Comprehensive Management Accounting Report for Imda Tech Ltd

This report provides a comprehensive overview of management accounting, using Imda Tech Ltd as a case study. It begins by defining management accounting and distinguishing it from financial accounting, emphasizing its role in decision-making. The report explores different types of management accounting systems, including costing, inventory management, job costing, and price optimization systems. It then delves into absorption and marginal costing methods, presenting income statements for Imda Tech Ltd based on each method. Furthermore, the report examines various budgeting types, their advantages, disadvantages, and the budgeting process. Pricing strategies are also discussed. Finally, the report describes the Balance Score Card (BSC) and its implementation, including its use in identifying and responding to financial problems and improving financial governance and strategy development. The analysis covers key aspects of management accounting, offering valuable insights for business development and financial management.

Management Accounting

TABLE OF CONTENTS
introduction......................................................................................................................................4
TASK 1............................................................................................................................................4
a) Preparing a well-researcheched written report on the functions of management accounting. 4
i) Defining management accounting and distinguish management accounting from financial
accounting....................................................................................................................................4
ii) Importance of management accounting information as decision making tool........................5
b) Different types of management accounting system ................................................................6
TASK 2............................................................................................................................................7
Absorption costing.......................................................................................................................7
Marginal costing methods............................................................................................................9
TASK 3..........................................................................................................................................11
a) Different types of budgets and their advantages and disadvantages.....................................11
b) Process of preparing the budgets...........................................................................................12
c) Pricing strategies....................................................................................................................13
TASK 4..........................................................................................................................................13
a) Describing the Balance Score Card and its implementation..................................................14
i) Using Balance Score Card (BSC) to identify and respond financial problem.......................14
ii) Use of Balance Score Card to improve the financial governance and development of
effective strategies.....................................................................................................................16
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18
Illustration Index
Illustration 1: Financial perspective of BSC..................................................................................15
Illustration 2: Balance Score Card.................................................................................................16

INTRODUCTION
Management accounting is the important field or section of the finance which helps to
prepare the effective report and meet the expectations of all related parties. It covers activities
related to presenting the financial information with the accumulation of reliable information or
valid data. The current report is based on Imda Tech Ltd; dealing with special charger for mobile
telephone and other carry on gadgets in UK. Further, report covers the difference between
management and financial accounting. In addition to this, Balance Score card has also been
applied for measuring the performance of the business and meeting the expected objectives or
outcome. Moreover, different types of management accounting system are also explained.
TASK 1
a) Preparing a well-researcheched written report on the functions of management accounting
The functions of management accounting are explained as follows which consists of
different aspects related to costing. This enables corporation to integrate all related activities and
accomplish long as well as short term objectives of the business in an effectual manner. It covers
below mentioned aspects-
i) Defining management accounting and distinguish management accounting from financial
accounting
The management accounting consists of several activities such as preparing and
providing timely statistical and financial information to business management so as to take daily
decision along with other related short term decision. For this purpose, it becomes easy to state
the difference between management and financial accounting (Kaplan and Atkinson, 2015).
Furthermore management accounting helps corporation Imda Tech Ltd, in the following manner-
 The decision making and planning are based on the data collected or presented through
management accounting
 The employees or managers are motivated for achieving the organizational objectives
 Use of management accounting facilitates to create the competitive position of the
business in the marketplace.
 The performance of the corporation is measures in accordance with activities, sub-units
and managers as well as employees.

