Comprehensive Management Accounting Report: Imda Tech (UK) Limited

This report delves into the realm of management accounting, specifically focusing on its application within Imda Tech (UK) Limited, a company dealing with chargers and electronic gadgets. The report begins by differentiating between management and financial accounting, highlighting the importance of management accounting information for departmental managers in making informed decisions. It then explores various management accounting systems, such as cost accounting, inventory management, job costing, and price optimization, to improve business activities and functions. The report further includes the preparation of income statements for Imda Tech, detailing the financial performance. It also analyzes different types of budgets, along with their merits and demerits, and the process of preparing a budget, as well as various pricing strategies. Finally, the report assesses the use of the balance scorecard in addressing financial problems and developing a strategic framework for Imda Tech's future. Overall, the report provides a comprehensive overview of management accounting tools and techniques relevant to a retail business.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
(A). (i). Definition of management accounting and difference between management and
financial accounting.....................................................................................................................3
(A). (ii). Importance of management accounting information as a decision making tool for the
departmental managers................................................................................................................5
b. Explaining different types of management accounting system for improving the business
activities and functions................................................................................................................6
TASK 2............................................................................................................................................8
Preparing income statements for Imda Tech (UK) Limited company........................................8
TASK 3..........................................................................................................................................10
A) Various kinds of budgets along with their merits and demerits...........................................10
B) Process and steps for prepare budget....................................................................................12
C) Various types of pricing strategies.......................................................................................13
TASK 4..........................................................................................................................................14
a. Assessing the use of balance scorecard in responding financial problems and development
of strategic framework...............................................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Management accounting is highly concerned with the preparation of daily reports about
the financial performance and positions that aid in effective decision making. Tools and
techniques of management accounting places more emphasis on the internal management and
control. Moreover, reports clearly furnishes information regarding the extent to which business
unit has made optimum use of inventory, cash etc. Hence, by getting deeper insight about the
internal business performance business unit can develop framework for the near future. The
present report is based on Imda Tech which offers charger and other electronic gazettes to the
customers through the means of retail outlet established in UK. In this, report will present the
extent to which financial and management accounting differs from each other. Besides this, it
will also shed light on the different types of budgeting system which in turn facilitates optimum
use of financial resources. It will also develop understanding about the concept of marginal and
absorption costing, accounting as well as inventory management system.
TASK 1
(A). (i). Definition of management accounting and difference between management and financial
accounting
As per the scenario, Imda Tech Limited is a British organization who is engaging in the
merchandising of special chargers for the cell phones and other gadgets for the UK based retail
outlets. Currently, it is suffering several financial difficulties due to lack of availability of
financial information to the decision-makers for devising suitable managerial policies and
rationalized decisions for the growth.
Management accounting is an important branch which is regarded as the process of
utilizing financial data, business reports, accounts and others that provide reliable, accurate and
updated statistical information to the managers for making excellent decisions for reaching
growth (Goddard and Simm, 2017). In Imda Tech Limited, there are number of departments
working into the organization like purchase, production, sales, marketing and others, every
divisional manager is accountable to handle their departmental functioning by formulating
appropriate plans, strategies and qualitative decisions which ensure smooth functioning of day-

to-day activities. It is important for the managers to examine, assess and evaluate their own
divisional functionality, align their activities with the organizational aims, take remedial &
corrective measures for overcoming the challenges for improving their performance.
It is different from the financial accounting which is the process of keeping track over the
Imda Tech Ltd’s financial transactions. It involves recording, summarizing and interpreting
monetary activities through making annual accounts and reports, more important, statement of
comprehensive income and balance sheet as well.
Difference Financial accounting Management accounting
Objective The main purpose of this is to
measure the results of regular
business operations and financial
status of Imda Tech Ltd by making
income statement and balance
sheet.
MA mainly aims at providing required set
of information & reports to every
departmental manager of Imda Tech Ltd
to create strategies, plans and define
targets as well (Weygandt, Kimmel and
Kieso, 2015).
Users It mainly fulfils external
stakeholder’s requirement who
aims at examining business success
i.e. investors, lenders, taxation
authority and others.
MA renders important information to the
internal stakeholder, more importantly,
managers, directors and other top-
executives for devising appropriate
policies to reach goals.
Legal
obligation
As per the Company Act, 2006, it is
the legal obligation for the Imda
Tech to produce income statement,
balance sheet and cash flow
statement and publish it to report
their performance to the external
users (Francis and et.al., 2015)
There is no any legal compulsion for the
establishment to communicate their
internal departmental records like sales,
cost sheets, inventory reports and others
to the external parties (Drury, 2013)..
Rules and
regulations
An annual account needs to be
prepared by adherence and
compliance with the accounting
standards like UK GAAP,
International Accounting Standards
Under this, departmental managers aim at
examining the current performance and
thereby forecast and anticipate future to
perform excellent.

