Management Accounting: Report and Analysis for Tech UK Ltd

This report provides a comprehensive overview of management accounting practices, focusing on Tech UK Ltd. It explores the meaning and needs of management accounting, emphasizing its role in financial transaction management and profitability enhancement. The report details various reporting methods, including inventory, performance, and job costing reports, and highlights the importance of collected financial information. It examines different costing methods like cost accounting, inventory management, and job costing systems, illustrating how these techniques calculate net profit. Furthermore, the report discusses the merits and demerits of different budgeting types and analyzes the use of planning tools. The application of the balance scorecard method for evaluating financial issues is also addressed, concluding with an evaluation of overall financial issues and providing insights into effective financial management strategies for organizations.

Management Accounting

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Meaning of management accounting and their needs......................................................1
P2: Various types of reporting methods.................................................................................4
(b): Importance of collected information..............................................................................5
M1: Benefits of using management accounting system.........................................................5
D1: Critical evaluation of accounting reporting method........................................................5
TASK 2............................................................................................................................................6
P3: Various types of costing method used to calculate total net profit..................................6
M2: Various types of accounting techniques.........................................................................9
D2: Analysis of data collected or reconciliation....................................................................9
TASK 3............................................................................................................................................9
P4: Merits and demerits of various types of budget...............................................................9
M3: Analysis of different planning tools..............................................................................11
D3: Critical evaluation of financial issues............................................................................11
TASK 4..........................................................................................................................................12
P5: Balance scorecard method..............................................................................................12
M4: Evaluating financial issues............................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is an essential aspect for an organisation. By the help of this
company would able to manage and control their financial transaction in more effective manner.
The main aims of Tech UK are to attain maximum gain through using resources in more proper
ways. This project report is providing crucial information about various accounting and reporting
systems those are used for the purpose of recording transactions into their respective set format.
Moreover, it will be discussing various costing methods that are used for calculating net profit
for the company. With the use of merits and demerits of various budgets managers of Tech UK
would be able to control their costs and future expenses. Apart for this, all those financial issues
those are present in an organisation can be analyse by accountant and resolve them by using
balance scorecard method in an effective manner (Amoako, 2013).
TASK 1
P1: Meaning of management accounting and their needs
In every business enterprises, management tried to manage their day to day financial
transactions through using appropriate accounting system. These are helpful for an organisation
to increase the profitability for an organisation. The primary motive of every business is to make
use of vital accounting systems that are always assists Tech UK Ltd to regulate their operations
in more effective manner (Klemstine and Maher, 2014). Management accounting is a systematic
recording of all financial transactions that are incurred in an organisation during a specific period
of time. by the help of a well organise accounting systems which is the only key to perform their
operations at internal level. It is necessary to make evaluation of data through using appropriate
tools and accounting standards. It will assist them to increase overall aims and objectives at the
same point of time. The manager’s main aims are to enhance profitability as well as efficiency
by proper allocation of organisation resources. It has been analyse that financial accounting and
management accounting are having certain kind of similarities. Those are being discussed
underneath:
Management accounting Financial accounting
According to this accounting system which is
aid the internal and external department of
Tech UK to provide all necessary information
While in case of this, all the policies and rules
that are being made by organisation are used
for the purpose of preparing specific financial
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to accountant so that overall aims and
objectives can be attain in reliable manner.
statements during the time.
All the data which is being provided by
owners are always assists them to future
planning and growth for the company.
The main objectives of using this accounting
are to provide essential information about
financial position of Tech UK to their
investors.
Every data and information are taken into
account those are related with financial as
well as non-financial at similar stage.
Only financial data is taken into consideration
to make accurate report for the company.
This accounting only provides practical
overview and information about the company
so that future decision making can be done.
Only theoretical aspects are analyse through
using reliable accounting rule and regulation
for the company.
Some examples are: Cash flow management,
sales tactics or budgeting are taken into
account.
Examples are: Balances sheet, profit and loss
statements and cash flow statements.
It often consists of companies total available
cash and recent sales earning and many more.
Physical money and account receivable
earned but not yet collected.