Management accounting Financial accounting
The management accounting work on the basis
of data collected from financial accounting
The base of financial accounting is monitored
transactions.
It is helpful for the purpose of decision
making, controlling and planning as well as
operation of the business
It is useful to publish the financial statement an
other financial reports so as to present the
financial situation of the business effectively.
Internal focus is considered under the
management accounting but no any kind of
mandatory rules
The external focus is considered under the
financial accounting under which practices
such as GAAP are followed.
The subjective information are considered with
focus on non-financial and financial
information (Renz, 2016).
The financial accounting consider the historical
orientation for the purpose of presenting and
collecting the data.
Historical data used for future performance or
any kind of estimation related to internal
management of the business.
Overall information related to firm is
summarizes for the purpose of meeting
expectations of stakeholders and providing
them reliable data.
ii) Importance of management accounting information as decision making tool
Management accounting is very important for taking the decision related to business. It
facilitates to integrate all operational activities and support firm to achieve the long as well as
short term objectives of the business. It covers broad varied aspects through which corporation
can completed all related activities regarding taking the the most suitable decision and improve
the performance of the business in an effectual manner. The following process of the decision
making is taken under the management accounting. There are different types of tools applied for
decision making under the management accounting (Fullerton, Kennedy and Widener, 2014).
For this purpose, budget as the most effective tool is taken into account whereby management of
the business understand the common objectives and forecast the financial activities associated
with the firm. By referring the budget, Imda Tech Ltd, estimate the requirement of employees,
cash flows and warehouse facilities so as to start the operational activities in an effectual manner.

In this manner, budget is applied for the purpose of bring certainty with the business and
managing the cash flow in an effectual manner. Furthermore, make or buy decision is taken
under the management accounting which is derived with the help of comparing the relevant cost.
The decision making tool as the cost volume-profit analysis is applied so that decision
related to approximate sales turnover can be taken. Here, management shed light on graphical
form of the collected data and accordingly gather the information that what proportion of sales
will be needed to meet the objectives (Otley and Emmanuel, 2013). At the same time, estimated
price is also determined through which company can reduce the certain and ensure competitive
edge of the business. In addition to this, product costing is helpful to find the cost of product by
using marginal accounting.
b) Different types of management accounting system
There are different types of management accounting system applied by the corporation.
This in turn each job is completed in a cost effective manner. These different types of
management accounting system are explained as follows-
i) Costing accounting system
This method is applied to find the cost of each products and service produced under Imda
Tech Ltd. It involves the job order costing and process costing. At this juncture, different
methods are included under the cost accounting system such as input measurement basis,
inventory valuation methods as well as cost-flow assumption and recording interval capacity. It
is helpful for business to derive valid outcome and reach the end results effectively. Here, the
real time component reflects the most valuable feature associated with cost accounting. In this
manner, it consists of both job and process costing so as to represent the benefits from the cost
accounting (Suomala, Lyly-Yrjänäinen and Lukka, 2014). This leads to keep record related to
performance of the business in an effectual manner. Many corporations like Imda Tech Ltd
follows the computerized system so as that keep track over progress of each operational
department. This is effective to control the inventory system and determine the long run success
of the business by controlling overall expenses associated with the production procedure of the
Imda Tech Ltd.
ii) Inventory management systems

The inventory management system is the most important part of the business through
which all input used under the production of products and services. For this purpose, appropriate
techniques such as Just in time and last in first out and first in first out are used. This is helpful to
manage the inventory effectively and reduce the extra cost incurred in the storage etc. This is
done under the management accounting system and accordingly most effective tool is applied for
better performance of the business.
iii) Job costing systems
The job costing system is a system under which manufacturing cost of each individual
unit produced under the particular batch is recorded. This is helpful for management to
determine the price of products and services. For this purpose, different aspects are considered
under the job costing such as allocation of overheads, labour and material etc. In addition to this,
job costing accumulate the cost related to overheads, material and labor effective trough which
price of product and services is considered (Job Costing, 2017). In this manner, costing for each
element is determined through which it becomes easy to increase overall rate of return.
iv) Price optimizing systems
Price optimization system is another aspect under which cost or price of the product is
determined with the help of different price levels. For this purpose, cost related to cost and
inventory level are applied for the recommending the appropriate price decision for the purpose
of deriving higher level of profitability.
TASK 2
According to the give, scenario, income statement of the Imda Tech Ltd has been
prepared which is presenting the information related to sales turnover and other related expenses
regarding different activities. It has been presented as follows. In this context, absorption and
marginal costing are considered for preparing the income statement. However, major difference
of the both costing method can be seen under income statement of the business. This proves to be
effective to derive valid outcome and ensure the best utilization of limited resources and meet the
long as well as short term objectives of the same (Dung and Aoki, 2014).
Absorption costing
The absorption costing is calculated on the basis of total cost for each cost center for the
purpose finding the total cost. Here, variable and fixed cost both are considered along with

