Management Accounting Report: Imda Tech Financial Performance Review

This report delves into the core concepts of management accounting, using Imda Tech as a case study. It begins by differentiating management accounting from financial accounting and highlights its importance in decision-making, strategic planning, and performance evaluation. The report then explores various management accounting systems, including cost accounting, inventory management, and job costing, emphasizing how they enhance business efficiency. A key section focuses on calculating and comparing absorption and marginal costing methods, illustrating their impact on profitability. Furthermore, the report examines budgeting processes and pricing strategies, alongside an analysis of the balance scorecard and financial governance. Through these analyses, the report provides a comprehensive overview of management accounting tools and their applications in optimizing financial performance and achieving organizational goals.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Management accounting and difference between management accounting and financial
accounting...............................................................................................................................1
1.2 Different types of Management accounting systems and the way to improve the reports3
TASK 2 ...........................................................................................................................................5
Calculation of Absorb and marginal costing:.........................................................................5
TASK 3 ...........................................................................................................................................7
Budget and its categories........................................................................................................7
The process of budgeting........................................................................................................9
Pricing strategy.......................................................................................................................9
TASK 4..........................................................................................................................................10
Balance scorecard:................................................................................................................10
Financial governance:...........................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is a process by which manager can make effective decision
related to the planning, performance of employees etc. It includes complete records of all the
information which are prepared by the manager in a report so that they can analyse the actual
position of a company (Zimmerman and Yahya-Zadeh, 2011). Imda Tech company is taken in
the report.. By comparing financial accounting and management accounting company can
identify the uses of reporting in day-to-day transactions. It also presents the importance of
information which is important as a decision-making tool. Furthermore, it also describes the
various kind of costing system and by calculating the value through absorption and marginal
costing company can analyse its income. At last, with the use of balance scorecard firm also
evaluate the actual level of performance and identify the problems which is faced by the
company.
TASK 1
1.1 Management accounting and difference between management accounting and financial
accounting
Management accounting
Management accounting is the key concept for the business or the organization to
manage the funds and to develop and implement the strategic plan for the further progress.
Management of the business or organization use this Management accounting to get more
efficiency and understand the bigger images of the business current position that helps to make
the decision making for the future progress of the business. Management accounting is not
describing only the financial terms while it also shows and analyse the non-financial terms. On
the business, Management accounting helps to do effective strategic planning, understanding the
business internal and external capacity to meet the market demand, to do the performance
management and to implement the strategic plan to reach the success for the business according
to its mission and vision.
Management accounting systems makes clear and effective involvement of the managers
with the accounting roles that they can understand the business capacity that helps to make them
the effective decision for the future progress. So, the Management accounting is the process of
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the combination of identifying the issues and measuring these with the depth analysis of these
issues and interpreting on the business field to get the communicating information.
Difference between Management accounting and financial accounting:
There is traditional thinking that the financial accounting and the managerial accounting
is almost the same but in real sense, there are lots of difference present among these two subject
and these are-
Management accounting Financial Accounting
Management accounting is the combination
of the decision making, planning and
controlling the business activities (Ward,
2012).
It describes the statement relates with the
financial activities of the business
Management accounting basically use for
the internal user of the organization
This is the paper that use to represent
organization position and capacity to the
external users
There are no mandatory rules to do the
Management accounting
The main objective of the financial
management is to describe the financial
information
To do the Management accounting both
financial and non-financial information use
to represent the data
It describes the whole business
Management accounting describes the
planning, decision making, controlling etc.
The process of the financial accounting is the
collecting, measuring, storing, analysing,
reporting and managing the process.
The output of the Management accounting
describes as the special reports, product
costs, customer costs, budgets, performance
reports
The output of the financial accounting
describes as the balance sheet, income
statement, cash flow statement etc.
Importance of management accounting information as a decision making tools:
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Determining the aim: Management accounting provides right information to the
department manager so that they can determine the goals and objectives of Imda Tech company.
Helps in the preparation of plan: It is also important to make an effective plan for the
business activity. Implementing the plan helps the company to achieve its growth.
Helping in make or buy decision- The management accounting is important for the
department manager because it provide and make the effective decision to the department
manager of the company.
Increase efficiency of the business- The management accounting is important for
increasing the efficiency of the business. It increases the efficiency of the business and provide
the effective goals and objectives to the department manager (Sundem, 2014).
