Management Accounting Report: Analysis of Accounting Systems and Tools

This report provides an in-depth analysis of management accounting principles and their application within TECH (UK) LTD. It begins with an introduction to management accounting, highlighting its essential requirements and contrasting it with financial accounting. The report then delves into specific tools and techniques, including activity-based costing, relevant costing analysis, and various cost accounting systems (actual, normal, and standard costing). Furthermore, it examines inventory management systems, job costing, batch costing, contract costing, process costing, and service costing. The report also explores the presentation of financial information through budgeting reports, job cost reports, and inventory/manufacturing reports. Finally, it addresses the use of the Balanced Scorecard approach for responding to financial problems, offering a comprehensive overview of management accounting practices and their impact on organizational decision-making.

Management Accounting

INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and its essential requirements........................................................3
P2 Presenting financial information............................................................................................7
M1 Benefits of management systems under the TECH (UK) LTD............................................8
D1. How management accounting system and management accounting reporting integrates
within the company process........................................................................................................9
TASK 2............................................................................................................................................9
P3 Calculation of net profit under marginal and absorption costing: -.......................................9
M2. Application of techniques:.................................................................................................12
D2. Data interpretation:.............................................................................................................12
TASK 3..........................................................................................................................................12
P4. Budget and its advantage and disadvantage........................................................................12
b).Different types of common costing systems which can be used for budgetary control:......13
c) Importance of budget as a method for planning and controlling purpose:...........................13
M3. Use of various planning tools for making budget:............................................................14
M4 How financial tools are used for evaluating the financial problems:.................................14
TASK 4..........................................................................................................................................14
P5 Balanced Scorecard Approach can be used to respond its financial problems: -................14
D3 How planning tools for accounting respond for solving financial problems:.....................15
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
As per this record a technique for accounts for management, for providing important and
reliable report for accomplishment of purpose to the management. Management Accounting
includes functions such as planning, directing, controlling and helps management to perform
these functions in better and acceptable and in a systematic arrangement to organization in short
way (Arroyo, 2012). In this record, TECH (UK) LTD. manufactured a unique sound system and
it believes that, applying the principles of management accounting will lead to effective
communication and proper understanding in different department with regard to availability of
information for all the departments for making improvement in ability to make decisions. In this
record organization will prepare the accounting records related with management in such a way
that it will help them in making the decisions that are best for the purpose of the company. There
exists many type of techniques which can be used to check the overall achievement of
organization in achieving desired standards in a better and acceptable way.
TASK 1
P1 Management accounting and its essential requirements
Management Accounting is a way by which we interrelate, investigates, and
demonstrate the accounting data that is collected by considering the financial information and
costing information. It is used in controlling procedures of the organization and forming
conclusions for same and is also providing better concern regarding performance of organization
to Board, CEO” s and accounting executives of the organization.
The areas where management accounting can make difference are:
 Measuring risk
 Evaluating performance standard
 Allocating resources properly
 Assisting in readying financial statements of the organization
 Forming policies and making decisions which are appropriate for the organization.
1. Differences between management accounting and financial accounting: -
Base Management accounting Financial accounting
Motive
It is used to give important information to
Financial accounting is an art of
classifying, summarizing and

the management for performing its
function.
recording of events and
evaluating the results thereof in
an appropriate way.
Rules to be
followed
There is no requirement for following the
rules and requirements of accounting
principles as well as conventions in the
management accounting (Boyns and
Edwards, 2013).
In case of Financial accounting
there exists some rules and
regulations which are to be
followed if applicable to the
company and there is legal
binding to follow such
requirement.
Time period Management accounting records are
updated at regular time period in course of
the financial year
These records are always
developed at the end of
accounting period i.e when all
the transactions of organization
for the year are completed.
Usage Management accounting considers the
financial information as well as non-
financial information for evaluating the
performance standard of the company
Financial accounting considers
only the financial information
in preparing the final accounts
for the year.
Consideration In management accounting, each
subdivision of the organization is treated as
a distinct entity. Therefore, performance
reports and their analysis are prepared
separately for each division of the
organization wherever required.
Financial accounting are
constructed by considering all
the subdivisions of the
organization as one.
2. The important tools of management accounting information for assisting in making
decisions for the department managers are given below: -
Activity based costing: - (ABC) is a cost accounting method that analyze costs to
overhead actions and then apportions those costs to product. ABC costing identifies the relations
among costs, overhead processes and products which are manufactured by the organization

