Detailed Report on Management Accounting for Imda Tech's Business

This report provides a comprehensive analysis of management accounting principles and their application to Imda Tech, a company specializing in mobile phone chargers and electronic gadgets. The report begins by defining management accounting and differentiating it from financial accounting, highlighting its role in internal decision-making. It then explores the significance of management accounting for Imda Tech, emphasizing its ability to aid in strategic planning, cost management, and performance evaluation. The report delves into various management accounting systems, including cost accounting, inventory management, job costing, and price optimization. Furthermore, it examines profit and loss determination using absorption costing. The report also covers budget statements, pros and cons of different budgeting techniques, and methods for determining selling prices. Finally, it discusses the Balanced Scorecard (BSC) concept and its importance in the workplace, providing a holistic view of performance measurement and strategic alignment for Imda Tech.

MANAGEMENT
ACCOUNTING

INTRODUCTION
The method under which different number of financial transactions like as incomes and
outcomes are recorded, analysed, assessed, monitored etc. by the managers and responsible
employees for making business decisions is called as management accounting. All the business
entities which operate in the industry adopt the respective accounting system for make the firm
profitable along with taking decisions for the internal business environment. The current case
scenario is to be explained using the business like as Imda Tech which provide the products such
as specific kind of chargers for mobile phone and electronic gadgets. The report describes about
the systems which are beneficial for the Imda Tech which comes under the management
accounting as well as make difference of management as well as financial accounting. The
second part is all about the determining net profit by considering two costing ways such as
marginal and absorption. In the third task of the project, phases tgo making budget statements,
pros and cons of various budgets as well as the techniques to determine selling price of the
chargers for Imda Tech are explained. With the help of last part, the reader able to understand
about the Balanced Scorecard (BSC) concept and its importance at the workplace.
TASK 1
A) I. Explaining management accounting along with making difference with financial accounting
The process and method under accounting which supports to identify, assess, measure,
analyse, prepare as well as interpret the financial information and data to make effectual plan and
implement at the workplace is identified as the management accounting. In the world of
accounting there are two main concepts come which are like as the financial as well as
management by which Imda Tech external and internal decisions for business (Rossi, 2014).
Moreover, difference among such mentioned both the concepts of accounting is describes as
below:
Financial Accounting Management Accounting
The concept which is used by the businesses in
order to assess the overall business
performance in terms of the financials and
profitability is identified as financial
The management accounting is used by only
internal stakeholders of Imda Tech to know
that how much costing is there for making the
mobile phone chargers and different types of
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accounting. the electronic gadgets.
It provides the financial statements to the
external stakeholders by which they able to
make decisions towards the company that
whether to purchase products and invest
money or not in Imda Tech (Kotas, 2014).
On the other side, by analysing the internal
reports the company determine that some
products or in process goods needs to produce
within firm or purchase from the suppliers and
outsiders.
To prepare accounts in this, there are specific
formates along with the time periods stated and
framed by the authorized body. The time frame
for prepare financial accounts are like as
quarterly, half yearly or at the end of fiscal
year.
At here, to make the books of accounts there
are any type of the formats as well as particular
time period is not there. The Imda Tech
whenever needs and wants to take decisions
then can prepare.
In financial accounting, those transactions are
recorded and analysed which relies under the
only financials and monetary form.
On the other hand, all kinds of transactions and
data recorded whether they are comes under
the monetary or non financials.
To make statements necessary to follow and
implement all the accounting standards and
theories like as GAAP, IAS, IFRS etc.
There are any kinds of requirement is not to
make the accounts (Difference Between
Financial Accounting and Management
Accounting, 2016).
The financial statements like as balance sheet,
profit and loss, cash flow etc. are to be
analysed and verified by the external parties
and auditors such as Chartered Accountants
etc.
Due to preparing at the internal level without
considering any accounting theories and
aspects verified by the internal parties and
managers only.