Various types of accounting system:
Cost accounting system: According to this accounting method which assists managers
to control and operate their internal operations in effective manner. All the costs that are used for
the production of product and services are taken into account at the same point of time. There are
certain types of costing which are needed to be taken into consideration such as:
 Normal costing: It is said to be an appropriate costing methods which a company normal
incurred at the time of production of products with the same resources.
 Actual costing: It is known as those costs that are actually incurred while production of
one unit by Tech UK Ltd in their daily course of business.
 Standard costing: As per this costing this charged as per the set standard by the owner
of the company. This seems to be used for the purpose of making comparison of actual
results to that with actual one.
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Examples of cost accounting systems is, it is the costing that is more appropriate for a
specific activities of an organisation, a niche furniture producers or formulation of high cost of
air surveillances system. Some other are auto mechanic repair shop rebuilding of any machine.
Inventory management system: According to this accounting system that play an essential role
in analysing total position of inventory which is been kept by Tech UK in an accounting period
of time. This seems to be more reliable only to make comparison or tracking of stocks that are
being provided by suppliers for the process of production. There are certain types of inventory
systems such as:
 LIFO: It said to be cost flow assumption which can be helpful for the company in respect
to analyse total moving of costs of products from stock to the cost of product sold. It
means that last inventory which is kept by the company will be discharged first.
 FIFO: As per this method of stock valuation which is associated with cost flow basis that
initial costs are firstly recorded and realise during the period of time.
 AVCO: It is known as effective method of inventory control which is being used to taken
into account the total cost of products still present for sales and divided through total sum
of products at the initial stage (Lim, 2011).
Examples are periodic inventory entries such as purchase transactions and sales is
recording using a cost of sales account.
Job costing system: It is known as one of the appropriate costing system which is being assign
during the production cost to a single products or job of products. Basically, the job cost is used
at the time when produce products are sufficiently different from one another. There are various
types of costing systems such as:
 Contract costing: This is that kind of cost which is used to track overall production level
of a product produce by Tech UK. It is mostly associated with Construction Company.
 Batch costing: It a kind of specific order costing which is similar to job costing system.
Every batch of products is being provided a specific number which is more identical and
different from one other (Van der Stede, 2015).
 Process costing: It is mainly a method of assigned cost to particular products units
produce during a period of time. This seems to be product costing which is being measure
the product cost.
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Examples: Direct materiel, labour and overhead are taken into consideration while making any
particular costing system. It is must be helpful to track the cost of the labour use on an individual
job.
P2: Various types of reporting methods
Management accounting is all about managing funds in appropriate manner in order to
accomplish things in effective manner as well as main objective is to control possibilities of
losses. It helps in maximizing more or more profit by planning each or every aspect of an
association. Capital is seen as lifeblood for corporate companies because it helps in managing
various business activities in more appropriate manner. Along with this it aids an enterprise
while making proper company plans with the help of useful strategies and schemes. Basically, it
is not easy to manage expenses in appropriate manner. In order to allocate sufficient amount of
funds an organization needs to design an effective report for various other departments. Their
main objective is to manage things in better way by considering necessary facts or figures.
Hence, numerous of reports which is going to be falls under finance department is described as
follows:-
 Inventory report: - Stock management is very much essential for delivering products to
right time at right place in a defined time period. Along with this, it’s all about management
of goods which is produced by company, closing and opening balance for supplying it as per
consumer need or demand. Mainly, it aids in controlling the level of mistakes and errors
which might occur at the time of producing products. However, inventory report is consisting
of various necessary details about transferring of goods across the international boundaries.
 Performance report: - According to this component it is essential to analyse the
performance of employees in order to make necessary changes as per need or demand of staff
members. Basically, it helps managers while conducting training programmes for employees
as well as helps during judgement process so that company can easily improve the
performance of an organization in much better way.
 Account receivable report: It is known as one of the crucial aspect which is used to
determine total list of unpaid customers invoices and credit memo. It is mainly related with
that particular report which deals with recovery of amount form debtors.
 Job costing report: The job cost report is the initial place for much of information which
contained in other report. This report contain list of each job those are working on and cost
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incurred on a job in last period of time. It is kind of process which is assigning the cost those
are incur to a particular production of a product (Lavia López and Hiebl, 2014).
