Detailed Management Accounting Report: Imda Tech (UK) Performance

This report provides a comprehensive analysis of management accounting practices, specifically focusing on Imda Tech (UK). The report begins with an introduction to management accounting, differentiating it from financial accounting, and highlighting its functions and importance. Task 1 explores the core functions of management accounting, including its role in decision-making, product costing, and budgeting. It then contrasts financial and management accounting, emphasizing their distinct objectives and applications. Task 2 delves into the calculation of net profit using both marginal and absorption costing methods, providing detailed financial statements and a comparative analysis of the results. Task 3 examines different types of budgets, their advantages and disadvantages, and the process for preparing a budget, followed by a discussion of pricing strategies. Finally, Task 4 introduces the balance scorecard approach as a performance measurement tool. The report concludes with a summary of key findings and a list of references.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
a) Functions of management accounting ....................................................................................3
b) Types of management accounting system..............................................................................5
TASK 2............................................................................................................................................7
Calculating net profit through adoption of marginal as well as absorption costing tools...........7
TASK 3............................................................................................................................................9
(a) Different types of budget and their advantages and disadvantages.......................................9
(b) Process for preparing budget ..............................................................................................10
(c) Pricing strategies..................................................................................................................11
TASK 4..........................................................................................................................................13
a) Balance score card approach.................................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
It is significant for every firm to recording the transactions that are taking place on daily
basis. Therefore in this regard firm needs to carry out concept of management accounting and
offer financial information to several stakeholders (Otley and Emmanuel, 2013). The
organization makes appointment of accountant for recording the financial transactions in order to
record the information within time. However this proves to be effective and leads to directing as
well as controlling the business actions. In the present study management accounting has been
discussed in context of Imda Tech (UK). The report makes analysis of the income statement that
is devised based upon the marginal as well as absorption costing tool.
TASK 1
a) Functions of management accounting
i) Definition of management accounting and distinguish management and financial
accounting
Management accounting is the concept that helps in recording all the financial
information upon which management of firm aims to take crucial decision. Here, top
management analyses, measures and interpret the information related to finance in regard to
obtain significant data (Fullerton, Kennedy and Widener, 2013). Here, manager of Imda Tech
Limited maintain proper management accounting in regard to record daily transactions occurred
within business. Therefore, its main purpose is to prepare accounts and thus identify the areas
where firm is lacking so that crucial decisions could be taken in terms of improving the
performance of firm in market. With the help of management accounting it aids business to look
forwards and attain future goals. Also, it is considered as the crucial part within firm and finance
manager requires to carry out deep study so that they could identify the loopholes and make
appropriate decision in relation to enhance financial performance of firm in market. Imda faces
tough competition in market therefore firm aims to prepare good budget and thus make financial
decisions in relation to attain desired success (Bhimani and et. al., 2013). Management
accounting involves income and cost incurred within business in an accounting year. It also helps
in increasing the sales volume and income of Imda and make proper financial decision in terms
of achieving success. Managers of cited firm requires to allocate resources using Zero based
Budgeting and thus make assumptions regarding set targets could be attained. Below described is
the difference between financial and management accounting which are as follows-

Financial Accounting Management Accounting
Financial accounting is prepared in terms of
recording the transactions and tracks the
previous performance of firm. Through
preparing the financial account, manager of
Imda requires to use proper accounting
standards and guidelines so that transactions
could be recorded appropriately (Chan, Wang
and Raffoni, 2014).
On the other hand, management accounting
helps in recording the information related to
business and help managers to take crucial
decision in terms of carrying out effective
functioning (Dobroszek and Szychta, 2015).
Financial accounting requires to record all the
type of information i.e. financial or non
financial.
Further, accountants records only financial
information within management accounting.
It possesses the main objective of preparing
financial reports and thus it could be used by
external stakeholders and make crucial
investment decisions (Schaltegger, Gibassier and
Zvezdov, 2013).
While, preparing management accounting helps
business to provide accounting related
information to internal stakeholders such as
employees so that they make crucial decision
(Cleary, 2015).
Financial accounting is being prepared through
using historic data obtained in past.
Management accounting helps in recording the
data which is useful for firm to be used in
future and make the decisions accordingly
(Fayard and et. al., 2014).
Accountants recording financial information
needs to undertake effective accounting
standards (Gibassier, 2017).
On the other hand, management accounting
undertakes management information system
which helps them to execute the information
and attain success.
With the help of financial accounting it assists
in generating the reports that are related to
prepare appropriate financial reports.
While, in order to prepare management
accounting it aids in recording accurate and
reliable information so that performance could
be improved of Imda (Klychova, Faskhutdinova
and Sadrieva, 2014).
Financial accounting helps in preparing annual Management report aims to generate monthly

