Management Accounting Report: Imda Technology Analysis

This report provides a comprehensive overview of management accounting principles, focusing on costing methods, budgeting, and financial governance. It begins by differentiating between management accounting and financial accounting, outlining the various types of management accounting systems and methods to improve reporting. The report then delves into costing methods, specifically absorption and marginal costing, using Imda Technology as a case study to illustrate the calculations and interpretations of each method. Furthermore, it examines budgeting, its functions, and its importance in financial planning. The report also explores the balance scorecard and financial governance, providing a well-rounded understanding of the subject. The inclusion of calculations, interpretations, and different types of budget makes this report useful for understanding the application of management accounting in business.

Management
Accounting

Table of Contents
TASK 1............................................................................................................................................1
Management Accounting........................................................................................................1
Difference between Management Accounting and the financial management of the business
context:...................................................................................................................................1
b) Types of Management Accounting system and the measures to improve the Management
Accounting reports. ...............................................................................................................2
Importance of the managerial accounting on the business:....................................................4
TASK 2 ...........................................................................................................................................5
Calculation of Absorb and marginal costing:.........................................................................5
TASK 3 ...........................................................................................................................................6
Budgeting and the different function, importance:.................................................................7
Process of budgeting:.............................................................................................................8
Pricing strategy for the business.............................................................................................9
TASK 4..........................................................................................................................................10
Balance Scorecard:...............................................................................................................10
Financial governance:...........................................................................................................11
REFERENCE.................................................................................................................................13

TASK 1
Management Accounting
Management Accounting is one of the major concepts of the business to get success of it
because Management Accounting describes the effective combination of the functions of the
business that relates with the fund and management to reach the business goals and objectives.
Management Accounting helps to describe the business present position on the market and helps
to make coordination of the work of all the functions that relates to implement the strategic
planning of the business. Management Accounting identifies the business capacity to meet the
demand of the market and face the challenges by analysing the internal and external capacity of
the business. Management Accounting refers the discussion of both financial and non-financial
term on the business content. There are some process and the terms of Management Accounting
available these are, planning of the strategy, then need to get the proper image of the internal
and external capacity and demand of the market, employee management and the performance
management on the same time that helps to do the implementation for the strategy that chose to
reach the business goals and objectives
Difference between Management Accounting and the financial management of the business
context:
Management Accounting helps to do the effective decision making of the business by
making plan and do monitoring and controlling the plan to reach the success also, Management
Accounting mostly use to understand the business internal capacity because it describes the
information relates with the internal sources of the business. There are some rules that
Management Accounting must maintain to implement the strategic planning on the business
context. Also, Management Accounting describes and making coordination of the both internal
and external information of the business. Management Accounting describes with the reports,
budgets, and products cost, the report describe the performance etc. The major process and
functions of the Management Accounting are-
 Planning
 Decision making
 Monitoring
 Controlling
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On the other hand, financial accounting refers the financial activities of the business that
relates with the fund raising, fund management, utilization of the fund and control the funding
and financial activities of the business. Financial accounting is used to define the business
capacity by describing the external issues and users of the business and the financial activities. It
helps to make effective financial management on the business context.
Financial accounting functions are like-
 Collecting
 Measuring
 Storing
 Analysing
 Reporting
 Management
Financial accounting describes by the balance sheet, cash flow statement where both
cash inflow and cash outflow are shown, income statement etc.
b) Types of Management Accounting system and the measures to improve the Management
Accounting reports.
Management Accounting is the system that helps business to do decision making by
analysing and getting the information about the whole business context like the external and
internal issues and user of the business because Management Accounting helps to determine the
business capacity and the market position so, it helps to do effective decision making on the
business context. There are some issues that relates to the Management Accounting. This are-
 Behavioural issues
 Cost and benefit issues
 Information
 Evaluation
 Adaption
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In depth, Management Accounting deals with the different functions of the business and
helps to describe with the different functions by the different types of the system. This are-
Cost accounting system:
Cost accounting system is one of the key Management Accounting systems. This system
refers the total cost of the business on their whole operation to make the product so that helps
them to do effective pricing to reach their goals and objectives. Cost is the fact that needs to
understand and get clear about it before set the price to set the profit margin for the business.