classification of cost in accordance with production, selling & administration along. This assists
management of Imda Tech Ltd ascertain the profitability on the basis of fixed cost method. In
addition to this, per unit net profit can be derived by using the mentioned costing method. Apart
from this, conventional way is applied for data presentation. Therefore, below mentioned
statement is derived by applied absorption costing method. As per the below mentioned, it has
been found that sales turnover for Imda Tech Ltd was 52500 and direct material cost was 16000
and direct labour cost was 10000. Along with that, 4000 and 10000 is variable and fixed cost
respectively. It enables corporation to assess the business performance effectively so as to
determine long run success of the business by presenting the results in the right manner.
Therefore, gross profit in this case is 12500 and then net loss was occurred to business by 5375.
It shows that poor performance of company because instead of getting profit firm is having loss
in the particular time span. For this purpose, appropriate strategies can be applied to control the
expenses and raise the rate of return. Not only this but management should go for this particular
method only so as to find the realistic valid related to performance of the business. This in turn
company can integrate all related activities and find the most suitable ways to allocate all related
resources effectively.

Marginal costing methods
The marginal costing method is considered as the another important one under which
data are collected and presented in the tabular form. Here, total cost of production is known as
the marginal costing wherein both fixed and variable cost are considered in context of
classification. Furthermore, the ratio used to measure the profitability is by profit volume ratio. It
contributes towards the determining the success of the business over a certain time span (Kaplan
and Atkinson, 2015). Moreover, the cost per unit does not have any impact of the variance
between closing and opening stock. Moreover, contribution per unit is considered by Imda Tech
Ltd for keeping record related to financial performance of the business. The below mentioned
table is showing that net profit derive from the Imda Tech Ltd for particular time span. It has
been found that sales turnover will be 52500 and cost occurred in direct material was 16000. On
the other hand, direct lobour has cost of 10000 whereas variable production overhead was 4000.
In this manner, gross profit derived for the business was 22500. Furthermore, administration and
selling cost has been deductive through which net profit has 4625 was derived by the business.
This is showing that profitability under marginal cost can be derived ion comparison to other
selected method of cost. The main reason behind the same is that fixed cost is not deducted from
the gross profit and accordingly corporation easily cover its cost of production and derive the
higher rate of return.
The report mentioned from each as marginal and absorption costing has found and
accordingly, it has been suggested to management of Imda Tech Ltd to go for first method only.
The main reason behind applying that particular method to find the clear information related to
financial performance of the business and control over the related activities to deliver good
quality of services among all related parties. In this manner, it can be effectively said or stated
that firm can use the suitable method to keep record related to direct or indirect expenses and
direct effect of the same can be seen on profitability of the same. In addition to this, difference
between the marginal and absorption costing can be taken into account which reflects that cost
application is different and measurement as well as profitability arrived from both kind of
method is also different (Taipaleenmäki and Ikäheimo, 2013). It enables corporation to integrate
all related activities and determine the higher rate of return from the business. In addition to this,
marginal costing reflects the profit measurement with the help of contribution whereas gross is

derived under the absorption costing. IN this manner, both techniques are different form each
and reflect the different outcome.

TASK 3
a) Different types of budgets and their advantages and disadvantages
There are different types of budget which can be used by corporation to manage all
operational activities effectively so as to meet the objectives of Imda Tech Limited. Following
types of budgets are prepared by the business- Master budget-It is considered as the final budget under which all functions are added
and approved by the top management for its implementation. The advantages of master
budget is that it represents all functions budget and provide the estimation of profit.
Furthermore, forecasting can be done by the budget effectively. The disadvantages of
master budget is that issue in one budget leads to wrong foresting. Operational budget-This budget deals with daily operational activities of corporation.
Here, revenue shows that activities which derive the profit for the business where as cost
or expenses head indicates that how firm increases the cost of production. The major
advantages of operational budget is appropriate management of current expenses and
protecting the future one (Blackstone, 2017). This in turn revenue can be built for future.
In addition to this, disadvantages of operational budget indicates inaccuracy and rigid
decision making. Cash flow budget-It is the most common budget prepared in each organization like Imda
Tech Limited so as to manage the present or future cash as well as expenses. The major
advantage of cash budget is control over expenses and disadvantages can be related to
wrong estimation and ignorance to external factors affecting the performance of the
business.
 Sales budget-It is considered as the planning instrument and control mechanism under
which all related activities of the business is associated in order to manage the
performance of the business effectively and control the entire performance of the
corporation to a great extent (Beatty and Liao, 2014).
b) Process of preparing the budgets
The budget is considered as the important aspect for estimation of future profitability and
expenses regarding the company under consideration. For this purpose, management of Imda
Tech Ltd can prepare the budget in the following manner-