(IAS) and International Financial
Reporting Standards (IFRS).
Format There is a specified formats
mentioned for Imda Tech to
construct their final accounts and
report their profitability and
financial position (Ismail and King,
2014).
There are no any standard formats for the
Imda Tech’s departmental managers to
prepare sales, marketing, inventory and
other report & cost sheet.
(A). (ii). Importance of management accounting information as a decision making tool for the
departmental managers
Management accounting is of vital importance for the Imda Tech UK Ltd to attain their
set organizational targets and objectives. Strategic Management Accounting (SMA) has been
defined as a procedure of emerging corporate aims and strategies with the managerial accounting
information in order to devise excellent and rational business strategies and model for deriving
long-run success (Francis and et.al., 2015). Imda Tech UK Ltd is a manufacturing and distributor
of special charges for the mobile phones and other gadgets as well. It is essential for the all the
HR, Finance, Purchase, sales and marketing departments to utilize their internal as well as
external business information for the purpose of making smart decisions for the growth &
success.
Referring the finance department, Imda Tech’s financial manager has to examine
potential future capital requirement and identifies various sources of finance to procure sufficient
amount of funds from the right or appropriate source. Moreover, not only the procurement but
also they will make strategies for the effective & optimum financial management, cost
minimization and safeguard the business against possible financial consequences i.e. sudden
decrease in the market demand, rising interest rate, excessive cost & others (Schroeder, Clark
and Cathey, 2016). Such divisional manager is also responsible for the capital structure decisions
by creating a right composition of the long-term borrowings and equity capital. Besides this,
production manager estimates market demand and identify the manufacturing requirement to
produce special chargers and gadgets in required quantum to satisfy all the consumer needs and
expectations.

In despite of this, Imda Tech Ltd’s managers will use annual accounts, cost records,
marketing expenditure and sales performance and others for examining their business results and
thereby make right plans for the future. Managers also forecast potential results by creating
budgets using both the internal and external sources. With the help of this, managers create
strategic policies for administrating, monitoring and controlling their day-to-day functions and
assure smooth functionality. They also design growth and expansion plans which strengthen the
competitiveness and drive long-run sustainability (Robson, Young and Power, 2017).
Managers also create cost-curtailments strategies for reduction in wasteful spending and
make plans i.e. promotional plans, discounting offers and many others for sales maximization.
Many-times, Imda Tech has to put money in the fixed assets, in such case, they examine the
worthiness and project viability to make rational investment decisions that will drive favourable
yield. In the current times, although managers face various challenges in analysing &
interpreting large set of data which requires lengthy time & efforts, however, in the real world,
some-times quick decisions have to be made by the managers (Weygandt, Kimmel and Kieso,
2015). In the IT-driven technological period, such difficulty has been resolved by the emergence
of advanced software like Management Information System, Enterprise Resource Planning,
Executive Information System, Decision-Support System and many others.
b. Explaining different types of management accounting system for improving the business
activities and functions
Management accounting system includes various types of tools and techniques that can
be undertaken by Imda Tech for better reporting. In the business organization, suitable reporting
is the prior requirement which in turn makes contribution in the profitable decision making
(Weygandt, Kimmel and Kieso, 2015). Hence, retail business unit is required to make focus on
preparing suitable timely reports for that provides assistance to the firm in developing
appropriate framework for the upcoming time period.
Cost accounting system
By using standard costing system business organization can monitor the performance
level in an effectual way. Such costing system is highly significant which in turn helps Imda
Tech in making evaluation of business performance (Schroeder, Clark and Cathey, 2016). On the
basis of this aspect, by making comparison of actual performance with the budgeted figures retail

business unit can assess deviations which take place in financials. Hence, assessing the causes of
deviations corporation can take significant measure for further improvement. In this way, by
using standard costing method manager works at operational level can present suitable report to
the firm (Robson, Young and Power, 2017). Thus, by using such report higher management can
make suitable modifications in the existing framework.
Inventory management system
Inventory management system is the software or computer based system which in turn
helps in tracking stock level, orders, sales and deliverables. Such system is highly important
which provides high level of assistance to the manufacturing company like Imda Tech in
maintaining the record about inventory level (Francis and et.al., 2015). Hence, by making
evaluation of production related documents firm can avoid undesirable situation such as product
overstock and outage to the significant level (Inventory Management System, 2017). Moreover,
such software helps company in making suitable decision about the extent to which it requires to
maintain finished inventory. Thus, by undertaking this, Imda Tech can reduce the storage cost as
well as would become able to meet customer requirements.
Job costing system
Managers of Imda Tech can prepare suitable report by taking into account the job costing
system. By employing this, firm can track the cost of material and scrap value regarding the
course of job (Job costing system, 2017). Thus, by undertaking job accounting system firm can
assess the cost of production which is associated with the manufacturing of chargers and other
electronic gazettes. This costing system provides high level of assistance to the firm in setting
suitable prices of products. In this way, such system allows Imda Tech to get the desired level of
profit margin by setting suitable price according to cost level. According to such system suitable
inventoriable cost can be assigned by Imda Tech to the manufacturing goods and services.
Moreover, such system accumulates three types of cost such as direct material, labor and
overhead (Ismail and King, 2014). Hence, by dividing the total cost from number of chargers
manufactured Imda Tech can assess unit cost in the best possible way. Hence, by adding profit
margin in the unit cost company can set suitable price.
Price optimizing system

