounting also plays an important role to decide the effective costing techniques.
In this way Imda Ltd can determine the effective costing techniques such that in which manner
resources are buy or sell. In this way company should minimize the cost by using effective techniques
for the costing. So that while making an effective costing techniques, ABC costing is considered by
Imda so that it will help to maximize there profitability of an organisation.
Management accounting provides the data for the managers so that they can analysis each and
every conditions of the business. Such information helps the Imda limited to take effective decision

related to there operational activity. In this way by making an effective report of the business by using
the relevant data, it will help the organisation to take effective decision which are best for the company.
As a instrument of determination devising it consider to analyse the magnitude relation, fiscal
perspective of the company, and also aid to prediction in fund such as currency change of location and
there various deviation which is related to the Imda limited.
b) Types of management accounting system
Cost accounting system- Cost accounting system is helpful to determine the actual cost in an
organisation. It is done so because it increases the chances of profitability in the the organisation. There
are various methods which are used in estimating the actual cost. So Imda limited firstly determine the
cost that it is normal, actual or standard(Morales and Lambert, 2013). Normal cost represent that such
cost which are entering into the business having there real value, but in actual cost it includes the actual
market value of the cost. So that to form cost accounting, occupation order of magnitude costing and
process costing can be used so that all this methods can improve the value of report in an organisation.
Inventory management system- It is a computing device - based system which aid the structure
for path the plane of stock, orders, sales etc. It also utilized by making a command of work, invoice for
all the substantial and other representation which is affiliated to the acquisition(Vakalfotis, Ballantine
and Wall, 2013). So that various section can change there reports by carry off there orders, pursuing
there assets, negotiate there services, characteristic there commodity and by optimizing there stock list.
For example: wired chase, radio-relative frequency determination etc. are the instrument of stock
direction scheme.
Job costing system- Job costing are used in an organisation because the products which produce
in a business are different with each other. In this way, business can apply the job costing system so that
they can improve the product quality by using custom equipment so that the quality of each products will
be improved.
Price optimising system- Price optimising system is a system by following such system, producer
can determine the level of satisfaction of the customers with the products which are rendered by the the
company(Lavia López and Hiebl, 2014). In this way, producer should fixed there price by optimising
them, so that it will satisfied the customers demand and also achieve there profitability. For example: If
Imda limited setting there price they go to the help of retail, banking, airlines etc. to maximize there
prices.

TASK 2
1. Absorption Costing
In absorption costing, price of products is to be interpreted by using indirect expenditure as well
as the direct costs(Hiebl, 2014). While calculating the cost following calculations can be done:
From the above solution, gross sales is 1500 unit and per unit price is 35 so that amount of
money is 52500, variable cost of production is 2000 unit and per unit cost is 15 so that amount of money
is 30000, Fixed overhead absorbed cost is 10000, closing inventory is 10000, COGS is 30000 (30000-
10000+10000), under/ over absorption is 5000 so that GP IS 17500, in which non production cost are
deduct so that gross loss are occur with -375.
2. Marginal costing
It is a method of costing which are used for the preparation of financial statement such as income
statement in the financial year(Kaplan and Atkinson, 2015).

From the above solution it can be present that loss in the marginal costing is -£2,875. In this
method managing director of the cited firm return only multivariate cost in the fomentation. In this way
profit is high in the marginal costing in comparison to the absorption cost.
Reconciliation
TASK 3
a) Types of budget and there advantages/ dis-advantage
Master Budget- Master budget are basically used in making plan and setting the business
objectives. It a summarised project in which are use for making cash budget, income statements based on
budget and budgeted balance sheet(DRURY, 2013).

Operational budget- Operational budget relates to the operational activity of the business. It
includes the day- to- day revenues and expenses such as all type of overheads, cost, expenses etc. In this
budget, manager use this information to compare the results throughout the year. All the inflows and
outflows are compared with each other, in this case any variance are generated in revenue can be
adjusted in this type of budget.
Cash flow budget- This budget mainly focus on the net cash inflow and outflow during the
accounting year. On the basis of such estimation, cash requirement in a business is estimated at a specific
time duration(Cooper, Ezzamel and Qu, 2017).
Financial budget- Financial budget mainly prepare to determine the financial requirement in a
business. It analysis that how much funds are used in the operational activity and how much fund are
required in the future.
Advantages of budget
 Budget provide the sufficient information about the business operational activity.
 It also help to find out the strength and weakness of the organization.
 It also assist to identify the business performance in future.
 It is a best techniques which help to maximize the resources so that such resources can use
effectively.
 Budgets also increases the profitability of the company.
 It is considered as a best tool to allocate the funds and assets in an organisation.
Dis-advantages of budget
 By making wrong estimation of the budget it make negative impact in financial preparation and
dealing of a business.
 Budgets are successful as per the estimation of past and forthcoming events. Such events are
unpredictable so that it is hard to make an effective management of business.
 By making budget in a business, it is very time consuming and costly process done by the
manager.
b) Process of preparing budget
Gather Information- The first step is the collecting the information related to all type of expenses
and income during the year. In this way, Imda limited prepare a statements of bills, loans etc. which are
incurred during the year.
Recording all the sources of income- Imda limited should record all the sources of income such
as income from investment, income from sale etc. In this way, company should record all the sources so
that manger can estimate the budget for accomplishment of the operational activity.