through this relationship. It apportions indirect cost to product indirectly as compared to the
prevailing old methods of costing. It assists in reducing overhead cost to a much lower level
which is set as a standard by the organization and also this system will help the organization in
point out costing, production manufacturing line, analyzing profits, in the organization. ABC
betters the process of identifying costing in three ways. First, it increases the number of bases by
which we can bring overhead costs under one umbrella. It also brings out new standards for
apportioning indirect cost in such way that cost based on the activities that will produce cost
instead of on production measures, such as machine hours or direct labour cost.
Relevant costing analysis Buying decision: - when organization wants to purchase something
then this decision making process is used by organization regarding transaction before, during
and after the purchasing period (Herzig and et. al. 2012). It could be seen as special form of cost
saving analysis in the presence of many other options. It helps the management in selecting the
best supplier between outside source supplier and market and after analyzing the above
procedure the manager analyse which is much better alternative for the company.
3. Cost accounting system (actual, normal and standard costing):- This process is used by
the organization to estimate the price of the product for performing profitability analysis, stock
value and controlling cost for the same. An organization must have knowledge about its best
product and this can be only possible when it has sound knowledge regarding that product and
have applied correct measures to ascertain the cost of the product.
Difference between the NORMAL COSTING, ACTUAL COSTING AND STANDARD
COSTING:-
NO. NORMAL COSTING ACTUAL COSTING STANDARD
COSTING
1. Direct cost which are
apportioned to particular job
as soon it is occurred
Actual Direct costs are
assigned to job as it is
occurred
Standard direct costs
are apportioned to job
as occurred.
1. Overhead related with
manufacturing is distributed
Overhead related with
manufacturing which have
Overhead related with
manufacturing is

by using already fixed rate
of overhead
been occurred actually are
distributed only when actual
costs are known
distributed by using
standard overhead rate.
2. Actual cost are being used
by the organization to
estimate normal costing
(Otley and Emmanuel,
2013).
Actual cost are used in this
costing.
Standard cost of actual
cost is used in this type
of costing.
3. This method is better when
budgeted data for standard
overhead is authentic
IF organization is using this
method then controlling the
cost and measuring the
performance not remains in
the hand of the organization
This method is very
useful when the aim of
the organization is to
control the cot and
setting up the
performance standard
of the organization.
4. Inventory management system:- It is an important system for business organization
when they want to have record of inventory. Generally, these programs are used by the
organization that sells or produces product or on his own manufactures a product for
purpose of accounting of the products which have been produced or manufactured by the
organization. Inventory management system is needed due to some reasons like lead
time, utilizing economies of scales. This system will help the organization in making a
good flow of inventory inbound and outbound at the time of sale.
5. The two important essential are:
 Strategy replenishment and forecasting the strategies
 Management of inventory both in terms of physical presence and monetary value.
Job costing system:- This system helps the organization in collecting information
regarding the cost related with a particular job, service or production. The information will help
the organization in knowing the accuracy in estimation of the organization, which will help them
to quote price that allow a reasonable profit for TECH (UK) LTD
This process involves the following;-

 Receiving any sort of inquiry
 Determining the price of the job
 Receiving the orders
 Producing an order
 Recording the cost
 Completing a job Batch costing: This is a type of job costing and in this homogeneous goods are taken as
cost unit. This consists some specific number of products and that number varies from
another batch. Mainly batch cost is utilise to ascertain cost per unit and article per unit.
Procedure of batch costing is similar as per job costing and that’s why production order
number is allotted to every batch.
 Contract costing: This is one of the most popular method of Job costing. Under this, a
separate number is allotted to each contract and records are maintained for each contract
separately. Mainly this is used by builders and construction firms. Main purpose of
prepare a contract account is to determine the cost of every contract separately and profit
of each contract.
 Process costing: In this a method of assign manufacturing costs where cost of each unit
produced is assumed to be the same for every unit. This is mostly used when products are
mass produced and in the cases when cost linked to individual cannot be distinguish form
each other.
 Service costing: This type of costing is used in service organisation like transport
organisation, power generation, colleges and hospitals. All cost incurred during a specific
time period is collected and examine and after that expresses in terms of a cost per unit of
service.
P2 Presenting financial information
Management accounting records are way through which we can get a good knowledge
about TECH (UK) LTD (Parker, 2012). This record can help us in reaching the opinion about the
working of the organization, helps organization in submitting additional reports that the company
must complete for tax purpose. The different management accounting reports helps the
management in preparing better reports related with management. The different type of records
which are prepared by the management and their advantage are given below:-

