Comprehensive Management Accounting Report for Imda Tech Analysis

This report provides a detailed analysis of management accounting practices within Imda Tech, a leading company. It begins by defining management accounting, differentiating it from financial accounting, and highlighting its importance in business decision-making. The report then explores various management accounting systems, including cost accounting, inventory management, and job costing. A key section focuses on preparing an income statement using both marginal and absorption costing methods, comparing their implications for financial reporting. Furthermore, the report delves into budgeting, discussing different types of budgets, their advantages and disadvantages, and the budgeting process. Pricing strategies are also examined. Finally, the report touches upon the balance scorecard approach as a financial governance and strategic tool. The report concludes with a summary of the key findings and references.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
(I) Definition of management accounting and difference between financial accounting and
management accounting..............................................................................................................3
(II) Importance of management accounting information.............................................................4
TASK 2............................................................................................................................................6
Preparing income statement for the month of September using marginal cost and absorption...6
TASK 3............................................................................................................................................9
a) Different types of budgets and their advantages and disadvantages.......................................9
b) The process of preparing budgets............................................................................................9
c) Pricing strategies....................................................................................................................10
TASK 4..........................................................................................................................................11
(a) (I) Balance score card approach...........................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
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INTRODUCTION
Management accounting information supports a business for taking financial decisions in
effective manner. Present report is based on Imda tech that is a leading company and it offers
superior quality products for its business consumers. The report describes about different type of
management and financial accounting information that is being used by business. Along with this
importance of management accounting information has been explained. Moreover, types of
management accounting systems have also been mentioned in the report. Furthermore use of
balance score card method for getting financial governance for business and developing effective
strategies have been defined.
TASK 1
(a)
(I) Definition of management accounting and difference between financial accounting and
management accounting.
Management accounting is explained as a technique that is used in organization for
regulating financial conditions of business. It supports the management of company for taking
decisions relating to business matters. Data and information related to financial statement can be
collected and analyzed so that better and effective decisions can be taken for performing business
activities. Imda tech is a leading company and management accounting practices are used in the
organization for recording all the daily transactions that are performed in the company. Weak
performances in financial areas can be identified and on the basis of that measures can be taken
for making positive improvements in performances of business (Taipaleenmäki, 2014).
Meaningful insight can be gained by financial manger and it supports for executing
different types of financial activities in successful and effective way. With this it can be stated
that management accounting is a process of identifying, measuring, analyzing, interpreting and
communicating information related to business activities. There is wide difference between
management accounting and financial accounting and basic difference is in the accounting
system that is followed in both the practices On the other hand financial accounting is explained
as practice used for publishing financial information, statement and reports. Management
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accounting information is used by internal users where as financial accounting information is
used by external users.
Financial accounting :- Major focus of financial accounting information is on external users and
it follows extremely imposed rules. It renders objective financial information and it has historical
orientation and information about the firm is given in summarized format in financial accounting
(Bebbington, Unerman and O'Dwyer, 2014). It is prepared by making use of historic data in the
past. Income statement, balance sheet and profit and loss account are being prepared in the
financial accounting system.
Management accounting :- Managerial accounting is a process of analyzing financial information
of business for decision making, planning, and controlling an organization's operations. In this
accounts record only the financial information (Fayard and et. al., 2014). It helps in recording
data and information that is required for taking financial decisions for the entity. Inflow and
outflow of cash, inventory and stocks and accounts are payable and receivables and it are added
in the management accounting.
(II) Importance of management accounting information
Imda tech is largest growing organization and it is critical that financial decisions should
be taken in organized and systematic way. Management accounting supports for taking quick and
effective decisions for business. It expedites for long term growth and success of the business.
Planned objectives and goals of the company can be achieved successfully by making use of this
approach.
Decision related to purchasing products and services of the company :- purchasing manager and
operation manager of the firm will get proper data and information that is required for buying
materials and other equipment for performing business activities in successful manner.
Comparison between cost of products can be made and it will help for buying affordable price
and super quality products for the organization. Difference between different option of making
decisions can be taken successfully.
Determining cost of products :- it is critical that investment cost of the company should be
recovered so that profitability can be enhanced. Management accounting information hasten for
setting the price of the products and services that are delivered by Imda tech. Along with this
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profitability aspects can be assessed and on the basis of that effective price can be set for the
different products and services that are offered by the company.
Preparing budget for the company :- Management accounting information supports for making
budget so that allocation of financial resources can be done in organized way. It will hasten for
carrying out all the required task and activities that are performed ion the company. Financial
information for the business can be utilized and it will aid for achieving long term and short term
goals of the entity in successfully and effective manner.