(b): Importance of collected information
In the mentioned case of Tech UK Limited, they need to make proper understanding of
all necessary information about financial position. This is major part for them to analyse every
financial report that are necessary to increase profitability and growth in near future time.
Financial reporting provides executive a clear image of the financial health of Tech Ltd. It cannot
provide every data on necessary to assist them to determine business performance at operational
level. There are certain accounting standard which are needed to be followed as per the GAAP
rules and regulations. It is the collection of similar standards which is associated with financial
transactions of an organisation. There are certain principles are needed to be followed before
preparing report. Some of them are discussed underneath:
 It seems to be basic report of accounting principles and regulations.
 The one of the appropriate regulations those are being issued by FASB as per the
requirement of the company.
M1: Benefits of using management accounting system
It has been seen that all those accounting methods a company is using in an organisation
are having some kind of benefits which will assist in increasing overall growth and profitability
for the company. In case Tech UK is using cost accounting system they are able to determine
specific relationship amount normal, actual and standard cost they are incurring in production of
products. While inventory management system which assist them to track current position of
inventory those are being kept by an organisation with them. Whereas job costing is use to
analyse total cost they are investing in manufacturing of a specific job cost (Bennett, Schaltegger
and Zvezdov, 2013).
D1: Critical evaluation of accounting reporting method
In accordance with generating more appropriate results for the company. Manager need to
make use of valuable reporting methods. These reports are being presenting in front of various
investors and stakeholder for the purpose of making future valuable decision regarding their
capital investment in their upcoming projects. Methods like performance report which is needed
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to be implemented in specific manner so that actual position can be analyse. While of account
receivable report which is used to determine total time period for collecting necessary capital
from the debtors.
TASK 2
P3: Various types of costing method used to calculate total net profit
Cost is an essential aspect for every manufacturing company to analyse their total cost
needed for the production of one unit of products. The primary aims of using these costs is to
make specific analyse of total capital they are going to invest in the production or goods. Cost is
basically said to be value of amount which is being paid to get something (Abdel-Kader, 2011).
There are various types of costing methods that are used by accounting to evaluate total profit for
the company. Some of them are discussed underneath:
Absorption costing: It is known as one of the effective costing method which is used by
Tech UK at the time of manufacturing products during the time. These costs included both
variable and fixed costs because of which it is known as full costing method. It is not appropriate
for making future decision for the company.
Marginal costing: It is said to be most appropriate costing method which is helpful or
applicable for the company that is paid for additional production of units. It consists of only
variable cost and fixed costs are not taken into account for analysing net profit for the company.
This seems to be more reliable method which is being used for future decision making.
Income statement as on September by using Marginal costing method:
Working 1: Calculate variable production cost £
Direct material cost 8
Direct labour cost 5
Variable production O/h 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
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Nil 2000*15 = 30000 500*15 = 7500
Net profit using marginal costing ￡Amount £ Amount
Sales value
Less: Variable costs
Stock at the begining
Cost of production
Stock at the closing
Variable sales overheads
Contribution
Less: Fixed costs:
Fixed Production overheads
Fixed Selling overheads
NIL
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
Net loss -2875
Income statement on the basis of Absorption costing method
Selling Price per unit ￡35
Unit costs
Direct materials cost ￡8
Direct Labour cost ￡5
Variable Production overhead ￡2
Variable sales overhead ￡5.25
Budgeted production during the year is 3000
units
Production overhead: In this budgeted cost is £15,000and Actual cost is £10,000
Selling cost: In this budgeted cost is £10,000and Actual cost is £7875
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Absorption costing working notes
Working Note 1: Calculate full production cost
Direct material ￡8
Direct labour ￡5
Variable cost ￡2
Fixed cost ￡5
Total ￡20
Working Note 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2,000*20 = £40,000 500*20 = £10,000
Working Note 3: under/ over absorbed fixed production overhead
Actual fixed production: ￡15000
Fixed overhead: ￡10000
Total £5000 (under absorbed)
Net profit using absorption costings ￡Amount £Amount
Sales value
Less: Cost of Sales:
Opening stock
Cost of production
Closing stock
(Under)/Over absorbed fixed prod. O/h
Gross Profit
Less: Selling Expenses
Variable sales expenditure
Fixed selling expenditure
NIL
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875
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Net loss -375
M2: Various types of accounting techniques
In respect to evaluate financial position of Tech UK manager need to make use of various
accounting techniques which are helpful for increase growth and sustainability for the company.