Such system of management accounting is highly effectual which in turn helps in
assessing the extent to which demand level differs at varied price level. Along with this, price
optimization system combines data regarding the cost as well as inventory and thereby assists in
setting suitable price (Goddard and Simm, 2017). In this way, by considering the financial
information such system recommends suitable price which in turn may result into higher profit
margin. Further, by using price optimization model helps in evaluating the customer’s response
at different price level (Price optimization model, 2017). Hence, marketing condition and
modeling results helps company in forecasting appropriate demand level. By considering overall
framework it can be stated that price optimization system helps in controlling inventory level and
enhancing customer satisfaction level to a great extent.
TASK 2
Preparing income statements for Imda Tech (UK) Limited company
The statement of financial which helps to the company for determine level of sales and
profit of the business is known as income statement. In other words it known as profit and loss
account which is prepared with the help of different costs and expenses. There are various kinds
techniques and method are used by the finance and account manager to prepare the respective
statement. The methods which are used by the Imda limited are like as marginal and absorption.
Different companies uses different types of methods to assess and determine profitability on the
basis of income statement. When profit and loss account prepares on the basis of marginal
method then only two kinds of costs are to be included which are like as direct as well as
variable (Sawakuchi and et.al., 2014). Due to considering and using only variable type of costs it
can be called variable method of costing as well. On the other side, another method considers all
the costs which are available to produce charger of mobile phones. Due to considering whole
kind of expenses total cost of production lower in comparison to variable costing. Furthermore,
by using marginal as well as absorption both the method income statements is to be prepared for
Imda Tech for the month of September. The profit and loss account for selected firm is stated as
below:
Preparation of income statement using marginal or variable costing:

Preparation of income statement using absorption costing approach:
Interpretation
From the above prepared income statements it can be analysed that level of net profit and
loss differs in every method of costing. It can be clearly visualised that as per the marginal
costing the Imda Tech limited is able to generate net profit worth of 4625 GBP which is

beneficial for it. On the other side, as per the absorption method Imda Tech Limited generate net
loss worth of -5375 GBP in the month of September. Reason for occurring such difference is that
considering different values of the costs (Kundu, Kar and Maiti, 2014). The absorption method
shows clear and actual performance of the firm. Furthermore, profitability position of the Imda
Tech company is not better and well because at the end of moth it generates loss.
TASK 3
A) Various kinds of budgets along with their merits and demerits
In the accounting and financial world there are various types of budgets are prepared to
predict different informations. Further some budgets are shown as below:
Cash budget
The statement which shows mainly two things for future FY such as cash incomes and
disposals is known as cash budget. On the basis of such two aspects Imda Tech able to assess net
cash position at the end of month and year. Example of the cash budget is stated as below:
Particulars January February March April May June
Opening inventory 563 3042 5591 9239 12955 16245
Cash inflows
Revenue 4373 5902 6864 7800 8690 9535
Account receivables 1235 1896 2458 3258 4630 5290
Total cash inflows (A) 6171 10840 14913
2029
7 26275 31070
Cash Disposals
Raw materials 1235 2579 2467 3579 4687 5430
Labour cost 324 688 976 1257 2341 3420
Maintenance charge 463 673 683 738 983 839

Fuel cost 345 435 563 645 754 865
Othe expenses 762 874 985 1123 1265 1320
Total cash disposals
(B) 3129 5249 5674 7342 10030 11874
Cash balance (A-B) 3042 5591 9239
1295
5 16245 19196
Advantages and disadvantages:
Cash budget helps to the Imda Tech limited in order to predict future performance in
terms of financials. Moreover, the resources are allotted in adequate manner with the help of
cash budget within business which is most beneficial for it (Megginson, Ullah and Wei, 2014).
Through cash budget further strategies formulated in highly appropriate manner.
However, it is based on the assumptions and predictions and sometime if the manager
predicts wrong things and data then overall budget gets hamper. Due to this, appropriate
strategies and decisions are not made.
Sales budget
A financial plan in which level of production along with the selling price is included is
identified as sales budget. The Imda Tech limited business entity able to make the plan for
increasing revenue for the further quarter and year to become stronger in terms of financial
health.
Benefits and drawbacks:
It helps to Imda company for determine that on the production level how much expenses
will be incur as well as how much revenue will be generate in next FY. Apart from this, it shows
that how much number of units and output level will be needed to produce for meet with the
expected sales and revenue. Further, cash flow is managed as well as overhead expenses are also
determined with help of sales budget (Hernandez, Jonker and Kosse, 2017).