1.2 Different types of Management accounting systems and the way to improve the reports
Management accounting system that helps the business to make effective decision
making. It helps the assisting managers helps to do the directing and controlling the accounting
activities. Also, managers make motivation to make the employees engagement to make value on
the organization. Management accounting is based on some issues like behavioural issues,
informative issues, costs and benefits issues and evolution and adaption of the managerial
accounting
Cost accounting System: Cost accounting is one of the most vital managerial accounting
system. It describes the all cost of the business that helps management to get the overview of the
cost of the business operation and they can search and set the fund they need to adopt the cost
and make the business profitable. There are three different way are available to measure the cost
of the business. These are-
Actual costing system: Actual costing system describes the direct materials costs, cost
related with the direct labour and the manufacturing overhead. So, it describes the direct cost of
the process or operation for the business. These direct costs are relating with the work in
progress time, to do the finishing of the goods and the cost of the goods to sell. The overall costs
show on the income statement by deducting the total cost with the total amount of income to get
the net income of the business or the organization for a certain period
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Normal costing system: Normal costing system is the traditional costing system and it
uses to get the normal view of the total cost of the business by analysing the actual direct
materials, actual direct labour cost and the estimated manufacturing cost of the business. This is
the costing where the manufacturing cost assumes an amount not the actual one because the
manufacturing cost is unknown while it makes the pre-determination to the fund of the costing
and the estimated overhead can be achieving by divide the budget overhead with the budget
activity usage cost for the business
Standard costing system: Standard costing is the standard costing process that describes
the costs that charge to do the production and relates with the standard direct materials, standards
direct labour and the standard manufacturing overhead on the business context. To get the
standard costing system the timeline is the most crucial for this process.
Cost management also describes the variances of costs on the business like the price
variance, usage variance that describes the budget variance that effect on whole business plan
and the revenue and expenditure of the business
Inventory management system: Inventory management system is the system that
describes the stock management on the business. To do the effective and successful business,
need to do the effective resource management for the business. Inventory management business
helps business to understand and identify the resource and its importance on the different fields
that makes positive impact for the business success. Inventory management systems helps to
identify the require resources to implement the business strategic plan so it helps to identify the
gap between he requires and presence of the resource and helps management to take decision to
fulfil the gap and make effective planning for the funding and using the best way to the limited
resources of the business
Job costing system: Job costing system describes the issues relates with the revenue and
the cost of the business (Saladrigues and Tena, 2017). It also the depth analysis or the part of the
cost accounting management. Job costing helps business to identify the total unit cost that helps
to make the effective pricing of the product or service for the business. To identify the unit cost
need to take the total cost of the job divided by the number of units that need to produce to meet
the customer demand.
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Job costing system describes the costs relates with the labour costs that can be variable and fixed
like the salaries, direct or indirect costs, overhead cost, variable overhead costs, warranty cost
etc.
Price optimizing system: Price optimizing system is the system that helps business or
the organization to set the price of their product or services. Price optimizing systems describes
the whole process like the cost need to produce the product and set the services and form the
production tot eh distribution and the feedback of the customer and the cost relates with these
and the effective output of the costs as the profit is describing under the price optimizing system
(Quattrone, 2016). Managers identifies all he costs and assume the profit of the project or
product that is under the price optimizing system for the business
After analysing these different managerial accounting system, the importance of the
managerial accounting system is-
 Managerial accounting system helps management to make the effective decision for the
further progress of the business
 managerial accounting system helps to make plan, control and evaluate the business
issues
 managerial accounting system helps to make coordination and combination between the
different function so if the business like- operation, finance and marketing function
 managerial accounting system helps to make effective communication between top to
bottom level of managers
 managerial accounting system helps to make the motivational activities to make
employees goal oriented to reach the business goals and objectives
 managerial accounting system helps to do effective budgeting for the business
 managerial accounting system helps business to do the effective employee management
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TASK 2
Calculation of Absorb and marginal costing:
It is important for Imda Tech company to prepare an income statement by which
company can analysis its financial situation. As per the information presented in the context of
Imda Tech Ltd. income statement has been prepared as follows:
Absorption costing
As per the above table, the profit & loss of Imda Tech company was -£375. In this
method, firm take all the cost such as fixed as well as variable cost and receive gross profit with
17500.
Marginal costing
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As per the above table, It shows that this method only considered variable cost It can be
said that company's profit or loss was -£2,875. It shows that profitability is higher in marginal
costing method as compare to absorption costing method.