(B) Different types of management accounting information
There are different types of management accounting information that is being used by
organization for carrying out the financial activities of business in successful way. Various types
of management accounting information that are used in the company are as described :-
i. Cost accounting systems (actual, normal and standard costing)
This management accounting system is used by organization for helping business to performing
the business functions in successful way. Cost of the products can be estimated and it will aid for
estimating the profit that could be earned by the organizations (Johnson, 2013). Along with this
financial statements are prepared in this and closing inventory and finished stock can be
estimated successfully by making use of this method.
ii. ii. Inventory management systems
This techniques support the management of Imda tech for properly managing the stocks of the
firm so that needs to the consumers can be satisfied successfully. Along with this type of
information is important for keeping record of daily transactions so that proper record of all the
data and information about inventory control can be managed (Chan, Wang and Raffoni, 2014).
iii. iii. Job costing systems
It is one important cost accountability technique that is used by business organization for keeping
the record of raw material so that data and information can be gained successfully. Three
different type of information are included under the job accounting and it consists of information
about direct material, overhead expenses and labor (Bhimani and et. al., 2013).
iv. Price optimizing systems
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It is an effective management accounting system that is used in organization for performing
required financial functions successfully. In addition to that response of clients and price of the
products charged by firm can be assessed and it will aid for carrying out the required financial
functions successfully.
TASK 2
Preparing income statement for the month of September using marginal cost and absorption
The income statement has been prepared as per the marginal costing reflects that net loss
in the below mentioned income statement is higher. It is showing the loss of 5375 whereas
another income statement as per the absorption the profit has been occurred to Imda Tech Ltd.
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The major difference between marginal and absorption costing is related to cost
recognition. Here, under the marginal costing fixed cost is known as the period cost and variable
is termed as the product cost. Furthermore, variable and fixed overhead are classified and
profitability is measured in accordance with profit volume ratio. On the other hand, contribution
per unit has been considered for the purpose. This aids to complete all related activities so as to
utilize the limited resources in the right manner. In case of absorption costing both fixed and
variable are known as the product cost. Under this, classification of cost is done in accordance
with production, administration and distribution as well as selling. Accordingly profitability is
derived from inclusion of fixed cost whereby profitability gets affected. In addition to this,
convention way is adopted for the presentation of cost data. Apart from this, net profit per unit is
determined so as to present the information in a right manner. It leads to incorporate all
important data for preparing the cost structure. Moreover, marginal costing aids to present the
total cost of each product whereas traditional aspects are followed under the absorption cost.
Therefore, marginal and absorption costing are different which proves to be effective for
presenting the data in the right manner. It leads to set the price of products and services
effectively and meet the long as well as short term objectives of the business. Thus, cost report in
each method varies and provides the valid information related to the performance of the business
effectively.
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TASK 3
a) Different types of budgets and their advantages and disadvantages
There are different types of budget applied by the business which facilitates to meet the
expectations of all related stakeholders by meeting the budget related objectives of the firm.
These are explained as follows-
Operating budget-It consists of record related to income and expenses related to different
activities such as production, inventories and sales as well as finished goods. This assists
management in completing the business activities as per the set time span and establish proper
control over the expenses. The disadvantage of operating budget is wrong estimation whereby
production activities might get affected (Gilani, 2017).
Sales budget-Under this budget, expenses related to sales of particular number of units is done.
This aids to done the sales planning effectively and enabling corporation to carry out the
operation activities in the right time. The major benefit of sales budget is setting benchmark for
the revenue of the corporation. However, failure in setting the benchmark leads to affect the
performance of the corporation,
Cash budget-It is the best suited budget applied for the forecasting of the profit and loss occurred
for a particular time span. It is helpful for administration department to effectively take remedial
action in case of shortage of cash etc. The major disadvantage of this budget is uncertain
associated with the planning.
Capital budget-This kind of budget is effective in term of acquiring the assets for the corporation
such as land, building and machinery. This aids to forecast the cost of major capital purchases.
The disadvantage of capital budget overestimation related to capital expenditure.
b) The process of preparing budgets
There are several steps of preparing the budget under which corporation effectively
control its overall expenses and derive the valid outcome in order to complete the operational
activities. The first step of the process is obtaining the estimation under which expected cost,
production and sales are effectively understood. Furthermore, estimation is coordinated in
accordance with the organization performance. It leads to reduce the uncertainties associated
with the business and ensure the upward direction of the corporation with the increased rate of
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return (Basic steps to making a budget, 2017). The third step is regarding communication of
budget whereby all department members are assembled for the completion of basic objectives in
an effectual manner. All department managers review the respective budget and reach to the
valid decision for the purpose of completing the long as well as short term objectives. In addition
to this, budget plan is implemented with availability of necessary resources. The last step is
related to reporting the interim progress in the line of budgeted objectives. In this manner, Imda
Tech Ltd follows the right kind of procedure to allocate the financial resources and availing the
same for meeting the organizational objectives effectively. Furthermore, budget is prepared on
the basis of feedback of previous year. Hence, competitive edge of the corporation is created
with effective management of financial resources.
