Comprehensive Management Accounting Report for IMDA Tech Ltd Analysis

This report provides a comprehensive analysis of management accounting practices for IMDA Tech Ltd, a mobile phone charger producer in the UK. The report explores various accounting functions, comparing financial and management accounting, and highlighting the importance of management accounting in determining goals, planning, and performance measurement. It delves into different types of accounting systems like cost accounting, inventory management, job costing, and price optimization. The report further examines the benefits of management accounting, including performance measurement, business efficiency, and planning. It then critically evaluates management accounting and reporting systems and details costing methods used, such as absorption and marginal costing, providing income statements based on both methods. Various financial reporting techniques are also discussed. The report concludes with an analysis of the company's performance, budget preparation, and an evaluation of planning tools, including the balance scorecard, to address financial issues and provide recommendations for the company's future.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P.1 Accounting Functions ..........................................................................................................1
P.2 Types of accounting system..................................................................................................2
M.1 Benefits of Management accounting...................................................................................3
D.1 Critical evaluation about management accounting and reporting system............................4
TASK 2............................................................................................................................................4
P.3 Costing method used by company........................................................................................4
M.2 Techniques for financial reporting......................................................................................7
D.2 Data interpretation of company performances.....................................................................7
TASK 3 ...........................................................................................................................................7
P.4 Budget preparation................................................................................................................7
M.3 Analysis of planning and application of budget..................................................................9
D.3 Evaluate planning tool for overcome financial issues..........................................................9
TASK 4............................................................................................................................................9
P.5 Balance scorecard and its respond to financial issues..........................................................9
M.4 Analysed accounting problem..........................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
.......................................................................................................................................................13

INTRODUCTION
The project assignment is about management accounting. Under which various
accounting function are explain and how they are beneficial for the IMDA Tech Ltd. The
company is major producer of mobile ,telephone charger for retail outlets in UK (Kaplan and
Atkinson, 2015). As a manger of this company I have tried to overcome the financial issues that
are arises in company and provide valuable recommendation to make strong decision regarding
stability of department.
For this many cost accounting system and calculation to solve problem of net profit by
using marginal and absorption costing method. To improve financial impact, we have prepared
budgets with its advantages and disadvantages to the company. Based on our analysis we have
given so many findings and recommendation that the company may follow to improve its
positions in comping future. The report is based on entire accounting system of IMDA Tech Ltd
as to improve the performance of the company.
TASK 1
P.1 Accounting Functions
Management accounting: It refers to the process of collecting, sourcing,
communicating, analysing and evaluating monetary and non-monetary transactions or
information to return and create value for the company (Ward, 2012). It combines finance,
accounting and management systems with the business skills and techniques that will help
organisation grow. The accountants use this information of all kinds, not only financial to lead
business strategies and desired from sustainable success.
Comparison between financial and management accounting.
Financial Accounting Management Accounting
1. The report are prepared those are based on
previous performance which is in line to
requirement.
2. It produce required financial data to use by
other departments within the organisation like
for examples, Department manager.
1.The information collected like surplus, cash
flows and outstanding liabilities to prepare
trend report which help in taking important
decision.
2. It combines both monetary and no-monetary
information to brought complete image of the
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3. It mainly focused on outside like
shareholders.
4. Financial accounting is based on certain law
that has to be followed by every manager.
5. Under this information is related to various
data collection from financial transaction done
by the company.
6. Every financial accounting has set format
that has to be followed by manger while
preparing statements.
company position.
3. It provide information as internal level to the
people.
4. While management accounting doesn't need
law because these are generally excepted.
5. It helps organisation to plan its aims and
objectives.
6. The demand of management that if they
need a kind of format then they use it
otherwise not fixed format followed.
Importance of Management accounting
 Determine Aim: on the basis of information available with management they determine
its goal and tries to search route through which they can reached to its goals (Burritt,
Schaltegger and Zvezdov, 2011).
 Help in formulation of plan: The manager must prepare plan which should identified
present and future stability and existence of the company.
 East to take financial judgement: Before taking any important decision regarding
financial impact. We must choose right plan which can help to decide whether company
may get most out from this plan or polices.
 Measurement of performance: There are various standard costing which enable the
organisation to measure performance. It also enables to find out derivations among
standard and actual costing.
 Increase efficiency of business: Management accounting helps to maximise the efficiency
of the company. The target is set in advance and achievements are taken as important
techniques to measure its efficiency of the company performance.