 Obtaining the estimation-It is the first and foremost step under which estimation is done
for the production and sales level. This in turn it becomes easy for the management to
forecast the cost in term of available resources. However, Imda Tech Ltd will consider
the cost of each department with regard, production, marketing and sales etc. Coordinating the estimates-Under this stage, team of budget consult regarding the
different plans related to availability of resources so as to implement the plan on right in
an effectual manner. Here, resources are allocated for each activities involved under the
development of budget (Tan, Libby and Hunton, 2015). Communicating budget-After completion of planning activities and allocation of
resources, management of finance department handle the task related to communicating
regarding the purpose or aim of the plans among the responsible parties. However,
necessary changes and modification are incorporated under budget if any department
provides the valuable suggestion. Implementing the budget plan- Just after the communication regarding the budget for
each department and Imda Tech Ltd, management implement the budget by taking into
account certain budget period (Kaplan and Atkinson, 2015). For this purpose, required
material such as labour, facilities and other related aspects for carrying out production
activities are provided.
 Reporting interim progress towards the budgeted objectives-This report is prepared by
each department of Imda Tech Ltd and provided to the management of the corporation. It
aids to assess the performance of the business in accordance with set standards. However,
top management also organize the investigation to assess the gap between actual and
expected results. It leads to bring the perfection in the budget process and meet the
objectives of the corporation effectively.
c) Pricing strategies
The pricing strategies plays important role in recovering the cost of production and
determining the long run success of the business in the marketplace. The pricing strategies
explained as follows- Competitive pricing-Under this price of products and services are set in accordance with
competitors. It is most effective only in case when firm is targeting for its survival only.

It aids to avoid price war and allow business to maintain its competitive edge in the
marketplace. It facilitates to increase the profitability and meet the expectations of all
related parties. Multiple pricing-This strategy is applied by the business to attract more customers. For
example, Imda Tech Ltd can charge 5GBP for one charger and 7GBP for charger plus
earphone. It proves to be effective to increase sales turnover and raise the profitability of
business too. This in turn resources can be used in an appropriate manner whereby
company can effectively integrate its resources so as to determine competitive edge in the
marketplace (Fullerton, Kennedy and Widener, 2014). Penetration pricing-Such kind of pricing strategy is very effective for new market under
which Imda Tech Ltd at first set very low price to gain the attraction of the customers.
Once the specific objectives of the business met then prices are increased to raise the rate
of return. However, it is applicable in case firm want to maximize the quality and or
revenue. It is also helpful to retain customers and enhance their level of satisfaction in an
effectual manner.
 Skim pricing- This pricing strategy is applied for the unique product which are few in the
market and competitors are not higher for the same. This assists business to control the
expenses and increase overall rate of return. However, when the competition in the
market increases then business start lowering down the price. This in turn it becomes
easy to create the competitive edge of the business in the marketplace (Otley and
Emmanuel, 2013).
TASK 4
According to the given scenario, Imda Tech Ltd suffer from loss of £1.5 million and now
management has desire to implement effective ways through which performance can be
improved. At this juncture, role of management accounting in responding the financial problems
have been explained. This in turn auditors will go for the Balance Score Card approach to
improve the current performance effectively.
a) Describing the Balance Score Card and its implementation
Balance Score Card refers to the management tool which helps to maintain the short term
performance of business by measuring the financial aspects. By using this approach it becomes