 Budgeting reports:- these records are prepared by the company to make standard
regarding the manufacturing target which a company sincerely wants to achieve. For this
company obtains data from the previous period. Employees will be able to get more
incentive and bonus with the help of these records and will also able to achieve the target
of the company.
 Job cost reports:- These records are obtained to collect information with respect to
each job, contract, product or work order. Each production subdivision is treated as
distinct entity in these records. These records are prepared to know the cost involved in
each project and the cost involved in material, labor, overhead of organization.
 Inventory and manufacturing reports:- Organization use this record improve its
manufacturing standard in such a way that it will be better than previous. Information
about the cost per unit, labour and overhead are some of the highlights of these reports.
 Performance report:- these records considers managerial accounting information and
are concerned with the performance of the organization. These records helps in
comparing budgeted cost and actual cost of the company. These reports may be prepared
by the organization half-yearly or quarterly as needed by the organization.
2. Recording system’s importance:-
It will help the management of the organization in knowing the performance standard of
the company and overall growth of the company in the year. It will record all the important
transaction which are essential for the survival of the organization and which provides the value
to the organization these report will also able the organization in having the records of debtor and
creditors of the organization. It will also enable the organization to have the records of inventory
which are currently available with the organization (Vasile and Man, 2012).
M1 Benefits of management systems under the TECH (UK) LTD.
These techniques will surely be going to help TECH (UK) LTD. It will help them to run
their business without any hiccups. These tools will help in achieving the goals set by the
organization in a better way. Management accounting gives more beneficial objective to
company when providing important information also increasing the ratios related with profits of
the company.

D1. How management accounting system and management accounting reporting integrates
within the company process
Management accounting system helps to TECH (UK) LTD. There is a need to make sure
that reports are prepared in such a manner that it will help the business in achieving the business
goals by keeping in view the standards set by the organization to control the cost and achieving
the targets with stipulated time. This will help them in running their business with not so much
difficulty therefore both the system of management accounting reports and management
accounting system are need of the hour for the organization in attaining a smooth workable
balance (Cadez and Guilding, 2012).
TASK 2
P3 Calculation of net profit under marginal and absorption costing: -
Marginal costing: it is a system of costing in which total cost is taken as variable cost and
exclude fixed cost of product. In marginal costing it required a clear distinct in fixed cost and
variable cost of product. Marginal costing is possible when total cost is apportioned in two cost
these are variable and fixed cost and there must be clear exclusion of fixed cost of product while
costing under marginal method.
Absorption costing: - it also usable method in costing for calculation of net profit,
absorption costing is method of costing in which direct fixed cost and direct variable cost is
attributed to total cost in costing due to this it can be said it is method of charging both cost to
total cost for calculation of net profit (Van der Stede, 2011).
Income statement under absorption costing:

Incoming statement as per marginal costing:
Reconciliation statement between marginal costing ad absorption costing:

M2. Application of techniques:
In the situation of this case TECH (UK) LTD. Should use these technique to increase and
enhance its profit margin. It will be useful for the enterprises to operate their business in better
and effective way. These techniques is very important for the company for taking business
decision and planning for company’ goals and objecting to be directed.
D2. Data interpretation:
The calculation on net profit from both of the method that is marginal and absorption costing
identify many differences. According to the absorption costing method, the company earns (£)
4,625 net operating profits. On the other hand, the company loss (£)2,875 net operating loss by
using the marginal costing method. So, it is better for the company to use the absorption costing
method to earn the net operating profits (Fullerton, Kennedy and Widener, 2013).
TASK 3
P4. Budget and its advantage and disadvantage
Budget is very important and essential tool for company. Budget can be define as a
presentation of last year and old data and information based standard for current business.
Budget is tool of comparison of lat financial position and current financial position and help to
target the expenses and income for the company. It can be say that budget is very important part
for operating company’s business for accounting manager. A budget is made for applying the
forecasted plans and strategies to achieve business object with effective way. Due to budget the
company is able to reach the analysis of targets of business.
Operating budget: Operating budget is first step and starting budget, this budget is made for
the operational function like operating income, operating expenses and operating profit ratio of
company. It is a budget which provide essential for operating profit.
Advantage
 By use of the operating budget company is able to know about operating total profit and
position of company.