Create a list of monthly expenses- A company should create a complete records of all the
expenses such as salaries, wages, bonus, repair and maintenance expenditure, selling expenses,
administration expenses etc. In this way Imda limited UK, make a complete records of all the expenses
in the form of income statement, so that manager can determine such records for estimation of future
budget.
Break expenses into categories- To preparing a budget, company should divide all the expenses
into there sub- categories such as fixed expenses and variable expenses(Brandau, Endenich, Trapp and
Hoffjan, 2013). Fixed expenses are such expenses which are same from every month, for example: fixed
loan repayment, mortgage etc. Variable expenses are those expenses which are fluctuating over the
month. For example: Gifts, vacations expenses etc.
Available funding- After estimating all the expenses and income or determining the budget
assumptions, the next step it to secure the available funds. This step is do so because by estimating the
funds, managers can determine the actual need of fund in a company. As per the available fund, it is
helpful to the company to allocate the resources in such an areas which is required for the funds.
Receiving income prediction and section fund- Later creating a budget accumulation, income and
role in departments can be prediction in this phase. For foretelling the division fund, Imda cover can
form a judgement which are successful for performance. Successful financial gain of the section and
here the performance can-full modification in it. Aside set up a activity program are helpful for effectual
apportionment of assets and beginning(Fullerton, Kennedy and Widener, 2014). Therefore, away move
ahead preceding each path a appropriate fund can be successful for Imda Limited for here flourishing
plan of action.
c) Evaluation strategies:-
Administration controller of the Imda limited setting here product's price by there production
and distribution system. A business can use various type of pricing strategies to sell there products and
services. This price is set up by the accountant to secure the business's profitability. In this way, pricing
is a best way to create a demand of the products in a market. Effective pricing strategies attract there
customers so that they can buy the products in a company. In this race, Imda Limited always try to set-
up there price by using different pricing model. Company can use absorption pricing, high-low pricing,
terminal point pricing, minimum cost pricing, odd number pricing, cost plus evaluation and premium
pricing model to set there product's price.
In absorption pricing, company can use the variable cost of each unit in there products but in
high-low pricing they should maintain there price higher in case of competition but in condition of
promotion time, they should reduce there product's price in the market. In case of limit pricing, company

should limit there price so that they can reduce the entry of new firm in the monopolist situation. In cost
plus pricing, company set there products and services prices in a cost based method. Furthermore, Imda
Tech Ltd can also go with skimming pricing strategy. In this way, company can set-up there prices as per
the market and customer condition, so that they can earn profit with giving customer satisfaction.
TASK 4
(A) Equilibrium Rating card and usage of scale rating card to identify and state to financial problems:-
Equilibrium Rating card is the theoretical account thet is used to evidence and negotiate the
business organisation fit. It about rarely exploited to carry plan of action of entity to existence and assist
into organise the plan of action crosswise the business firm (Miller and Kelber, 2015).
1. Utilization of Equilibrium score card for identifying and state to fiscal problems:-
The equilibrium scorecard is exploited by Imda Tech Ltd in order of magnitude to fit there
standard and so that can fulfil there goals in future. It is a process which focuses on various elements
such as process of the business, human resources, perspectives of customers, capital invested by the
investors etc. By using the balance scorecard, it helps to create new and innovative things in a workplace
(Bodie, 2013). It is a best techniques by which company can analysis there performance and take
corrective action for the improvement. With the help of balance score card, it will help the IMDA Tech
Limited to achieve and compete with the competitors . As per the inquiry its analysis that Imda Tech
Limited face the failure of 1.8 meg GBP so that balance score help the firm to identify there weakness
and strength. In this way balance scorecard is best techniques that can help the firm to overcoming for
there financial crisis. There qare various SMART objectives of the Imda Tech Limited, which are as
follows:
 To increase there sales volumes till the end of accounting period with 40%
 To increase the rate of retention by 20% to 40% in 2016
 To increases there revenue by 30% in 2016
2. Use of equilibrium rating card in order of magnitude to modify the financial administration
Proportion rating card is the instrument that assist inch facing the problems of the structure or
advise to the manager that can aid in partitioning the financial difficulty of the organization in future.
Imda Ltd intent focusing along the client neediness so that it can execute their ascendant that decrease its
financial difficulty. It will be helpinattracting wide range of group and will heighten sales property of
the entity to large level. Separated from this inner business concern enterprise exercise also enclosed
the equilibrium rating card formulation. Administration reviews the performance of worker and organize
scholarship difficulty for them who are unable to execute their responsibility in a proper way.

Equilibrium rating card help the Imda Ltd in decreasing the space 'tween anticipated and existent
commercial enterprise execution and outcomes (Sundem. and et. al, 2014). With the help of this concept
cited firm purpose be able to execute its subjective well.
CONCLUSION
From the above written report it can be terminated that administration account is an necessary
instrument that help the structure in realize their issues and influence in achieving the cognitive content
of the entity important. It is the method that influence in commute the origin well so that operable cost
of the entity can be reduced(Simons, 2013). It container be said that adoption of onset pricing strategy is
helpful that influence in compound the profitableness of the entity to large extent. This written document
is terminated that administration accounting is an formulation of management by which generic
enterprise dealing get on managed. Therefore, various governing body instrument are ascertained for
assigning money for Imda limited. Considering this, cost accounting such as absorption and minimum is
advised for set up financial gain evidence that presents fiscal point of organisation. Furthermore,
captious valuation on fund is given for foretelling and determination for advance business trading
operations. According several kinds of fund and its planning process is thoughtful this assignment.
However, valuation strategies for surround costs according to various determinants are represented for
cost potency as well proper establishment of entity is acknowledged. Apart from this, fiscal evidence
investigation is acquire by which current business performance is analysed that is impressive to reduce
economical problems occur at geographic point. Consider this, importance of administration system is
explicit which is used to change governing body and development effective plan of action at high level.
Thus, through with this study, different administration system tools and grouping are presented for
power of entity and compound its fiscal presentation consistently(Armstrong, 2014).

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Online
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