Cost accounting systems helps to do that. There are some process and systems to understand the
actual amount of cost with the cost accounting system. This are-
Actual costing system:
This is the costing system where the actual cost of the production per unit comes to
represent the cost of the product that helps to set the price of it. It mentions the direct material
cost, direct labour cost and the manufacturing overhead to justify the cost of the per unit. To get
the actual cost of the product by using this actual costing system the rules is to subtract the total
cost from the total income to get the net profit margin of the whole process
Normal costing system:
Normal costing system is the costing system where the actual direct materials, actual
labour cost and the assumed manufacturing cost added to show the normal costing of the
product. To process this system the assumption, need to close and correct with the actual
manufacturing cost otherwise business activities can see the financial problem on the operating
time
Standard costing system
Standard costing system describes the issues of the cost, that relates with the direct
production and the direct materials, direct labour and standard manufacturing overhead
describes to understand the cost margin of the product that helps to determine the exact amount
of cost that helps business to set the effective pricing to get the positive output by increasing the
sales volume and profit margin on the business
Inventory management system:
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Inventory management system describes the resource management and the stock
management of the business. To reach the business goals and objectives need to do the effective
resource management and the stock management at the same time. Because the stock
management helps business to determine the market demand and also helps to control eh
production because inventory management describes the amount or quantity the product need to
produce to reach the market demand on the business context.
Job costing system:
Job costing system refers the issues of the cost and profit of the organization. It describe
the actual cost of the labour because the labour cost has the big impact on the total cost because
it’s can be variable on some issues. So, job costing helps organization to understand and having
clear view on the total cost of the product to produce that helps business to set the best possible
price to operate the market. The issues that relates with the job costing system are like- direct
costs, indirect cost, salaries, overhead cost, variable cost, warranty cost, accident cost etc. that
relates with the labour
Price optimizing system:
Price optimizing system is one of the key systems of the Management Accounting
system. This is the system that helps to determine the whole cost of the product to produce and
describes the way to do the effective pricing to reach the business goals and objectives.
Managers of the business need to recognize the product cost and need to set the price to get
efficiency from the product and get more customer engagement with the product that will helps
the business to increase the sales margin and the profit margin on the same time
Importance of the managerial accounting on the business:
 Managerial accounting system determine the different accounting and management
functions that helps business to take positive decision for the upcoming time
 Managerial accounting system helps to do the effective pricing for the business
 Managerial accounting system makes the relation with the all functions of the business
 Managerial accounting system helps to make planning, control and evaluate the plan to
implement the plan
 Managerial accounting system helps to do the budget
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 Managerial accounting system helps to do the motivational work on the business context
TASK 2
Calculation of Absorb and marginal costing:
For Imda technology income statements are prepared according to two of the methods
followed in management accounting i.e. Absorption and Marginal Costing. Under Absorption
costing profits are negative due to all costs including fixed production overheads being absorbed
on production. However under marginal costing only variable costs are absorbed in production
cost. Thus, profits differ in both the methods used.
Absorption costing
Interpretation: From the above calculation it is found that profit/ loss in the absorption costing
is -£375. In this company takes variable and fixed cost both into consideration and accordingly
it calculates the figures. Gross profit in this method is found 17500.
Marginal costing
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Reconciliation
Interpretation: From the above report it can be said that profit/ loss in the marginal costing is
-£2,875. In this method managers of the cited firm take only variable cost in the consideration.
So it can be said that profitability is higher in the marginal costing in compare to the absorption
cost.
TASK 3
There are some financial tools that help to do the effective financial planning for the
business. Financial planning needs to be accurate and effective because it has more impact on
the business to run for the period and for the long time. Financial planning describes the whole
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financial terms of the business and to do the effective financial planning one of the most
practices and significant tool is budgeting.
Budgeting and the different function, importance:
Budget is the most practice ad effective financial tool on the organizational context.