 The operating budget leads to run business without financial issues.
Disadvantage:
 The operating budget is not helping in identify with actual relation with operating
position of company (Luft and Shields, 2010).
 Standard made for the budget will not match with actual outcomes.
Cash budget: it is also very important budget which is use for cash flows of company. This
budget entails about the cash receipt and cash payment of company is required in attaining goals
and aim of company with the effective liquidity of company and availability of cash reserves in
company for initial payment of creditors and loans of business (Tucker and Lowe, 2014).
Advantage
 It entails the company about the liquidity of company.
 Cash budget is important in procurement of cash fund for initial payment of cash.
 It is useful in managing proper cash requirement of company.
Disadvantage
 Cash budget not useful to relate with non cash activity.
 Cash budget not entail essential opportunity cost of cash outlay.
b).Different types of common costing systems which can be used for budgetary control:
 Standard costing: standard costing is method of identify the adverse and favourable
position of company in this method actual cost of product got compared with standard
cost of product.
 Normal costing: normal costing is a method whereby all the direct costs are chargeable
which are actually incurred for product.
 Actual costing: it is method of costing where all actual data are prefer for purpose of
costing and require the actual cost of product for costing.
c) Importance of budget as a method for planning and controlling purpose:
The making of budget is very useful for the company, budget are pre-determined data
which is incurred on the basis of last financial data of company and lead to achieve the business
objective and goals for the management. Due to budget company will be able to know financial
position and fund requirement of company and what action should be taken by the company for
remove the bugs and hurdle of operating business (Morales and Lambert, 2013).

M3. Use of various planning tools for making budget:
Using various type and tools for preparing budget is useful for regulating business
strategies and planning for business function. Budgeting is very essential for budget preparation.
Each organization take into the consideration when making planning for operating function of
company. These following tools can be applied by the business entity about the decision while
making budget:
1. Need of funds for the organization.
2. Outcome of organization’s procedure.
3. Decision for internal external factor.
4. Policies and expectation of company.
M4 How financial tools are used for evaluating the financial problems:
Here are many type of method which company can be apply for analysis of financial
complexity of company. Using all these method is very useful for the company to relate with
controllable and uncontrollable issues and provide solution for these issues but Balance Score
Card approach is the very essential tool which can be use for the increase in the life period of
company and its growth.
TASK 4
P5 Balanced Scorecard Approach can be used to respond its financial problems: -
Every company use the management accounting system for taking business decision or
making policy and business operation. The balanced scorecard approach can be use for the
evaluation of overall performance of both the direct and indirect function of company for
developing by management accounting system. It normally gives a solution for financial issues
for the company (Vaivio and Sirén, 2010).
The TECH (UK)LTD. apply the balanced scorecard in:
 Gathering information for utilization of effective and better use of advantage.
 Use of this with goods and services on routine base.
 Regular use of policies with basic work of company.
 Establishing relation with workers for achieving determined business objectives and aim.
Balanced scorecard useful for company to determine all essential aspects which are following:
 Enhancing company’s financial structure.

 Analysing overall function of company.
 Response from the customer.
 Development and improvement for reaching goals and advantage.
 External function of company.
With help of Balance Score card firm can provide better services to its customers and in this
way can retain them for a long time period. One of the main benefit of use Balance Scorecard
approach is that it helps in determine company’s vision and mission which provide direction to
all managers and employees and improve company’s productivity. With help of effective
utilisation of resources efficiency can be enhanced and company can generate more profits and in
this way organisation can cover all its loss. Further with help of balance score card company can
get competitive benefit and can generate more number of profits.
D3 How planning tools for accounting respond for solving financial problems:
Various type of tools and technique are given in management accounting for planning
and decision making tool that is useful for TECH (UK) LTD. Company for solving the financial
complexity. There are different kinds of budget which can be applied by the firm for determining
about the actual and standard value which would very useful for increase in profit of the
company in an appropriate way (Quinn, 2014).
CONCLUSION
Management accounting project report is very useful due to it identify with related
information and main data and picture of structure of company. In this report various type of
rules and regulation which company have to follow is described and importance of using
different method for calculation of overall performance of company functions and it also relate
with the effective and efficient application of strategies, planning and decision related to aim and
goal of business.

REFERENCES
Books and Journals