Comprehensive Management Accounting Report for Tech UK Limited

This report provides a comprehensive analysis of management accounting principles, focusing on Tech UK Limited, a mobile phone and gadget seller. It explores the differences between management and financial accounting, highlighting their importance and applications. The report delves into various cost accounting systems, including actual, normal, and standard costing, as well as inventory management and job costing systems. It also examines different types of management accounting reports, such as budgets, inventory reports, accounts receivable, and job costing reports, emphasizing their significance in decision-making, financial return, and cost reduction. Furthermore, the report analyzes income statements using both absorption and marginal costing methods, comparing their approaches and outcomes. It also covers various types of budgets, discussing their merits and demerits, and addresses how management accounting responds to financial problems. Overall, the report offers valuable insights into the practical application of management accounting in a business context.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Essential requirement of management accounting and its system.........................................1
P2 Financial information.............................................................................................................3
TASK 2............................................................................................................................................5
P3 Income statement using absorption and marginal costing.....................................................5
TASK 3............................................................................................................................................8
P4 Various kind of budget and there merit and demerits............................................................8
TASK 4..........................................................................................................................................10
P5 Management accounting that respond with financial problem too......................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is that which does required in every field and this concept is
such which do help in defining the financial information that make management of firm to
produce an effective decision and strategy for company, and it also maintain the day to day
transaction in better way. Even though entity also uses advanced technology so that they can
develop there solution in proper way and thus it can also lead to have an improvement in
business too (Garrison and et. al., 2010). Moreover, dividing the finance can make company to
reduce the wastage of resources in great way. The report is based on Tech UK limited which is a
seller of mobile phones, special charger and gadgets too etc. Assignment will include the
difference in between the management and financial accounting and its importance with different
management system. Although various accounting report and its importance too, absorption and
marginal costing etc. apart from all budget with its advantage and disadvantage and importance
as well.
TASK 1
P1 Essential requirement of management accounting and its system.
a.) Difference in between the management accounting and financial accounting:
Basis Management Accounting Financial Accounting
Meaning Management accounting is that
which do help in making an
effective decision and strategies for
the company.
Financial accounting is such which
also classify, analyse and record
different thing and it also summarize
financial affairs of the entity in great
way.
Application Management Accounting is that
which also make management to
have an meaningful steps and the
strategies too.
Financial accounting is that which
show forth accuracy with fair also
having an picture of financial affairs
too.
Dependence Management accounting is such
which do take help from the
financial accounting to make some
Financial accounting does net get
depended on management accounting.

of the right decisions in great way.
Rules Management accounting is that
which doesn't follow the rules in
proper way.
Financial accounting is such which do
should be prepared as per the GAAP
and IFRS.
b.) Moreover, there is an importance of management accounting for making an decision for
the department managers and some of point of importance for the company are as:
 Basically, it is such which do help in identifying the key performance metrics for the
important department too.
 Moreover, Collecting data and comparing it and make report in between the indicators of
current performance with expectations of business.
 Management accounting is such that also analyse the variation and also look forward to
provide the better solution and corrective measures in effective way.
 Even though with the help of management accounting the advanced tools and techniques
such as key performance indicators, balance scorecard and having an scenario planning
with the management information system too.
c.) The various cost accounting system is such which do include the different costs and some of
those are as:
 Actual cost: Actual cost is that which leads to actual expenditure made in acquiring
asset, which do include the supplier invoice expense addition cost of delivery and test to
asset. Therefore, this is that cost of asset which is recorded in financial statement as fixed
asset in great way (Fullerton, Kennedy and Widener, 2014).
 Normal cost: Normal cost is that which is used to provide some value to manufactured
product with the actual cost, as actual direct labour cost and also manufacture the
overhead based predetermined manufacturing overhead rate as well. Moreover, these cost
is referred to product cost and used for cost of goods sold.
 Standard costing: It is such which has an substituting the cost for the actual one in
accounting record and periodically having variance that show the difference in between
the expected and actual cost as well. This is something which has an simplified
alternative system as FIFO and LIFO method, in which large number of cost information
is there which maintain the items.

