Detailed Management Accounting Report: Imda Tech Ltd Analysis

This report provides a comprehensive overview of management accounting practices applied to Imda Tech Limited, a company specializing in mobile chargers. It delves into various aspects, including the functions of management accounting, its distinction from financial accounting, and its role in decision-making. The report explores different management accounting systems such as traditional, lean, and throughput accounting, alongside inventory management and job costing systems. It analyzes the benefits of management accounting, including cost reduction and improved cash flow. Furthermore, the report presents an income statement using both absorption and marginal costing methods, highlighting the impact of fixed costs on profitability. It also discusses budgeting techniques and the interpretation of company activities, providing valuable insights for financial planning and control. The report concludes with an evaluation of the application of financial tools to address financial issues, offering a complete understanding of management accounting in a business context.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
P.1 Function of Management Accounting..................................................................................4
P.2 Different types of Management accounting systems............................................................5
M.1 Benefits of management accounting system ......................................................................6
D.1 Critical Analysis of Management accounting standard........................................................6
TASK 2............................................................................................................................................7
P.3 Income statement by using absorption and marginal costing...............................................7
M.2 Techniques to use the profit in preparing financial report...................................................9
D.2 Interpretation of the various activities of the company......................................................10
TASK 3..........................................................................................................................................10
P.4 Types of budgets ................................................................................................................10
M3.Need for use of different planning and its application for budget......................................11
D3 Evaluation financial tools help in solving financial issues.................................................11
TASK 4..........................................................................................................................................12
P.5 Balance scorecard approach and its implementation..........................................................12
M4 Interpretation of accounting problems................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
The project report is all about explain the management accounting of Imda Tech Limited.
It deal with all the provision of financial data and proposal to Imda Tech Ltd for use in company
and control of its business activity. The company is best known for producing effective charger
for mobile telephone and all gadget (Kaplan and Atkinson, 2015). The project contain various
decision related to department manager. Different method of accounting systems that are used by
the company. It consist of decision based on the absorption and marginal costing methods. It
also contains various budget and process or pricing strategies adopted by the company.
TASK 1
P.1 Function of Management Accounting
Management Accounting : It refer to the origin , analysis, summarise and make use of
relevant decision on financial and non financial data to generate and protect value of the
company. It combine accounting ,financial statement and management with skills and
technology used by the company that create value to them (Ward, 2012). The accounting system
of Imda Tech Ltd should reflect the reality and standard to the company objectives. The financial
statement one financial year has to be pre plan that can help to manage the resources of the
company.
Management Accounting Financial Accounting
1. Recording, summarising , analysing and
interpretation of the data is done under the
management accounting.
2. Transaction involve both monetary and non
monetary .
3. It provides information within the company
It help in the preparation of the financial
statement that are based on the operations and
performance.
All the monetary transaction are recorded
under this head.
Financial accounting is focused on the outside

as internal level.
4. It dose not require any law .
5. Reports can be made for set period of time.
persons like shareholders.
While it require certain laws.
It is concentrate mainly on the presentation of
financial reports.
Importance of management accounting as decision making tool for the manager.
Business manager face with decision on daily basis. The accounting makes decision more
reliable for long term basis. These are followed :
1. Relevant Analysis of cost : Information used by the company to determine what and
how to sale (Burritt, Schaltegger and Zvezdov, 2011). The decision related to this
examine the cost differences for each products.
2. Activity based costing : once it being decided that what to sell , the company need to
find out the person who is going to buy it. By using this techniques manager can
determine the require activity for the product line.
3. Cost reduction for the expenditure : Accounting system provide reduction to the
expenses of organisation that are related to functional activities. With the help of
this ,company can pull off or estimate cost of profitable resources and other concern
business activity.
4. Upcoming benefits : The primary ground of accountancy system is to form the budget
in much more easy way that it will increase profitability to the company in the future day.
The Planning has to be clear during the formulation of financial statements.
5. Utilization valuable data : It provide information about to grow our business. Budget ,
financial statement and various balance scorecard can help to guide the manager to take
decision for the company (Parker, 2012).
P.2 Different types of Management accounting systems
Management accounting system is based on tracking the cost that are associated to the
production of products and services in the company. There are various accounting methods like :
 Traditional accounting : It track cost by using the job order and process costing
methods. These determine that how the cost of the company is related to the direct
labour, material and manufacturing overhead.