Budget consists of the whole financial data and information and the assumption with the
planning to reach the certain position of the business within the certain time. There are some
major functions of the budget like, to set the profit margin for the business on any particular
issues or can be overall business, to do that need to understand the capacity and the market
position of the business then need to analyse the cost to produce the product or services of the
business and the customer demand on the product to set the sales volume target with the profit
margin, to do that need to get clear idea on the direct and variable cost of the production, need to
clarify the cash flows of the business and the need to determine exact liabilities and the assets
they have to reach the profit margin for the business
Importance of budgeting:
There is lots of importance of the effective budgeting on the business context. This are-
 Budgeting helps to make control over business functions
 It helps to make control over the money
 It clarifies the business goals
 It helps to do the effective financial plan for the business
 It helps to utilize the resources of the business
 It helps to do resource and waste management for the business
 It helps to make effective communication between all the functions of the business
 It helps to deals with the different financial problems on the business context
Types of budget:
There are different types of budget are available to determine the different issues of the
business. This are-
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Sales budget is the budget that helps to make estimation of the future sales of the
business and it describes the units into the currency that helps to make the company’s sales
goals on the real time
Production budget is the budget that describes the units of the production that need to
produce to reach the customer and market demand. Production cost describes the cost relates
with the production that helps to do the pricing of the product on the business context
Capital budget descries the budget to understand the investment issues of the business
that has long-term effect on the business. The products, new project, new plans, new machinery
or the replacement machinery that need to develop eh business operation are describing on this
type of budget
Cash flow budget is the budget that describes cash flows of the business that relates
with the cash inflows and cash outflows of the business on particular time. Basically, cash flow
budget describes the short-term cash flows of the business. So, it describes the cost of the
financial operation and the income against it to reach the profit margin for the business
Different behavioural impact on budget:
In general there are two difference behaviour seen on the budget, which has impact on
the budget. these two are -
Dysfunctional behaviour is the behaviour that explain the relation between the
management towards to reach the goals of the business that helps them to make positive impact
and relation with all the functions of the business to do the effective budgeting
Participative budgeting describes the budget where the strong communication is on-
going between top to bottom level of managers to get the highest level of efficiency.
Process of budgeting:
The steps to do the effective budget on the organization is like-
 Need to do the analysis of the business capacity
 Then need to do assumption according to the business capacity by using the different
methods
 Ensure about the funds to do the effective funding
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 Determine the business assets and liabilities
 Analysis the cost of production
 Make coordination of the different functions of the business
 Update the budget process and assume relates with the whole information
 Process the budget
 Review it
 Issue the budget
 Monitoring and control the budget to get the efficient output of it
Pricing strategy for the business
Pricing is the most key concept of success of the financial planning. It relates with the
production, operation, customer attachment, sales, and profit margin of the business. So, the all
business functions and the costing are relating with this pricing issues. There are different
pricing policy are available so business need to choose the best approach according to their own
capacity.
Penetration pricing Penetration pricing is the pricing policy
where business set the price of the new
product with the low pricing to reach the
customer and it helps to increase the market
share of the product slowly but on the same
time business gets more customer with the
product and on the maturity time of the
product they start increasing the price of the
product to reach the highest level of success.
It helps to make strong engagement with the
customers for the business point
Skimming pricing This is the pricing policy where business
with the strong brand name or the new or
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innovative product of them they shows and
represent with the higher price to market
because there are many customers who like
to get these innovative or new product from
the big brands quickly so the business
understand these issue and set the price on
high and slowly after a certain time when the
product is become more available or the
switching product become available on the
market they start reducing the price
Competition pricing The competition pricing is the pricing policy
where the businesses are producing the same
products on the same population with the
many choices of the customers’ n the
business and its products. This represent the
high competitive market, to run the business
under this condition the business need to
issue the price according to their competitive
price so the price margin should not show a
big gap between other businesses.
TASK 4
Financial planning helps to meet the financial barriers to make effective progress of the
business. On the business context, financial plan and the management accounting system can
work together to face the financial problems. These are different approaches that can be taken
on the time to solve the financial problems on the business. One of the most effective and
positive approach and method to response the financial problems of the business context are-
Balance Scorecard:
Balance scorecard is the efficient financial tool that helps to meet the financial barriers.
Balanced scorecard helps to determine the issues and the business activities that help to monitor
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