Analysis of Management Accounting for Tech (UK) Limited Retail

This report provides a comprehensive analysis of management accounting principles and their application within Tech (UK) Limited retail stores. It begins with an introduction to management accounting, its components, and its benefits in enhancing internal operations. The report delves into various accounting terms, the differences between management and financial accounting, and the significance of cost accounting systems. It then explores the importance of financial information, the different types of managerial accounting reports, and the presentation of financial data according to international accounting standards. The core of the report includes a detailed examination of costing techniques, specifically absorption and marginal costing, through the presentation of income statements. The report also covers budgetary control methods and planning tools, and it presents various accounting approaches to overcome financial problems within the organization. The report concludes by highlighting the practical implications of these management accounting techniques for improving financial performance and decision-making within the retail environment.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Analysing the management accounting system with determining various terms of
accounting...............................................................................................................................1
P2 Determining the financial information..............................................................................3
TASK 2............................................................................................................................................6
P3 Measuring the financial information of September month with the disclosure of income
statement.................................................................................................................................6
TASK 3............................................................................................................................................7
P4. Use of budgets in organisation.........................................................................................1
TASK 4............................................................................................................................................4
P5 Presenting the management accounting approaches to overcome with financial problems in
organisation............................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Management accounting is the most beneficial tool in terms of enhancing the internal
environment of the organisation. It will be fruitful for the professionals to analyse the internal
performance on the basis of various reports and financial statements which in turn helps in
presenting the most adequate solutions to the business operations. In the present report there will
be discussion over management accounting tools and techniques and their importance in terms of
enhancing the operations of Tech (UK) Limited retail stores. The report is consisted of various
reporting techniques, budgetary control methods and planning tools that will used by
professionals to improve internal performance of the organisation. There will be various
accounting approaches that will be helpful to overcome with the financial problems in Tech UK
Limited. Further, there has been presentation of income statements on the basis of two costing
techniques such as marginal and absorption on which the net profit will be analysed and the
managers will be facilitated with the adequate method to be implicate in the operations.
TASK 1
P1 Analysing the management accounting system with determining various terms of accounting
Management accounting: This technique is consisted with various components of
finance, management and accounting. It will be beneficial for big financial decisions, monitoring
the business risk as well as planning the appropriate business strategies. These information
helpful for the managerial and accounting professionals in terms of allocating the costs in Tech
(UK) Limited retail stores as well as making the adequate changes in the operations (What is
management accounting?, 2018). The use of such technique will help in improving or provoking
the internal financial health of the entity as well as enhances the efficiency to have favourable
revenue gathering in the future.
Difference between management accounting and financial accounting
Basis Management accounting Financial accounting
Motive and objectives The data set will be used in
planning and decision making
There will be communication
of financial position
Users Internal stakeholders such as
managers, board of director,
The information are being
used by external stakeholders
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auditing committee and risk
management committee.
such as investors,
shareholders, government,
banks etc.
Regulations/ Guidelines No regulations everyone can
prepare and present the data
set.
Standard regulations and
guideline facilitated by GAAP,
IFRS, IASB etc.
Focus Information gathered from
each department in the
organisation as to have better
decisions making for the future
operations.
If focuses over the past records
and transactions held for the
business operations.
Cost accounting system:
In accordance with the cost accounting system it can be said that there will be fruitful
gains as if Tech (UK) Limited retail stores have better cost monitoring techniques. These will be
beneficial for the professionals in terms of having the most adequate and appropriate cost stage-
management systems which will be helpful in revenue gathering (Cost Accounting Systems,
2013). To attain the goals of entity and have the profitable gains for long period of than there is
need to have effective decisions that will help them in satisfactory level of utilisation of funds
and resources.
Actual costing: This is necessary that the managerial professionals and the accountants
in Tech (UK) Limited retail stores must make the record of all the fixed assets on their cost
prices (Wachira, 2017). Therefore, it can be said that it follows the actual costs and the historical
value of such items. This will be beneficial in terms of analysing the costs of the products,
services which will be required in cost allocation.
Normal: These are the costs which are mainly used for the production of the units.