 Lean Accounting : It is said to be more revolutionary techniques of management
accounting system. It not focusing wholly on the costs because to maintain the wastage of
the resources. It information is provides in terms of taking financial decision.
 Throughput Accounting : It is not observed under traditional accounting but it focuses
on identifying the constraints within the company manufacturing system. It includes
material , labour and production process.
 Transfer pricing : It is another management accounting system that provide information
about the cost when it moves from one department to another department. The common
cost incurred to the transfer of the products form one subsidiaries to the other department
and the cost added in it is based on opportunity cost and variable (Granlund, 2011).
Other accounting system are :
 Cost accounting system : It refer to the management system that organisation used to
calculate the total cost incurred on the production process . It is based on certain
objectives and the has to be followed by the company by utilising minimum cost on the
expenses and generate maximum profit . It includes normal cost, actual cost and standard
cost are to be analysed.
 Inventory management system : This system of inventory utilised stock of the
company by using appropriate techniques like on the basis of the capability and
durability it has been categorised into three parts : A categorise for those goods which are
more important and less durable , B category for the minimal durability and C category
for the largest durability (Weißenberger and Angelkort, 2011).
 Job Costing System : It is said to be order assigning job that are related with the cost of
manufacturing the each unit of the unit. It is mostly used when their is differences in the
products.
 Price optimising System : on the basis of numerical and statistical data the demand of a
product is calculated .It exclude all the information with proper accumulation to the cost
and inventory position at which the prices will profit in increasing the productivity for the
company Imda Tech Ltd. It also find out that customer response tot he different price
level.

M.1 Benefits of management accounting system
From the above management system there are various advantages of accounting system
like the company has to plan for reducing the expenses incurred by the company. Another
important benefits is to improve the cash flow by preparing the budget according to the
transaction done by the company, it accounting system should be focused on increasing the
financial return to the company, which are related to make effective businesses that will
beneficial for the company growth.
D.1 Critical Analysis of Management accounting standard
According to (Bisbe and Malagueño, 2012) the accounting system provide clear picture
and growth potential to program their action and manage their financial transaction of the
company. It also help to control the cash inflow that are generated from various activities which
are planned by organisation. It will increase the action of the internal department in the
organisation. As the accounting system is based on the managing the financial statements of
entire year. It also identify the scope of the growth and development of the business in the future.
TASK 2
P.3 Income statement by using absorption and marginal costing
Absorption Costing : It is the acting of calculating the cost of items produce by the
company Imda Tech Ltd by taking indirect expenses and overhead costs. The are those cost
which are associated to the production process based on the internal department. Under this
variable cost are not determine as per unit cost of fixed overhead.
Marginal costing : It is said to be the additional cost of producing one extra unit by
using the variable cost and the fixed cost. It consist of labour and material cost by addition to
estimate a certain portion of fixed cost.
Advantages of marginal and Absorption cost :
over valuation and under absorption is recorded as these are happen because of fixed overheads
can never be absorbed properly ().
The next part would be difference in the stock valuation . Due to which there is difference in the
profit amount. It is simple to understand that if opening and closing stocks are not given there
will be no profit.
Income statement as per marginal costing

Calculate variable production cost £
Direct material 8
Direct labour 5
Variable production 2
Variable product cost 15
Working 1: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 2000*15 = 30000 500*15 = 7500
Net profit using marginal costing £
Sales 52500
Less Variable costs
Opening inventory
Production 30000
Closing inventory (7500) (22250)
Variable sales (10500)
Contribution 12000
Less Fixed costs
Fixed Production overhead 10000
selling & admin cost 10000 (12000)
Net Profit nil
Income Statement as per absorption costing :
Selling price £35
Unit costs
Direct Labour £5
Direct Material £8
Variable Product overhead £2

Variable sales overhead £5.25
Budgeted product for the time period is 3000 units
Actual product for the September month is 2000 units
Fixed costs for the month are given as : Budgeted cost Actual cost
Product overhead £15,000 £15,000
Administration cost £10,000 £10,000
Working 1: Apportioned of fix cost per unit:
£25000/2000=£12.5 per unit
Working 2: Calculate full production cost
Direct material £8
Direct labour £5
Variable cost £2
Prime cost £15
Fixed cost £12.5
Total £27.5
Working 3: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2000*27.5 = £55000 500*27.5 = £13750
Working 4: under/ over absorbed fixed production overhead
Actual fixed product: £25000
Fixed overhead: £25000
Total nil
Net profit using absorption costing £
Sales £52500(1500*35)
(-) Cost of Sales:
Opening inventory 0
Production £55000
Closing inventory ( £13750)

Total cost 41250
Net Profit £11250
M.2 Methods to form final statements
` on the basis of the above mentioned calculation we have various techniques that can help
us to prepare the financial report for the company . The internal management can use such kind
of techniques for planning, decision making and controlling the various activity and transaction
related to the cash management of the company. Planning will help us to overcome the wastage
of the resource or managing the expenses for the company.
D.2 Interpretation of the various activities of the company
As per (Coad, Jack and Kholeif, 2015) the marginal costing of the company has no profit
because they don't have the opening stock and more expenses done by the company. Likewise in
the case of absorption cost there is healthy net profit for the company because they don't have
fixed charges that results is under absorption for the company. The valuation of stock is done
only from either side because of the closing stock. The analysed data is helpful for the company
in planning the activity and budget for the coming next year .
TASK 3
P.4 Types of budgets
Budget : It refer to an estimation of the income and expenses for a particular period of
time. It includes the cost , revenues and available resources that reflects a highlight to future
financial suitability , condition and its objectives.
Types of Budget
1. Master Budget : It is aggregate of the company individual budget that present a overall
picture of its performance of activity and time management. It combines factors like sale,
operating expenses , assets and income to evaluate overall performance (MacDonald and
Richardson, 2011).
Advantages : All the budgets are combines under this head that help to analysed at same time.
Disadvantages : It too costly.