In this only past as well as the historical
informations and financial data are focused and
analysed. Further, by taking base to them
decision are take by both internal and external
At the current accounting aspect and system
there are present or current data are analysed
and on the basis of it future data are budgeted
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stakeholders (Schaltegger, Gibassier and
Zvezdov, 2013).
and then strategies are to be framed.
A) II. Significance of management accounting for the Imda Tech to take business decisions
The current concept of management accounting is the very helpful and supportive for the
companies for making several kinds of decisions along with framing the strategies and
techniques to achieve goals. In the current market scenario, there are level of competition is very
high ans complex by which the companies are not able to operate in the industry in appropriate
and profitable way. Along with this, level of generating the amount in form of profit and revenue
also gets reduce. In this case, with the help of the management accounting concepts the Imda
Tech able to manage the costing and enhance revenue which helps to it for make more efficient.
It is used by the companies at the wider level within the workplace by which they can know
existing level of performance and on the basis of it fruitful and accountable tactics are made. In
this context, several advantages or the significance are described as below:
 Through the management accounting various kinds of data and informations regarding to
the company are analysed and evaluated and in accordance to that Imda Tech highly able
to determine and fix aims as well as objectives. Every firm has common objective and
goal which is such as to improve the level of profit and maximize it in the industry
(Strumickas and Valanciene, 2015). By this accounting criteria firm know that how much
production is manufactured utilizing the raw materials and on the basis of it further
decisions and objectives are to be framed.
 With the accounting, the company can make and prepare plan for the further periods of
the fiscal which is the most necessary for it to improve the production and sales level.
When there are the production goes down along with increasing the costs and
expenditures then by considering management accounting Imda Tech can prepare the
schedule for enhance outputs and mobile phone chargers with existing and same raw
materials.
 In order to prepare budget for assessing the data of financials for future in the present
fiscal period the management accounting is one of the most helpful technique for Imda
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Tech. When the future data and informations are assessed and determined then company
can know that how much sum of money needs to generate for making budgeted expenses.
In case the firm founds that it cannot generate the predetermined income for fulfil all the
expenses then require fund which is raised through sources of finance. In this condition
the management accounting will appropriately help to take decisions of choosing the
financing sources (Toluwalope, 2016).
 Apart from this, it supports to the Imda Tech business organisation for understanding and
analysing the business performance by using the variance analysis of various kinds. The
method under which two kinds of results and data are compared like as expected and
actual is called variance analysis which is part of the management accounting. Hence, it
can be said that with this Imda Tech can evaluated that whether the objectives and
budgeted data are to be achieved or not. In case, it not able to meet with the expected data
then make the strategies for increase efficiency of individuals which lead to meet with
purposes and aims.
B) Different number of systems which rely under management accounting
In the management accounting criteria there are several numbers of the systems as well as
approaches are available which helps to the company for assessing performance and take
decisions. Moreover, the systems are highly beneficial for each company whether it operates in
the manufacturing or service or any other industry. The different systems along with their
importance are described as below:
Cost accounting system
In the management accounting, the system and approach where different kinds of the
level of cost and expenses are to be analysed as well as evaluated by the managers is known as
cost accounting or product costing system as well (Ng, Harrison and Akroyd, 2013). In such kind
of the method the business of Imda Tech collect, classify and segregate, evaluate etc. the
alternative costs and expenses which incur to manufacture the products like as electronic gadgets
and mobile phone chargers. After using this system the level of cost is to be determined that
whether it is effectual or enhance and in accordance to that strategies are framed to administering
the total costing. Higher the cost lead to reduce capability of Imda Tech to decline profit and
business performance in the overall industry which is the adverse aspect of it. On the basis of
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cost accounting, Imda Tech can raise and improve the extent of efficiency and productivity of
both such as company and organisational members.
Inventory management system
Stock is key aspect of every firm but higher the inventory remains within workplace lead
to reduce and hamper the profitability in the industry which lead to decline the business
performance. For this thing, it is necessary to manage, control and reduce the inventory in the
company for enhancing its current and existing business performance. Apart from this, when
there are all the inventories are utilized in appropriate manner then able to make more number of
chargers as well as sale at the lower rate in the market (Noreen, Garrison and Brewer, 2014). In
addition to this, it is also necessary to determine value of the inventory which is there with the
Imda Tech and for this various methods are available. Different techniques for valuing stock are
like as LIFO (last in first out), weighted average method as well as FIFO (first in first out).