c) Pricing strategies
There are different pricing strategies applied by the corporation in order to recover the
cost of production and enable corporation to enhance the rate of return effectively. At this
juncture, Imda Tech Ltd. can follow different pricing strategies such as premium pricing,
economy and penetration. Along with that, skimming price and psychological pricing are applied
by the firm. For example, psychological pricing such as 999 are charged for special charger
through which customers feel happy to pay less and buy the product or prefer the same in
comparison to competitors (Richards, 2017). On the other hand, Imda Tech can implement the
penetration pricing wherein price is set very low on the entry stage. For this purpose, attraction
of customers is gained and then slowly innovation is brought under the product and services so
as to charge higher. It is helpful in creating the positive impact of the business in the marketplace
and accordingly competitive edge of the business is created. Moreover, premium pricing is also
set by Imda Tech so as to ensure the strong presence of the business in the marketplace. It is
because some of the customers have psychological impact with the higher price of product and
services. They consider the higher quality for the products which have relatively higher price.
Owing to this, Imda Tech updates its pricing strategies for extensive range of products and
services.
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TASK 4
(a) (I) Balance score card approach
It is an innovative approach that is used by organization for managing the business
activities that needs to be performed in organization. Leading organizations across globe are
making use of this technique and it is helping for achieving long term and short term objectives
of the company in successful manner. Imda tech can adopt this method so that positive
performance of the business can be improved and it will help for achieving long term and short
term goals of the business in successful manner. There are four different perspectives that are
included in the balance card approach and it includes these four areas :-
Business process perspective :- existing practices and procedures that are performed in the
business are improved by making use of balance score card approach. Positive improvements can
be made and it will aid for making improvements in practices and procedures that are followed in
the company (Klemstine and Maher, 2014). Weak performing areas can be identified and
measures can be taken for making alterations in weak performing areas of the business.
Customer process perspective :- It aids for assessing needs and requirement of consumers and
on the basis of that strategies can be formed for delivering effective services to consumers.
Consumers are main assets of the company that provide financial resources to the consumers.
Balance score card techniques supports for designing and developing products and services as
per the needs and requirement of buyers (Noordin, Zainuddin and Mail, 2017). Satisfaction level
and loyalty of buyers can be gained and it will support for ensuring long tern success and growth
of the firm.
Financial perspective :- It is critical that all the financial activities of the business should be
performed effectively. Balance score card method provides an effective tool that could be used
for evaluating and assessing the financial performance of the business in effective manner. It is
critical that all the processes that are performed in the organization should be streamlined and
centralized so that effective strategies can be made for implementing financial decisions in
effective way. Along with this finance manager of the firm can make use of this procedure for
taking strategic decisions and allocating funds and resources for performing business activities.
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Non financial perspective :- Other areas of the Imda tech can also be improved by making use of
balance card technique. Training programs can be organized and staff members can be provided
with training so that their existing skills and capabilities can be improved and it will support for
achieving long term goal of the firm (Taleizadeh and et.al., 2017). Skills and capabilities of
employees can be improved and it will help for making positive improvements in their
performance, operational activities of the entity can be improved and it will aid for ensuring
success of the business.
(ii)
Balance score card method can be used for financial governance and development of
effective strategies. Finance manager of the company can make use of this technique for making
improvement in business practices and procedures that are performed in the organization. Four
different perspective are included in this method and it includes financial perspective, non
financial perspective, consumer perspective and business practices (Taylor and Scapens, 2016).
Financial governance can be achieved and effective strategies can be designed so that long term
growth and success for the business can be achieved.
Consumer perspective of balance score card method will expedite for identifying needs
and requirement of buyers and it will help for designing products and practices as per the needs
of the clients. When superior quality products will be offered to buyers than it will aid for
gaining loyalty and satisfaction level of consumers (Ax and Greve, 2016). Overall modifications
in operational process of the company can be gained by making use of this approach. Financial
perspective of balance score card method will help for making positive improvements for
making improvements in financial performance of the business (Brown and et.al., 2016). Better
decisions can be taken and it will support for enhancing the profitability and financial revenues
that are earned by the company. Along with this non financial practices can also be improved
and it will help for making improvements in different practices and procedures that are followed
in the company. Weak performing areas of the business can be identified by making use of
balance score card technique and it will support for making effective action plans and strategies
that could be used for achieving goals and objectives of the company in successful way.
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