Imda Tech: Management Accounting Systems, Planning & Analysis

This management accounting report for Imda Tech Limited covers various aspects of management accounting, including its definition, differences from financial accounting, and the importance of management accounting information for decision-making. It evaluates different management accounting systems like cost accounting, inventory management, job costing, and price optimizing systems, highlighting their benefits and integration within organizational processes. The report includes income statements using absorption and marginal costing methods, reconciles profits, and analyzes the use of different planning tools for budgeting and forecasting. Furthermore, it discusses the Balance Scorecard approach and how management accounting can lead organizations to sustainable success by addressing financial problems, with a critical evaluation of planning tools' effectiveness in this context. The report emphasizes the role of management accounting in improving financial information for better decision-making within Imda Tech Limited.

Management Accounting
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Table of Contents
Introduction:.............................................................................................................................................................3
Task 1.......................................................................................................................................................................4
P1.........................................................................................................................................................................4
I: Definition of Management Accounting and to distinguish Management Accounting from Financial
Accounting..........................................................................................................................................................4
II: The importance of management accounting information as a decision making tool for department
managers..............................................................................................................................................................4
P2. Explain the different types of Management Accounting Systems................................................................6
M1. Evaluate the benefits of management accounting systems and their application within the context of
Imda Tech (UK) Limited.....................................................................................................................................7
D1. Critically evaluate how management accounting systems and management accounting reporting is
integrated within organisational processes..........................................................................................................8
Task 2.......................................................................................................................................................................9
P3. Income statements of September using; Absorption costing and Marginal costing.....................................9
M2. Calculate income Reconcile the profits.....................................................................................................11
D2. Accurate apply and interpret the data for the business activities...............................................................12
Task 3.....................................................................................................................................................................13
P4. Provide a written report on planning tools..................................................................................................13
M3 you will need to analyse the use of the different planning and their application for preparing and
forecasting budgets............................................................................................................................................15
Task 4:....................................................................................................................................................................16
Balance scorecard:.............................................................................................................................................16
M4 you will need to analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success..................................................................................................................19
D3: you will need to evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead to sustainable success.`..........................................................................................................20
Conclusion:............................................................................................................................................................21
References:.............................................................................................................................................................22
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Introduction:
Being the trainee management accountant of the Imda Tech Limited, which is the producer of
the mobile telephone charger and the other gadgets for the retail outlets in UK, needs to
improve their financial information for the better decision making. According to the director
of finance, Mr Imda wants a report which should include the meaning of management
accounting and their difference with the financial accounting. The report includes the
different types of management accounting tools such as cost accounting systems, inventory
management systems, job costing systems and price optimising system. The report should
also state the importance of the management accounting system and how it integrates with the
organisational process. In this report, the calculation of marginal and absorption costing is
explained. In this report, it will also explain that departments should take the responsibility to
make budgets. The process of budget and pricing strategies are explained in this report. The
report also explains about the Balance Score Card Approach and how it helps in identifying
the financial problem.
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Task 1
P1.
I: Definition of Management Accounting and to distinguish Management Accounting
from Financial Accounting
Management accounting gives the information, records accounting data and helps in taking
the decisions regarding the financial matters. Management accounting does the proper
planning of the management and helps in improving the performance of the company and
achieving the organization strategy (REZNIQI, et. Al., 2015). It helps in giving the
information of the statistical data and also maintains the internal and external factors.
Management accounting Financial accounting
It gives the information to the people within
an organisation.
It gives the information to people outside
the organisation.
It is concerned with the products and cost
centres of the particular factor.
It is concerned with the entire organisation.
The report emphasis on the problems which
are occurring in the organisation and how to
solve them.
The report's emphasis on the profitability
and increases the efficiency of the business.
It can be measured in both the terms
quantitative and qualitative.
It can be measured in only quantitative
terms.
It doesn’t follow any rule and there is no
statutory requirement for this accounting.
This accounting has been prepared as per
the rules of GAAP or IFRS and it is
mandatory to be prepared by all the
companies.
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II: The importance of management accounting information as a decision-making tool
for department managers.
According to a Peter Drucker, a business can be successful only if the management has taken
the courageous decision.
i. Management accounting helps in taking the internal and external; decisions of the
business. Internal changes such as hierarchical change, changes on a global value,
mergers and acquisition, etc. External changes such as election, new policy and law
are created, etc. management helps in guiding how to take decisions when such
situations are arising.
ii. Management accounting collects the data and compares it with the current
performance so that we can analyse the performance of the company and take
decisions accordingly (Malmi, 2016).
iii. Management accounting uses various tools and techniques which helps in taking the
decisions and reduces the problems such as KPI, MIS, Balanced Scorecard, etc.
iv. Management accounting helps in analysing the expenses and revenues of the
company and also created budgets which help in taking the decisions.