reports at the end of financial year and thus it
could be used by shareholders, customers and
investors.
and weekly records in regard to improve within
different department of Imda.
Income statement, balance sheet and profit and loss
account are being prepared within financial
accounting system (Taipaleenmäki, 2014).
While, inflow and outflow of cash, inventory, stock
and accounts payable and receivable etc. are
recorded in management accounting.
ii) Importance of management accounting information
It can be assessed that management accounting information proves to be very crucial for
Imda Tech Limited and helps them to make effective decision making. These are as follows- Decision related to make and buy- Here, manager of purchase department makes
effective decision related to purchase or buy the products. Therefore, it is possible for
firm to make proper comparison about the cost and thus describes the difference between
appropriate decisions regarding make or buy. Imda manager aims to make appropriate
comparison and identifies the cost through which it helps them to make difference
between the different options of making decisions (Bebbington, Unerman and O'Dwyer,
2014). Product costing- It is another importance of management accounting information and
thus helps to measure the cost of Imda products. Manager also obtains crucial
information regarding the cost of the product and thus identifies the price at which
products need to be sold. Thus, manager of Imda looks at the price of the products and
identify the profitability aspect in regard to allocate the resources so that production
could be carried out accordingly (Lowe and De Loo, 2014).
 Budgets- It is one of the crucial significance of management information system and thus
helps Imda to prepare proper budget so that information could be utilized properly in
regard to attain success (Setthasakko, 2010). It helps in making effective purchase and
sales decision so that employees could be encouraged in terms of obtaining financial
information within firm.

b) Types of management accounting system
Management accounting system helps in obtaining crucial information and thus helps
business to make crucial decisions. Thus, Imda Tech Limited uses such management accounting
system in regard to be used by other departments and improve their reports which are as follows-
i) Cost accounting system- Imda uses such management accounting system and thus
helps business to make proper estimation regarding cost of its products and value
inventory, profitability and controlling cost. Within manufacturing department helps
in estimating the cost of products in regard to identify the profit earned by firm.
Further, such method is also being used in regard to prepare financial statements and
thus cited organization estimate the closing inventory, work in progress and finished
stock (Otley and Emmanuel, 2013).
ii) Inventory management systems- Further, such management accounting system
helps in assessing the inventory management system and thus helps Imda to manage
the stock to satisfy the needs of customers. However, such information is crucial for
manager of business to identify the level of stock available and required so that needs
could be fulfilled (Fullerton, Kennedy and Widener, 2013). It is essential for
management accountant to record the daily transactions and thus maintain record of
inventory control and thus take orders from customers in regard to maintain the
inventory level and helps in minimizing the wastage of resources.
iii) Job costing systems- It is also one of the crucial management accounting system
helps in executing job costing method and thus proper procedure is being carried out
in regard to manufacture the Imda products in market. Also, such information is being
utilized by other departments in regard to track the cost of raw material and thus
execute the job operations effectively and efficiently. Within job costing it involves
three different types of information i.e. direct material, labor and overhead expenses.
However, all such information is being used by accountants in regard to track the
record of cost and revenue earned by firm (Bhimani and et. al., 2013).
iv) Price optimizing systems- It is another type of management accounting system and
thus helps Imda selling department to use such system in regard to identify the
responsiveness of clients and chard different prices charged by firm in regard to
analyze the prices of products produced by cited firm. It also helps firm to make