Job costing system
The method and system where cost and expenses are analysed which are associated with
the each and every kind of product and services or batches is called as job costing system. With
this the Imda Tech is highly able to know that which kind of product incur how much amount of
the costs and expenses. In case, when the company adopt the job costing system then capable to
manage as well as administer all the costs which are relating with the different batches like as
electronic gadgets, mobile phone chargers etc. Moreover, this system is better and effectual for
the company to reduce the costing which is associated with all kinds of the product ranges
manufactured and offered in the firm.
Price optimisation system
Other than these all the explained systems there are price optimisation system is also one
of the best and highly effectual for the company which helps to analyse that at different level of
costs and prices customers are giving response in which ways (Jacobs and Cuganesan, 2014).
When the Imda Tech sales its gadgets and chargers in the market then able to know that
customers are purchase more or less number of products on which level of prices. For example:
at the cost of 250 GBP and 300 GBP the consumers are increasing or reduce the power of
purchasing it. On the basis of it, Imda Tech highly capable for making the decision that which
level of prices needs to charge from customers.
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TASK 2
I. Account of profit and loss under the costing tool of absorption
The method of costing which is used by the companies for determining the profit at the
end of year by adding all the associated costs is defined as absorption method. In this, variable
direct as well as fixed all types of the expenses are to be utilised for calculate the profit at the
year ending. Due to including all the costs and expenditures expenses and profit level is higher
and lower respectively as compare to other methods of costing (Lambert and Sponem, 2012). On
the basis of the absorption method profit and loss statement for Imda Tech is as follows:
The above statement states that the Imda Tech not able to generate the net profit amount
in positive manner which is negative condition for it and reduce its financial health. Due to
increasing level of the costing at the fiscal year ending for producing the chargers there are net
loss is to be created by firm and for that it needs to adopt various cost control strategies. Here
Imda Tech having loss at the end of September is worth of -5375 GBP where necessary to use
the effectual business strategies.
II. Account of profit and loss under the costing tool of marginal
Apart from absorption costing, there are marginal method is also used by the firms under
which only variable and direct costs are assessed and taken into account while computing the net
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profit. When compare with the above mentioned method then expenses are lower in this case
which result is incurring higher profit at the end of accounting period (Bebbington and Thomson,
2013). On the basis of marginal method the account of profit and loss is stated as below:
It has been visualized by the current statement is that Imda Tech generates positive return
and profit after selling the products in the market which is higher compare to the absorption. The
net profit created and generated by the chosen firm in the current case is worth of 4625 GBP
which indicates the management and managers of Imda Tech using those methods which helps to
attract customers along with reducing total cost. When costing of the mobile phone charger is
lower, then price also which lead to increase sales and ultimately profitability affects in the
positive way.
TASK 3
a) Various number of budgets as well as their merits and drawbacks
Cash budgets :-
A cash budget is a plan or expected cash revenue and disbursal during the time period.
There are two cash flow in accounting cash inflow and outflow for all transaction within the
company Imda tech. In other words cash plan is an idea or forecasting of the organizations cash
position where the company stand (Chenhall and Moers, 2015).
Advantages of cash budgets:
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 Cash budget is helpful for Imda tech in forecasting or idea of cash position in the
future.
 Cash budget helps in how much cash require for future investment.
 Cash budget also helpful for Imda tech in set up financially for seasonal change in
sales and expenditure.
Disadvantage of cash budget :-
 The cash budget include subject matter regarding the organization expectable finance
needs.
 According Imda tech Cash budget is use of estimation.
 As per Imda tech Cash budget used to analysis fiscal needs and financing choice non
financial component are excluded.