d.) Inventory management system:
Inventory management is such which is considered as the process of moving parts and
product out of the company's location as well. Firm is such which also manages the inventory on
the daily basis and having an place with new orders from product and deliver commodities to
ultimate customer (Dillard and Roslender, 2011). Even though it is required to determine stock
of product as it does help in meeting the need and wants of customer that can be satisfied in
proper way.
e.) Job Costing system:
It that method of accounting system which do determine the cost that normally occur in
developing the jobs from which the firm can earn higher income and revenue in great way.
Therefore, for such situation various needs and thing are there that help in gathering information
which is related to expenses with revenues of same too.
P2 Financial information.
a.) Types of management accounting report:
Different method are there which can be used in producing the managerial reporting in
better way. Report are such which include like Budget, job cost etc. It also help in gathering
information related to financial and non-financial data that may help in monitoring performance
of firm. Some of the reporting are as:
 Budget: It is that which help in preparing the different budget of firm which do include
expenses that is incurred with in earlier years as well. Basically, budget is that which help
in execution of performance of the department (Cinquini and Tenucci, 2010). Budget
report is such that mainly control the expenses which do sometime occur in between
process and it also help for looking forward to reduce some of operational cost and such
it can make themselves to attain the goals.
 Inventory: It is that which consider reports of inventory and also having an production
product of Zylla firm in great way. Generally, report is such which does help
management of raw material and somewhere it also help in finished goods. Generally, it
help in preparing product according to the requirement of market demand and having an
allocation with different resources effectively in proper way. It is that which include the
wastage of labour cost and overhead cost etc.

 Account receivable: Management accounting is such that help in monitoring the debtors
in great way. Moreover, it is being considered as the effective tool that is used by the firm
and also lead to manage the cash flow in effective way so that decision can be made and
regarding to this credit time is there of customer in great way. It is such which does help
to keep in mind about the various number of debtors and also create proper and effective
policies to such only in great way. Job cost: Report is that which is somewhere prepared by management and it is required
to determine the various expenses that is going to incur while having an implementation
of project as well. It is such, also match different expenses with expected revenue too.
Moreover, it is such which do help in earning higher income and profit too. Basically, it
is that which contribute cost and also has an time for firm and it also lead to help in
reduction of the operation of areas that has some worth of it.
Importance of these report for the organization and these report do help in performing in better
way so that firm can attain the goals and objectives in great way.
Decision making: Availability of information is such which is related with financial and
non-financial thing which do help in knowing actual problem of finance and it all has an
necessary steps and thus it has execution of business activities which are taken according to it.
Management also formulate the planning, performance management and having risk
management that also gain productivity as well (Christ and Burritt, 2013).
Increase financial return: Actions and procedure are those that are implemented and it
is required that needs to be followed by management of company. Basically, it is required to
conduct program to employees so as to perform proper way and it is such that has an possible
outcome in near future too.
Reduces cost: Information is such which do help management of entity to anticipate
some future problem and it also make an effective plans for having an purpose of eliminating
different issues as quick as possible. It is that which do help in reducing cost of production
process through various quality product are affordable in reasonable prices.

TASK 2
P3 Income statement using absorption and marginal costing.
Cost is such which lead to invest some amount of money in production process and it also
produces quality product and services for customers. It is such which also determine some of the
cost that is to incur some of the stages of production process which do sell quality product to
ultimate customer in effective way.
Marginal costing: This is that which is merely invested in production in extra unit of
product with the variable resources. Moreover at the time of calculation using marginal cost
leads to only have an variable cost and it is that which taken into account and it is such which do
excludes foxed cost (Baldvinsdottir, Mitchell and Nørreklit, 2010). Basically, marginal costing is
mainly used by every company or maximum number of firms as this helps in earning higher
profitability as well.
Absorption costing: This is that method for having an purpose of calculation of actual
cost of product, both variable and fixed cost also take into account too. Generally, adding cost
which is fixed and having an cost with profitability and also look to compare it by using some
marginal costing method as well.
Income statement on basis of the 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
0 2000*15 = 30000 500*15 = 7500

Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Cost of production
Closing stock
Variable sales overheads
Contribution
Less Fixed costs:
Fixed Production overheads
Fixed Selling overheads
Net loss
0
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
(2875)
Income statement on the basis of absorption costing:
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 for the period is 3000
units
Fixed cost of the month:
Production overhead: Budgeted cost is £15,000 and Actual cost is £10,000
Selling cost: Budgeted cost is £10,000 and Actual cost is around £7875.

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 = £40000 500*20 = £10000
Working Note 3: under/ over absorbed fixed production overhead
Actual fixed production: £15000
Fixed overhead: £10000
Total £5000(under absorbed)
Net profit using absorption costing £ £
Sales value
(-) 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
0
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875

Net loss (375
Reconcile statement:
Reconciliation statements Amount
Profit under absorption -375
Closing stock 500*5 2500
Profit under marginal 2125
From above statement, moreover it has to see that changing closing stock valuation of
2500 is there and even though marginal costing after having settlement of fixed cost when it
comes to 2125.
TASK 3
P4 Various kind of budget and there merit and demerits.
Moreover, there are various types of budget is there which needs to be prepared by
management of tech UK limited with an motive of operating business functions in more effective
manner. Including master budget, operational budget and having an cash flow budget too.
Budget are described below:
Master Budget: Moreover, it is that type of strategy which do forecast the future sales,
production level and capital investment as well that require the execution of future business
activities. Budget is such which also interrelated with the budget and having an different
department of company (Macintosh and Quattrone, 2010). Budget is that generally that needs to
purpose of making an effective plan and also set performing the objectives in great way.
 Advantages: It is such that help in providing overall cost that has incurred with
production process too.
 Disadvantage: Budget is having an preparation for having an specific activity that has
reliability and also having an accuracy of information may be reduce.
Operational budget: Budget is such which cover the revenue and cost that incur the operating
business activity on the daily basis too. Cost is that which are incurred with the help of

production that consider the overhead and administrative cost which is required for the
determination of management of firm in right context.
 Advantages: Budget do represent the revenue and cost that has incurred in with daily
basis business operation. Moreover, it also help in reduction of expenses that incur the
future business operation in right context too.
 Disadvantages: It is that which consumer more and more time to prepare operational
budget for having an functions of company in better way.
Fixed budget: It is that which cannot be changes and remain same for longer period and modify
the sales and for other activities either may it increase or decrease at for the same time (Nandan,
2010). Basically, it does not allow to change the financial plan in order to execute the business
activities.
 Advantages: This is that which does help in measuring the growth and success of the
small enterprises too.
 Disadvantages: Moreover, it cannot be able to adjust different factor which has prices of
raw material, interest rates and having an degree of competition as well.
Flexible budget: It is that which has different type of budget that can be adjusted and having
modified with changes happened in business activities as well. Moreover, changes are done at
anytime even manager identify need of changes in better way.
 Advantages: Helpful in having an possible outcome through which it make changes in
budget as well on time to time too.
 Disadvantages: It is that which needs an additional funds in executing some of business
activity and if manager needs to found some of the adjustment as well. Hence, it is such
which also increase the cost of project activities in great way.
Different pricing systems:
Price skimming: Pricing method which has company which do help to maximise the
prices and product in order to generate different revenues in better way. Management is such
which do focus on the adopting such prices and policy when the product are also merely firstly
introduced in market and later on prices are such which should be decreases in order to have a
compete with competitors as well (Nixon and Burns, 2012).
Economy pricing: Moreover, pricing policy is such of company that charge different and
lower prices then the rivals for the product in order to have attract large number of customers