Some of them are ABC costing techniques which is used to categories specific products as per
their nature. While performance techniques can assist them to determine present position by
evaluate total capital available with them. Standard costing techniques are used to make
comparison of actual results to that actual one. A marginal technique is one of the reliable for
making coming decision for growth and sustainability in coming time (Hilton and Platt, 2013).
D2: Analysis of data collected or reconciliation
Reconciliation statements Amount
Profit under absorption -375
Closing stock 500*5 2500
Profit under marginal 2125
In accordance to above analysis of income statements, it has been determined that
company is having two options to evaluated net profit for the company. In respect to analyse
more accurate outcomes which is more reliable for the company's managers of Tech UK. It
would be needed to make use of both marginal and absorption costing methods that are essential
for making further planning for an organisation. As per the reconciliation of income statements it
has been seen that profit under absorption cost is -375 after making evaluation of closing stock is
2500. They are able to determine total marginal of 2125.
TASK 3
P4: Merits and demerits of various types of budget
Planning is an essential aspect for an organisation. This seems to make proper analysis of
resources which are needed to be helpful in attaining future aims and objectives in more quick
time. There are various types of budgets which helpful for Tech UK to regulate their business in
effective manner. Some of them are discussed underneath:
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Operation budget: As it is known as one of the effective forecasting income and
expenses over the course of a specific period. There are certain factors needed to be taken into
account in this budget such as labour cost, overhead and manufacturing cost.
 Advantage: It is prepared on weekly, annually and monthly basis to determine total
estimated cost and expense incur during production (Parker, 2012).
 Disadvantage: Only limited information is collected with this report which is not
effective for prepared final account.
Cash flow budget: It is a projecting about total cash comes in flows out of Tech UK
within a specific period of time. It used to consider factors like accounts payable and accounts
receivables.
 Advantage: It is useful in determining whether company is able to managing their cash
in effective manner (Renz and Herman, 2016).
 Disadvantage: Once the recovery period is over, manager would be able to take into
account this budget.
Rolling budget: It is said to be continually updated to include a new budget time frame as
the most recent budget get completed. It consists of incremental extension of present budget
model.
Advantage: It is considering as one of the best planning and controlling that will be based
on more accurate budget.
Disadvantage: These are costlier and time consuming other than incremental budgets.
Process of budget:
 Identification of budget ideas which is primary aims of managers to prepare budget for
the company.
 Collecting necessary information from different department those are operating at
internal level.
 Obtaining capital forecasting from various sources.
 Collect budget request from upper department by taking appropriate suggestion.
 Update budget model in more proper manner in the manner of master budgets for the
company.
 Review of budget is a end process which is completed by taking feedbacks from various
employees and departments.
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Pricing policy: There are various types of pricing methods such as:
 Cost plus pricing: It is known as more easy and simple pricing techniques by which
products can be sold to their customers (Youssef, 2013).
 Price skimming: Under this, setting of price in starting stage is higher. After the
competition get normal company used to reduce prices.
Different costing systems:
 Process costing: It is known as one of the effective costing system that accumulates
producing cost individually for each process. It is mainly used nearly identical units that
are related with mass produced.
 Job costing: It is said to be appropriate method used for the purpose of recording the
costs of a producing job in-steed of entire process. It consists of accumulation of cost of
material, labour and other overhead costs.
Importance’s of using planning tools:
There are various types of effective tools that are effective enough to manage and control budget
for Tech UK. Some of them are
 Forecasting tools which is used to estimated total cost and expense incur by the company
in coming time.
 Contingency tools are other important techniques which is important for an organisation
to control all risk factors those are associated with the company.