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P2. Explain the different types of Management Accounting Systems
Cost accounting systems: This system helps in determining the cost of the company. It
estimates the profit, inventory valuation and also controls the cost of the company. Actual
cost is based on the product cost of material, labour and overhead (acharya, 2018). Normal
costing is used to derive the cost of the manufactured product. Standard cost is compared
with the actual cost they are the predetermined cost of the goods and services.
Inventory management systems: This cost includes the holding, ordering and managing the
stock of the business. To manage the inventory is very essential for any organisation. This
system controls the overseeing of ordering inventory, manages the storage of inventory and
also controls the price of the product of inventory (Ngubane, et. Al., 2015).
Job costing systems: This system involves a process which determines the cost of the
specific job or production. It tracks the cost of the labour. It assigns the indirect cost such as
depreciation, rent, etc. to more cost pools (Ingram, 2018).
Price optimising systems: It is a process through which it is analysed how the customer's
will response on different prices of goods and services. This system helps in meeting the
objectives of the company of maximising the operating profit. It is used in the company to
analyse the big data.
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M1. Evaluate benefits of management accounting within the context of Imda Tech (UK)
 Management accounting helps in preparing the plan and executing the same plan in
the operations of the business. Budgets are prepared for making a plan for the future
and to forecast the unexpected event.
 Management accounting helps in comparing the actual performance of the company
Imda Tech (UK) Limited with the standard or planned performance. If any deviations
are found then manage and control them with the help of standard costing and
budgetary control (Guinea, 2016).
 Management accounting helps in improving the efficiency of the company by
eliminating the wastage, defectives and reducing the inefficiency and problems of the
company.
 Management accounting helps in formulating the decisions and it also measures the
profit and put a value on inventory (Matambele, 2014).
 Management accounting helps in solving the problem by monitoring the performance
of the company Imda Tech (UK) Limited.
 Management accounting improves the communication between the different
departments and improved the coordination and integration of the activities of the
business.
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D1. Critically evaluate how management accounting systems and management
accounting reporting is integrated within organisational processes.
Management accounting system is integrated with the accounting reports because it deals
with the monetary factors of the company and accounting reports deals with the quantitative
terms. Integrated accounting system records the transaction of the company and gives the
financial information of the company. Management accounting controls the organisation
functions of the company (Matambele, 2014). It helps in reaching the goals of the entity and
serves the strategic objectives of the company. Management accounting helps in preparing
the report such as job cost reports, inventory report, manufacturing and production report, etc.
which helps the organisation to evaluate the cost and perform the functions of the business
accurately. Management accounting records give the mathematical data of the company such
as balance sheet, income statement, cash flows, etc. through which we can find out the
financial position of the organisation.
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Task 2
P3. Income statements of September using; Absorption costing and Marginal costing
Cost: term of cost can be explained as a monetary value which is paid by a person to get
something in ownership. It is a crucial matter for every business and various methods are
applied to measure and manage cost issues. On the basis of nature Different type of costs is as
follows:
 Fixed cost: fixed cost can be defined as a period cost which doesn’t change with
production volume or sales volume. For example, the rent which remains same for a
period.
 Variable costs: variable cost is those expenses which occur according to the volume.
For example, variable production overheads which occur according to the production
units.
Absorption costing: method of absorption costing is that which is applied to ascertain the cost
by including overall cost as product cost. This method comprises all flexible and fixed
charges as product charge if they are related to production (Medeiros, et. Al., 2017).
Absorption method of cost determination is a most useful method and it is also accepted
under accounting principles.
Marginal costing: marginal method of costing is applied to ascertain the cost of a product by
including only variable expenses as a cost which means that all fixed expenses are charged as
a period cost (S, 2018). This method is appropriate for budgeting purpose because it displays
costs in a wider manner.
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(Differences in marginal and absorption costing)
(Source: Slideplayer, 2018)
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M2. Calculate income Reconcile the profits
I: Profit under the method of absorption costing
Statement of Income £Amount
Value of Sales 52500
Less: Cost of Revenue:
Opening Inventory 0
Cost of Manufacturing 40000
Closing stock 10000 30000
(Under)/Over absorbed of fixed O/H -5000
Gross Profit 17500
Less:
Selling Variable Cost 7875
Fixed selling Cost 10000 17875
Net loss -375
II: Profit under the method of marginal costing
Statement of Income £Amount
Sales value 52500
Less: Variable costs
Stock at the opening 0
Cost of production 30000
Stock at the closing 7500 22500
Variable sales overheads 7875
Contribution 22125
Less: Fixed costs:
Fixed Production overheads 15000
Fixed Selling overheads 10000 25000
Net loss -2875
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D2. Accurate apply and interpret the data for the business activities.
Statement For income Reconciliation £Amount
Profit under Absorption costing -375
Less:
Difference due to Closing stock Overhead absorption 2500
Profit under Marginal costing -2875
On the analysis of above statement, it can be said that absorption and marginal, both methods
afford different results for same information. In the case of UK tech Ltd, marginal costing
practice is screening a defeat of (2875) and absorption method of costing is screening a loss
of (375). The difference of 2500 is arising because of closing poise of inventory and if no
closing inventory remains, both methods will report similar income.
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