P.2 Types of accounting system
To make appropriate decision regarding maximising the financial stability and managing
accounting system the company may use various types of accounting system to analysed their
financial position. The IMDA Tech Ltd has using cost accounting, and Price optimising system,
in their business to manage its retail outlet in UK (Parker, 2012). It helps to identified various
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investment and cost which are incurred during the year. The internal and external department of
company can be more affective by this accounting system. Cash flows are being analysed by
mangers and according to its need they able to use accounting system (Granlund, 2011).
Types of accounting system:
Cost accounting system: It is said to be costing system that use a framework which firm
make use to calculated cost of their product for profitability analysis and cost control. It includes
normal historical costing which is based on absorption costing as stock valuation and cost
accumulated method. It is also an internal reporting system used by organisation to make
appropriate decision (Weißenberger and Angelkort, 2011).
 Normal costing is used to evaluate manufacturing products by using actual material cost,
labour cost and material overhead cost.
 Standard costing values its manufacturing products with predetermine costs of material,
labour and overhead.
 Actual costing is recording of product cost based on actual cost of material, labour and
overhead by using actual quantity during the year.
Inventory management system : It is the administration of non-capitalized assets. As it
based on managing stocks of the company in their business operation. There are various
techniques to control inventory system which is categorised by three categories like A<B<C.
These grading are given on the basis of its durability.
Job costing system : Job order is a system for assignment production cost to an
individual good or bunch of goods. These are mainly used when there is sufficiently differenced
among each products. It also a method of recording cost of production job rather than processing.
It help to keep track record of cost used during the period of manufacturing.
Price optimising system : It refers to make use of statistical analysis of company to
determine how people will respond to various price for its product that are set for different
distribution channel. It also used by company to determine price which is set to achieve its aim
and objectives such as to increase operating profit for the company. Price optimization utilized
analysis of huge data to estimate the behaviour of buyer to different prices (Bisbe and
Malagueño, 2012).
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M.1 Benefits of Management accounting
As from above Management accounting system used by the IMDA Tech Ltd in their
business operation how they beneficial for the existence in near future is decided through
evaluating them in proper ways like : The actual performance should be measured with budgets
of the company (Coad, Jack and Kholeif, 2015). The business activities are managed through
using application of both budgeting and planning techniques. To build harmonious relation
between management and labour so that they can motivated with their performance in achieving
objectives. It also help to pre pare future plan by taking support of past outcome generated by the
company.
D.1 Critical evaluation about management accounting and reporting system
According to Vakalfotis, Ballantine and Wall, 2013, major question is being asked that
how to adopt strategies , and practices that are related to the social and organisational demand
while preparing financial profit to their shareholders. The choice of integration is fulfilled
through hold and retain its customer by providing proper requirement of product with minimum
costing. In the words of Scapens, 2011, performance and evaluation of financial statement are
done just to create synergy among firm and individual as they play a vital role in management
decision. Costing techniques can be very useful for managing financial resources of the
company.
TASK 2
P.3 Costing method used by company
Absorption Costing : It refers as all those manufacturing cost which are absorbed by
units produced. In other hand , cost of finished unit in stock will sum up by including direct
material, direct labour and both variable and fixed production overhead. It is often highlight of
variable or direct costing (Quinn, 2011). The fixed overhead cost are not allowed which are
associated to manufacturing process.
Marginal Costing : It is said to be accounting system under which variable cost are
imposed to cost unit and fixed cost of time are written off against the multiple contribution. In
other words we can say that the cost of extra unit or additional unit of quantity or output.
By using above two costing method IMDA Tech Ltd can identified its net loss or gain from
manufacturing of product.