M3: Analysis of different planning tools
All the tools that are discussed under this report are helpful to controlling budget for the
company. Forecasting tools are more reliable and accurate for increase growth and profitability
in more quick time. While another important tools are scenario tools that are helpful in case of
any crucial situations arises in an organisation.
D3: Critical evaluation of financial issues
In respect to manage all necessary problems that are arises in an organisation are mostly
associated with financial issues. These are can be occur because of low product and service
quality or not effectively allocation of resources. These can be overcome by using appropriate
techniques.
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TASK 4
P5: Balance scorecard method
As per the mentioned case of Tech UK, it has been found that they have recently detected
some issues associated with financial statements. It is showing a net loss of 1.5 million because
not following appropriate accounting techniques. The company asked from accountant to deal
with these issues. They have suggested making used of balance scorecard techniques. It is a kind
of effective methods which will be responsible for control financial problems those are arises in
an organisation. It consists of various perspectives. Such as:
 Financial: It is used to view organisational current financial position in effective manner
whether they are using resources in proper manner (BSC Terminology: Perspective,
2017).
 Customer or stakeholders: As per this perspective the performance from the point of
customers and create specific interest to their stakeholder are meet in reliable manner.
 Internal process: It is mostly associated with quality and efficiency to their products or
key business processes.
 Organisational capacity: It is related with human capital, technology and other capacity
that are more reliable aspects for the company (Ahmad, 2012).
The primary reason of using balance scorecard approach which is suggested by the auditor of
the TECH (UK) is that it will provide proper balance to both internal and external department of
an organisation. By using this, they can easily be able to resolve financial issues that are arises in
during the production process. The implementation in this particular views of functional level is
utmost important aspects for the company. BSC approach, an organisation used to translate long
term aims into operational purpose, actions and measure in above mentioned four perspectives.
Comparing balance scorecard with Just in Time approach in Unicorn Grocery Ltd.
Just in time approach: It is known as one of the effective planning in which material are
only ordered and retain as they are required during the time of production process. The main
motive of method is to eliminate cost by saving money on overhead investor expenses. This
approach is used to resolve all financial or stock related issues.
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M4: Evaluating financial issues
In accordance to deal with essential problems those are present in an organisation,
manager’s uses effective techniques such as key performance indicators this used to compare
actual performance with standard one. While financial governance is another technique that
consists of rules and policies set of government to operate business in proper manner.
CONCLUSION
From the above project report, it has been articulated that management need to make use of
valuable accounting and reporting systems to manage their performance in effective manner.
This project provides vital information about use of costing methods to calculate net profit they
are able to get in future time. While with merits and demerit of various budgets they can plan
their coming business in more reliable and sustainable ways.
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REFERENCES
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Review and Annotated Bibliography. Routledge.
Lim, M., 2011. Full cost accounting in solid waste management: the gap in the literature on
newly industrialised countries. Journal of Applied Management Accounting Research.
9(1). p.21.
Van der Stede, W. A., 2015. Management accounting: Where from, where now, where to?.
Journal of Management Accounting Research. 27(1). pp.171-176.
Lavia López, O. and Hiebl, M.R., 2014. Management accounting in small and medium-sized
enterprises: current knowledge and avenues for further research. Journal of Management
Accounting Research, 27(1), pp.81-119.
Bennett, M.D., Schaltegger, S. and Zvezdov, D., 2013. Exploring corporate practices in
management accounting for sustainability (pp. 1-56). London: ICAEW.
Abdel-Kader, M.G. ed., 2011. Review of management accounting research. Springer.
Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting, 23(1), pp.54-70.
Renz, D.O. and Herman, R.D. eds., 2016. The Jossey-Bass handbook of nonprofit leadership and
management. John Wiley & Sons.
Youssef, M.A., 2013. Management accounting change in an Egyptian organization: an
institutional analysis. Journal of Accounting & Organizational Change, 9(1), pp.50-73.
Ahmad, K., 2012. The use of management accounting practices in Malaysian SMEs.
Online
BSC Terminology: Perspectives. 2017.[Online]. Available through :<
http://www.balancedscorecard.org/BSC-Basics/About-the-Balanced-Scorecard>.
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