Reconciliation
TASK 3
Budget and its categories
There are some different planning tools are available on the term of management
accounting. One of the most practices and the most efficient tools among all the planning tools is
the budget. Budget is the set of activities that shows the whole information about the financial
plan on the business context for a certain time. An effective budget includes many features and
describes the functions of the business that includes the assumption of the profit margin by
analysing the organizational capacity and the past result of the performance of the business on
the market, cost that need to develop the strategy where all the fixed and variable cost describes
the total cost of the operation, cash flows that includes the cash inflow and also the cash outflow,
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the liabilities of the business and the assets against the liabilities (Miller and Kelber, 2015). So, it
helps to describes and make control over the financial plan of the business by making resource
management and make control over the issues that has impact on the financial planning for the
business and describes the roles and responsibilities of the managers of the different functions of
the business that helps them to do the effective performance management to achieve the target
set on the budget to reach the business goals and objectives.
There are different types of budget are available to do the effective financial planning for
the business. These are-
Sales budget Sales budget describes the budget to understand and define the
future sales for the business according the market position of the
business. It helps business to understand the market position and
the customer engagement with the business. On this budget, the
sales volume break into the units to describe the sales volume of
the business
Production budget Production budget is the budget that describes the production
estimation for the business on the coming time. So, it relates with
the sales budget, because sales volume describes the amount or
unit need to produce to run the business. Also, this budget is the
reflection result of the customer demand on the business
Capital budget Capital budget is the budget that refers the capital amount of the
business that need to perform on the current and in future activities
and it shows the funds to reach the capital by analysing the
stakeholders’ engagement and activities with the business
Cash flow budget Cash flow budget describes both cash inflow and cash outflow that
refers to the future cash flow for the business by analysing the
present and previous cash flows and market position of the
business and it describes the expenses and the cash amount for the
business on a certain period
Marketing budget This is the budget, that describes the cost and the funding of the
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business on the marketing plan and programs because marketing is
the key concept to success of any business on present time so
management team want to ensure the fund that need to raise and
how to utilize to the effective way on the business context and this
budget describes this issue (McPherson and Karney, 2014).
Revenue budget Revenue budget is the vital budget for the business it shows the
total expense and the total income of the business for a period in
future as an assumption by analysing the previous years by judging
the capacity and it set the target to reach to get effective
development for the business context of the organization
Behavioural implications of budget
Dysfunctional behaviour that describes the mature and effective relation with the
management and the goals and objectives of the organization with the organizational structure
for the business. On the other hand, participative budgeting refers the budget that make by the
top-level management by getting help of lower level management.
Also, sometime the over expectation or assumption on budget can make barriers to the strategic
planning because it becomes beyond of the business capacity
The process of budgeting
Budget plays an important role for the success of a company. By using the budget,
manager can estimate the actual cash requirement so that they will allocate the resources for
fulfilling their needs. There are various steps are used while preparing a budget, these are:
 The first process of preparing a budget is obtaining the ideas about sales, production and
expenses by which company can estimate the actual fund requirement for implementing
the activities (DRURY, 2013).
 In the next step, effective coordination is done through communicating the ideas with all
the departments.
 After making proper coordination and communication, budget plan can be implemented.
It includes evaluating the labour, materials, assets etc.
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 In the final process, budgets are prepared and report it to the interim progress towards
budgets objectives.
Pricing strategy
Pricing strategy is the most complex and significant strategy for the business to reach the
success because it depends the sales volume, customer engagement, production and product
concept and the revenue and cost to make the effective performance of the business to reach the
goals and objectives of the business (Cornell, 2014).
There are different pricing strategies are available to do the effective pricing for the
business. These are-
Penetration pricing:
This is the pricing policy where, business sets low price to increase the sales volume that
helps to increase the market share after a certain time getting more customer engagement, then
business start to increase the price slowly by getting the strong customer involvement with their
product
Skimming pricing:
This is the pricing policy where the business set the price high and slowly decrease the
price where most branded shops are using this strategy because they have the strong brand image
and they use that to sell their product with the high price and before the new version of the
product they launch on the market they start reducing the prices
Competition price:
On the high competitive market the pricing is bit different because when many business
are selling the same products and all of them have the same brand image. So, they make very
slide margin of difference of their product to stay on competition and try to reach the customer
TASK 4
Financial problems make barriers to implement the strategic plan of the business. There
are many reason is available for the situation that creates the financial problem (Coad, Jack and
Kholeif, 2015). These are-
 Poor financial management
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