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Income statement on the basis of Absorption costing method:
Selling Price ￡35
Unit costs
Direct materials ￡8
Direct Labour ￡5
Variable Production overhead ￡2
Variable sales overhead ￡5.25
Budgeted production for the period is 3000
units
Fixed cost for a month:
Production overhead: In this budgeted cost is £15,000and Actual cost is £10,000
Selling cost: In this budgeted cost is £10,000and Actual cost is £7875
Absorption costing
Working 1: Calculate full production cost
Direct material ￡8
Direct labour ￡5
Variable cost ￡2
Fixed cost ￡5
Total ￡20
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2,000*20 = £40000 500*20 = £10000
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: ￡15000
Fixed overhead: ￡10000
Total £5000(under absorbed)
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Net profit using absorption costing ￡ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod. O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed selling expenditure
Net loss
0
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875
(375)
Income statement on the basis of Marginal costing method:
Working 1: Calculate variable production cost £
Direct material 8
Direct labour 5
Variable production O/h 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 2000*15 = 30000 500*15 = 7500
Net profit using marginal costing ￡ £
Sales
Less Variable costs
Opening stock 0
52500
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Manufacturing
Closing stock
Variable sales
Contribution
Less Fixed costs
Fixed Production expenses
Selling cost
Net loss
30000
(7500)
15000
10000
(22500)
(7875)
22125
(25000)
(2875)
M.2 Techniques for financial reporting
There are various techniques of financial reporting or document which are used by the
company in their business operations. Those are : comparative financial statements, changes in
working capital statement, common size balance sheet and income statements. From all these
techniques company may go for either of them to used it in their business (Busco ,2011). These
are assorted of techniques which is employees may used in analysing their financial statements.
IMDA Tech Ltd can use income statement to identify its marginal and absorption cost incurred
during the period. From this they can estimate their cash flow in future growth of the company.
D.2 Data interpretation of company performances
As from above calculation of marginal and absorption cost we have seen some changed
under this under absorption of 5000 is indicating . As both are generating negative Net losses for
the company. While in case of marginal costing we does not have nay kind of safe situation that
may be profitable to the company. The final result are not sufficient to justify company financial
performance would remain similar or might be change by applying new techniques of financial
reporting . So, company may target to improve their operations by using appropriate costing
method.
TASK 3
P.4 Budget preparation
Budget : It is said to be estimation of cost, surplus and various resources over a particular
period of time, reflective its future financial conditions and objectives (Arroyo, 2012).
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Types of budget :
Master budget : It is total aggregation of company individual budget prepared to bring
image of financial activity. It combines various factors like sales,operating expenses,assets and
income statements that company help to establish goals and objectives of the company. These
are prepared by large manufacturing companies.
Advantages
 It explain all the aspect of financial statements of company performances at in one
statements.
 It is said to overall business budgets.
Disadvantages
 Lack of specificity.
 Difficult to read and update financial statements under master budgets.
Operational budgets : It refers to the forecast and analysis of estimated income and
expenses over a specific time duration (Hiebl, 2014). All the direct cost of material, labour and
overheads are to be analysed and recorded under the operational budgets. These are mostly
created on weakly , monthly or yearly basis.
Advantages
 Estimation of total number of extra expenses those are incurred during a project process.
 Managing current expenses for operating budget.
Disadvantages
 misuse and extra cost can not be control and managed by the company.
 Individual managers are no comfortable with the budget as they co-operate badly.
Cash flow budget : It is kind of budget which provide information about cash in and
flows out of a business within a specific duration time. It is very much helpful for company as to
determine they are managing is cash transaction properly. These are based on three activities like
operating activities , investing activity and financing activity.
Advantages
 Only cash transactions is being recorded under this budget.
 Overall business estimation of cost that are required to complete a particular project can
be identified.
Disadvantages
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 It may cause distortion. Cash inflows doesn't equate to gain.
 Cash budget are susceptible to manipulation in day to day transactions.
Process of budget formulation
1. Update budget assumption : About the business environment reviews.
2. Review choke point: Determine capacity level of primary outcome .
3. Available funding : Estimation of mostly amount from different sources.
4. Obtain revenue forecast : obtain sale forecast from the managers.
5. Collect budget from different department : check error and step costing constrain and
make adjustment accordingly (Ossadnik and Kaspar, 2013).
6. Review the budget : meet the senior authority to review the budget.
7. Issues budget : create a wide vision of budget and distribute to recipients.
8. Load the budget : load information into the financial software.
Pricing strategies : A business concern various pricing strategies while selling a goods
or services. The price can be fixed to maximise profitability of each unit sold by the company in
market. To increase market share or planning to enter into new market.
M.3 Analysis of planning and application of budget
As business is operational we first target to plan and toughly manage its financial
performance. When you are operating a business it is get slow down in day to day issues those
are arises in companies. The budget based on growth and dependability which will help to
estimated total value of company that will create value in near future. Application of forecasting
budget are based on estimating accuracy of forecast and cost benefit analysis. It is also depend
on total number of time forecasting as crucial factor in budgeting.