analytics based prices which are reasonable for both business and consumers
(Dobroszek and Szychta, 2015). Moreover, it helps consumers to make them ready in
regard to pay the prices for the products and receive best quality goods.
TASK 2
Calculating net profit through adoption of marginal as well as absorption costing tools
Marginal costing: This is considered as the method of costing which can be used by the
firm in order to make preparation of income statement for the financial year. Therefore it can be
defined in terms that with management accounting there is increment and decrement in the cost
of opportunity related with the business wherein there is presence of extra production of cost at
every level of production (Cleary, 2015). Moreover in the computation under the marginal
costing the management accounting take into consideration direct material, labor as well as
variable production as well as give ignorance to the fixed expenses. After that when making
calculation of the net profit it subtracts all the variable expenses and fixed expenses from the
gross profitability.
Sales revenue 52500
Less cost of goods sold
Direct labor 7500
Direct material 12000
Variable production overheads 3000
Cost of goods sold 22500
Gross profit 30000
Less: Variable expenses
Variable selling expenses 7875
Total variable expenses 7875
Contribution 22125
Less: Fixed expenses
Fixed selling expenses 10000
Fixed production overhead 15000
Total fixed expenses 25000
Net profit -2875

Absorption costing: It is considered other kind of management costing tool which can be
utilized by the firm in which it takes all kind of expenditure that are fixed in nature. Therefore it
can be referred to as full costing at the time goods are sold wherein it takes direct material,
material labor, variable expenses as well as fixed production expenditure (Fayard and et. al.,
2014). Therefore in this absorption costing method subtracts the variable production as well as
fixed expenses from the cost of goods sold. With this calculation of the gross profit is being
done.
Sales revenue 52500
Less cost of goods sold
Direct labor 7500
Direct material 12000
Variable production overheads 3000
Fixed production overheads 15000
Cost of goods sold 37500
Gross profit 15000
Less: Variable expenses
Variable selling expenses 7875
Less: Fixed expenses
Fixed selling expenses 10000
Total expenditure 17875
Net profit -2875
Interpretation: From the table above the computation of the net profit is being carried out
by the means of marginal as well as absorption costing tools. Imda Tech Limited business makes
calculation of the net profit through use of marginal as well as absorption costing method. This
can be interpreted from the information above that in table 1 the calculation of the net profit is
being done. Such is being done through summing direct material that is 7500, direct labor 12000
as well as variable production overhead 3000 there is summation of 22500. After this calculation
of the gross profit is being done through deduction of the sales revenue 52500 from the cost of
goods sold 22500 wherein the gross profit is 30000. Furthermore while making computation of
the net profit the whole expenses are deducted wherein total variable expenses is 7875 as well as

fixed total expenses is 25000. This is from the gross profit which is 30000 because the net loss
determined is -2875.

TASK 3
(a) Different types of budget and their advantages and disadvantages
Budget is effective approach assist to forecast and make decisions within the enterprise.
In this aspect, business operations of Imda limited can also gain various ideas which improve
financial position of budget program that is prepares for planning procedure. In addition to this,
it can be stated that budget is a fixed plan that are expressed quantitative elements that can be
specify with different resources (Ibarrondo-Dávila, López-Alonso and Rubio-Gámez, 2015). As
per the resources requirement, the company can deal with specified time period. There are
various kinds of budget can be prepared that are explains under here:
Fixed budget
In this types of management system, every organisation analysis their account with
assessing current business performances. With the help of preparing fixed pricing strategy it can
be implements for upcoming months (Breuer, Frumusanu and Manciu, 2013). Hence, certain
ideas and opinion assist to grow operations and outcomes in systematic way for development of
the company and its operations. With the help of ideas, the chosen business can deal with various
elements easily. As results, they will gain pore profits and revenue within the business
environment.
Flexible budget
It is quite different from fixed budget. It determines dynamic in planning strategies. In
this type of process, management account of Imda Limited play dynamic role. In this way, the
company is analysis there all month performances and sales which assist to grow operations and
functions in systematic way (Bodie, Kane and Marcus, 2014). Although, statistic plan take
place for occurring effective results and performances within the business environment. It can be
affects to productivity and outcomes of the chosen business enterprise. Due to continue
fluctuations, economy is widely impacted that create issues in productivity and distribution of
goods in different areas. Various part of the planning process can be as certain at workplace for
delivering results and performances in positive way (Ibarrondo-Dávila, López-Alonso and
Rubio-Gámez, 2015).
Master budget
In this type of budget, the firm carry various elements which serve effective results and
performances within the business environment. In this aspect, the company should analysis all