Sales budget :-
A sales budget means estimation or plan of all sales activities in the organization for
production and sale of product and services. In other words sales budget is key function of sales
management for profit maximizing and solve dad stock problems in the company. Its presents
administrations the best estimation of sales tax revenue (CPIM, 2014).
Advantages of sales budget :-
 According Imda tech sales budget helps in estimation of product production for
achieve the sales goal and targets.
 As per Imda tech sales budget beneficial for achieve zero west production.
 Sales budget is helpful in relocated of resources for increasing production of the
company
Disadvantage of sales budget :-
 According the forecasters present time sales budget can't efficaciously forecast the
market trends
 As per Imda tech sales budget can not much more beneficial in this competitive
market because customer are very fast switch from company to another.
 Sales budget is highly expansive and time consuming process because more human
resource require for customer feedback and survey for forecasting.
 According Imda tech in sales management require highly qualified employee for
forecasting.
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Production budget :-
Production budget means calculation or forecasting number of product unit produce or
manufacture for as per the market and customers demands with good quality and just in time
strategy with low inventory investment and covers all government rules and regulation for
running a successful organization (Ball, 2013).
Advantages of production budgets:-
 According Imda tech production budget helps in reduce inventory storehouse costs of
the organization because adopts just in time strategy.
 As per Imda Tech production budget helps in meet the customers and client demand
on time,
 Production budget help in reduce dad stock problems because organization produce
according orders or demands than achieve zero percent dad stock.
 According Imda tech production budget help in reduce creditors for the organization.
Disadvantage of production budgets:-
 Production budget demerit is reduced employment in market.
 Production budget is highly expansive process and time consuming process.
b) Process or method to make the budget statements
Budget is one kind of statement with the help of this the company forecast different kind
of the financial data to make the decisions and strategies for further financial years. In order to
prepare the budget there are particular kinds of the method and steps are there which are
explained as below: Obtaining the data – To prepare the budget very initially data are required due to which
at the first stage the manager obtain and assess reliable facts and figures. After obtaining
all the data and informations needed in the budget preparation the manager move forward
for further step (Seal, 2012). Coordinate data – After obtaining required data, these are coordinated and then arranged
in the proper structure formate which is compulsory for the budget preparation. Hence, at
the second phase of the budgeting process there are data for budget are arrange in the
proper formate which helps to make the budget in effectual manner.
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 Prepare raw budget – At this stage, after considering the arranged and formatted data
raw budget statement is made by the responsible manager which will be shown to the
senior authorities. Communicate budget – After making he raw budget for the Imda Tech it is shown to
those managers and seniors who provide approval for implementing (Ward, 2012). In
this, the budget prepared as a raw is to be communicated with the senior managers of the
company and wait for their approval and acceptance. Taking approval – In this stage, when the seniors analyse the raw budget then approval
and permission is to be given to the managers who prepare this within workplace. Budget implementation – At the second last stage of the budget preparation, it is
implemented in the Imda Tech and all the employees and workers follows this for
achieving all the expected and budgeted data. It is the important stage among all the steps
because here it implemented and then followed.
 Budget evaluation – At the last implemented budget in the above step is reviewed as well
as evaluated by the top managers that whether the objectives are achieved or not. If the
negative aspects are found then corrective actions are taken (Arroyo, 2012).
c) Different kinds of strategies to assess selling price Cost plus pricing – The method of pricing in which firstly cost of one unit is determined
and then manager go for calculating the price. After assessing cost of each and every unit
the percentage of profit which Imda Tech wants to charge is to be included in cost and
then price derived for selling in the market. For example: If the management of Imda
Tech calculate that cost of one mobile phone charger is 500 GBP and agreed profit is like
as 19% then price will be 500 + 19% = 595 GBP. Absorption cost pricing method – Another method of the pricing is absorption under
which all incurred and associated costs are to be used for making the decision of pricing.
For instance there are variable and fixed cost are like as 400 and 500 GBP respectively
then both are used in such strategy. Marginal cost pricing method – In this kind of method there are only variables as well as
direct costs are considered and on the basis of which further decision for charging prices
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