D.3 Evaluate planning tool for overcome financial issues
The initial stage to overcome financial issues to known implicit problems that are
impacting business performance. The other things are by creating budget which is best way for
combating financial issues. Next to determine financial priorities which might be clear. As per
the above used tools and techniques used in accounting systems for current year. It is based on
setting benchmarking tool of other competitors by keeping other aspects of accounting which are
used in budget preparation.
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TASK 4
P.5 Balance scorecard and its respond to financial issues.
I):
Balance scorecard : It is said to be strategic design and structure system which is used to
line up business activity to the vision and strategies of management by observing performance
against strategic goal. It was traditional performances that are measure only external accounting
data which are obsolete in nature (Jakobsen, 2012). This will help to provide balance to financial
situations.
Use of balance Scorecard:
 It will help to improve organisational performance by evaluating matters.
 Maximise concentration on strategies and desire outcome.
 Combine institution strategies with individual on every day basis.
 Focus on established communication of company vision and mission.
Measurement of Balance scorecard
 Financial: These are based on how much return on capital employed , economic value
added ,sales prediction and available cash flows.
 Customer: It refers to customer satisfaction, retention strategies and market share or
increasing profitability.
 Internal business: it includes measurement as internal value like innovation, operation
and post sale services offer to customer.
 Learning and growth : It includes people, and system which measure critical original
time.
Non-financial measures are mostly used to evaluated performance through using central
concepts which is balance score card. These can be helpful because any combination of cost less
performance can reduce risk. It also measures customer satisfaction, product quality etc. to
increase market performance.
Some of the financial issues which are arises in the organisation are:
 Inventory management issues: The record of stock items are not maintain in proper
manner which leads to the lot of wastages to the company resources.
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 Financial data misconduct: The reporting of daily transactions in the books of accounts
are not as of proper manner which made huge impact on the performances of the
company.
 Entries of wrong amount: Some times it has been seen that accountants make wrong
entry of amount which dis-balance the overall balance sheet.
 Costing accounting: The evaluation of costs during the production process are not
managed properly which will hamper the quality and extra cost of producing products
and services.
The balance scorecard helps to solve these issues by monitoring and regulating corrective
measures over the costs and financial aspects.
There are major situation that may be followed to overcome these issues:
 Accounting system collect all data and information through which a company can solve
its business problem.
 One of the important thing is connected with the basic standard to control risk and design
plan for the company.
 The company may adopt new innovation in tracking system of stock or major
equipments.
 Probably traditional measures system have spread from its financial functions to control
bias in organisations (Ball, 2013).
Strategies to improve financial governance:
The company is IMDA Tech Ltd has using this balance scorecard as strong base as to
improve financial governance that can be beneficial for the company. Safe and secure data
processing system should be designed for effective performance to improve accessibility to
governance. It must made fast and easy to evaluate critical operation in business premises.
ii) Respond to the financial problems
There are various tools and techniques which are used by the company to solve financial
issues. Some of them are:
 KIP: The Key performance indicators are useful techniques of managing financial
performance of an individuals as well as organisation performances. It is annually
analyse the companies statements which are performed by the company during the year.
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 Benchmarking: It is said to be setting a range in order to compare the financial position
of the other company with the ours. Under this, analysis of financial capacity and its
debts meeting ability are determine.
 Financial governance: Under this techniques, a rule and regulation which are set by the
government regarding the management of financial aspects of the company are need to be
followed accordingly.
M.4 Analysed accounting problem
From the various situations that are arises in business are having so many accounting
problem like variable and absorption costing, issues associated with cost volume and profitability
or important is capital budgeting process (MacDonald and Richardson, 2011). All this
accounting problems are to be analysed during review and evaluation important management
decision. Findings from evaluation outcome are just to make use of things in proper way in
managing financial resources.
CONCLUSION
The project report conclude about the topic management accounting which simplify
IMDA Tech Ltd, that how they are managing their accounting systems. The main aim of this
report are kept in mind while evaluating all the major aspect of accounting. Under this all the
management techniques and benefit associated to performance of organisation that are clearly
mentioned. It also contain various budget and process of budget are explain properly. on the
basis of interpretation we have made certain recommendation that has to be used by the company
in managing its financial system.
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REFERENCES
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Balanced Scorecard Basics. 2017.[Online]. Available through:
<http://www.balancedscorecard.org/BSC-Basics/About-the-Balanced-Scorecard>.
[Accessed on 6th June 2017].
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