detail programs for activities that create effective results and performances at workplace. In this
way, sales, production and material budget take place which assist to grow effective operations
and functions for ascertain results and performances (Carlsson-Wall, Kraus and Lind, 2015). For
assessment of this type of budget, Imda Limited using income statement, balance sheet and cash
flow statement.
Advantages of budget
These are very useful elements which assist to grow operations and functions in
systematic way. With the help of budget assessment, Imda Limited can easily enhance their
profits and revenue for their future investment. In addition to this, productivity and efficiency
can be enhances with the help of different approach (Quinn, Strauss and Kristandl, 2014). Thus,
the chosen firm can frame goals and objectives that are related to the enterprise. It is also
maintains relations with various people through getting participation from them. As results, it
can be consider essential and appropriate tool.
Disadvantage of budget
Beside this, wrong prediction for future can hamper to enhance profits and effective
results at workplace (Bodie, Kane and Marcus, 2014). It is very difficult to analysis business
activities that prepare planning strategies for assess the performances of company. Tough task at
workplace regarding business plan demonstrate various functions which assist to grow
operations and outcomes.
(b) Process for preparing budget
In order to prepare the budget program, it is important to assess effectiveness of the
business in systematic way (Breuer, Frumusanu and Manciu, 2013). It will assist to grow
operations and functions in successful manner. With the help of implementing budget program
Imda limited can gain various benefits at workplace. Process can be considers as follows:
Update budget assumptions
In this stage, the chosen organisation can consider their operations and functions with
update assumptions. In this step, they have to take various aspects which are needed to create
programs and results in effective manner (Ibarrondo-Dávila, López-Alonso and Rubio-Gámez,
2015). In this element management of Imda Limited recognise their performances. Hence, as per
the found data, they can make solutions for ascertain negative impact. As results, further
operations can be created within the business environment.

Review bottlenecks
In this step, the company analysis their maximum achievement, according to review of
different activities (Kihn and Ihantola, 2015). As results, effectiveness can be ascertain at
workplace which support to objectives with the help of investment plan, capabilities can be
enhance that support to implement actions plan as per the enhancing profitability within the
organisation.
Assess available fund
After review of all activities, operations and budget assumptions, Imda Limited analysis
available fund. It will assist to grow profitability and performances through assessing
expenditure and gained revenue (Bodie, Kane and Marcus, 2014). As results, targets and goals
can be maintain at workplace as per the operating of further activities.
Creating budget packages
In this step, Imda Limited creates their budget packages which assist to make effective
results at workplace. In this way, they are analysis adequate production and distribution services
which make results and performances profitable (Gibassier, 2017). Hence, it can be support to
determine different goals and objectives of the company.
Obtain revenue and department budget
After creating budget packages, revenue and department functions can be forecasted by
Imda Limited. On that basis, they are take decision to invest their money and operations in
different areas of the world (Carlsson-Wall, Kraus and Lind, 2015). It makes successful
operations and targets that made for implementation. Estimated incomes and expenditure assist
to move towards the goals and objectives within the business enterprise.
As per the following mention process, Imda Limited has various benefits to operate
functions and operations in systematic way. Decision making regarding business operation in
future assist to make effective results and performances that make results and performances
positive (Breuer, Frumusanu and Manciu, 2013).
(c) Pricing strategies
In this type of approach, there are effective management system take place which assists
to grow more profits and revenue in systematic way. Major it is used by government, non profit
organisation and other businesses (Shuttleworth, 2014). It will assist to align activities which
enhance external and internal outcomes. As per the various factors, cost is determines market