2. Operating budget : It is the combination of the income and expenditure incurred by the
company in the business activities for a specific time period. It is created on
daily ,weakly or yearly basis.
Advantages: To maintain balance between the internal and external department of the company
performance.
Disadvantages : Time consuming activity.
3. Cash flow Budget : It is projection of the estimated cash which are comes in and goes
out from the various business activities. There are normally three activities involve one is
investing, operating and financing activities (Ball, 2013).
Advantages : To know the cash and cash equivalent from all these activities of the company.
Disadvantages : only cash transactions can be recorded whether short or long term.
4. Financial Budget : It is based on strategies for managing the business assets,cash flows
and income or expenses of the company. It provide comprehensive overview of the
company performance.
Advantages : It record all the financial transaction done in an accounting period.
Disadvantages : It is flexible to estimate the future planning.
5. Static Budget : It is fixed budget which remain unaltered unless of changes in the
factors such as volume or surplus.
Advantages : It identified the position of inventory.
Disadvantages : For every warehouse we have to prepare static budget.
Process of Budget preparation :
1. Obtaining the estimation : 1st step is to estimate the sales, production ,cost and resources
for the department.
2. Coordinating Estimate : 2nd step is to prepare budget committee with other plans.
3. Communicating Budget : 3rd step is to communicate with the manger and concern
department for the approval (Jakobsen, 2012).
4. Implementation in budget plan: under this final budget is being present to the manger.
5. Reporting interim progress to obtain objectives : As a feedback in the budget process
with the performance.

Pricing strategies : Different pricing method can be used by a business while selling a
product in the market or services. It is set to maximise the profitability of the business. It is
combine as creaming or skimming,decoy pricing,contribution based pricing etc.
M3.Need for use of different planning and its application for budget
The forecasting of the budget is based on the time horizon and what are the objectives of
government forecasting policies. The budget of the company is supported on the future growth
and reliability it will help to figuring the total value of the company that they will earn during the
next accounting year by using time duration and multiple sources of financial support. The
duration to manage the element and acquire the desire results from it. It help in establish the goal
and make suitable business decision by taking the help of the budgets (Kaspar, 2013).
D3 Evaluation financial tools help in solving financial issues
There are various financial issues can be arises in our business that can be overcome with
using appropriate tools like Accounting software should be used for maintain the record of
transaction entries,budgeting tool is realistic and crucial part in financial success of the
company .it mostly depend on the accounting software. Another one is the payroll management
system (PMS) it very time consuming but it will help to reduce the costly inefficiencies. Agile
Billing is used to make the billing system more smoother and faster.
TASK 4
P.5 Balance scorecard approach and its implementation
Balance scorecard : It refer to a strategies planning and management information system
that is used to manage the business activity with the vision and strategy of the company Imda
Tech Ltd by monitoring performance ability against strategic objectives. It was first time
published in 1992 . it is based on the traditional performance activity which is focused only on
accounting data. It help to provide balance between financial appearance.
Use of Balance Scorecard :
 It help to measure and improve organisational productivity by taking the matters in
account.
 It is more focused on the strategies and outcomes.
 The organisation management with workers on daily basis.
 Focused on key to future performance of the stability and growth of the company.

 Improve the communication with the vision and mission of the IMDA Tech Ltd.
Implementation Factors :
1. Obtaining governing body support and commitment toward the company goal.
2. It is based on leader,manager and employees in development of scorecard.
3. Firstly one to one communication is to be developed among the manger and authority .
4. View scorecard as long term perspective rather than short term project (Ossadnik,2013).
5. If any outside support is required should be make available to the manager and concern
department.
Identify the issues and respond to financial problem
 As customer Perspective : It fall into time,quality and performance. It is combine
with the lead time that is required to meet the customer needs . These issues can
be solved through using the balance scorecard.
 As accounting standard help to overcome the problems by proper evaluation of
the data and various statements.
 Relevant and valuable information have adequate shortage of useful resources
while on the job in their project. (Balanced Scorecard Basics, 2017).
Basic strategies for improving financial governance
 safe and secure data network should be planned by the government for the effective
transformation of results which includes accessibility, reliability and adaptability.
 The government is trying to make the business system more fast and accurate to solve
critical operations of the company.
 Decision making for business be more easy in adopting the information and and
statements.
 The government is trying to make strategies to reduce the risk and cost of manufacturing
the product which will help the manager to control and project estimation of the total cost
incurred during the activity.
M4 Interpretation of accounting problems
The problems of accounting can be solve by using the positive attitude because problems
can easily be overcome if we define it properly. Another thing is the accounting problems should
be focused and given more priority that are alarming mostly. With the use of balance scorecard
we can make our accounting issues solve quickly and manageable with the performance of