However, these are the costs which normally incurred while performing the operational tasks of
the organisations such as direct labour, direct material, overhead costs etc. Tech (UK) Limited
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retail stores have to make payments of such costs and expenses in the accounts which will be
helpful for thee activities in the industry (Wei and Xima, 2017).
Standard costing: These are the difference or variance between the costs which are
actually incurred in Tech (UK) Limited retail stores operations with the estimated costs.
However, the costs are estimated on the basis of accounting standards such as they make forecast
and analyse the requirements of the funds that will be used in the activities (Srinivasa, Kaura and
Gilman, 2017). These can be known as the prices of the material and the quantity of it which are
predetermined by the professionals and they make further operations which will help them in
overcoming with such expenses of the organisation
Inventory Management system:
These are the most beneficial system that will help in tracking the transactions of the
inventory inflows and outflows. However, with the help of such records the managers of the
entity will become able to analyse the adequate numbers of inventories to be required in the
premises. There will be record of transactions which are mainly relevant with the operations such
as purchase, sale and deliveries of the goods (WHAT IS INVENTORY MANAGEMENT?, 2015).
These will be beneficial as if the professionals will analyse that in the coming period there will
be requirement of inventory in Tech (UK) Limited stores and that will be helpful as they will be
capable of delivering such products and services to the consumers.
Job costing systems:
These are the techniques which will be helpful for the business in terms of having the
adequate analysis over the batch, job and unit produces by the organisation. These are generally
refers to the variable products that mean those products which has variation in their costs and
manufacturing style (Narasimhan, 2017). Therefore, costs will be charge by the organisation to
the consumers over the produced goods. In accordance with the operations of Tech (UK) Limited
retail stores the costs which are mainly relevant with the manufacturing of mobile charger and
carry on gadgets which have the different manufacturing techniques as well as the level of funds
required for such operations.
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P2 Determining the financial information
In terms of presenting the financial information to the external market there will be need
of making the adequate decision and that will be beneficial for the operations of the business.
These are the responsibilities of the managers and heads of each department to make and present
the reports of their units which must contains all the income and expenses incurred by them
during the period. However, such reporting will be beneficial for determining the actual needs of
funds and the decision will make to lower down the costs of such operations. Therefore, such
reports are very helpful in terms of planning, executing and monitoring the operations of the
entity.
Kinds of managerial accounting Reports
Illustration 1: Various types of management accounting reports
(Source: Managerial Accounting Reports, 2014)
On the basis of above listed diagram which present the various management accounting
reports that will helpful for analysing the internal performance of the organisation. However, if
Tech (UK) Limited retail stores will implicate such reporting methods in daily operations that it
will be fruitful for the business in terms of enhancing the efficiency as well as having the
favourable growth in the future.
Budget Report: These are the fundamental technique of management accounting which
helps the internal stakeholders in understanding and controlling the costs of operations
(Shojaeezand, Mohammad-Khani and Azmi, 2018). Here in Tech (UK) Limited retail stores, the
managerial professionals make proper decisions to predetermine the costs of activities which are
going to be held in the coming time.
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Accounts Receivable Ageing Report: In accordance with such techniques the business
will be beneficial as to make the adequate analysis over the numbers of debtors during the period
which will be suppliers, distributors and consumers (Leotta, Rizza and Ruggeri, 2017).
Therefore, these are to be mentioned in the reports in the form of accounts receivable or debtors
which determines that such amount will be received by the firm as per the completion of the
standard period. These will be 30, 60 and 90 days of the period which determines over the
capabilities of the debtors to make payments.
Job cost Report: These are the costs which will be measured over the each operational
activities made by the firm in terms of manufacturing the units. Therefore, there will e costs
which are mainly relevant with the direct material, direct costs and overheads expense (Wachira,
2017). However, such cots are normally incurred and are to be paid as to have the efficient
production level in the firm. In accordance with Tech (UK) Limited retail stores, it can be said
there are production of mobile charger and various gadgets and each of them has different
manufacturing units and techniques as well as resources. Thus, in order to analyse the costs of
each job and units these report will be very helpful for the professionals.
Inventory and manufacturing Report: These is the most valuable report for the
manufacturing units like Tech (UK) Limited retail stores as they will have proper record so f the
transactions relevant with inventories purchase and sales. These will be fruitful for store in terms
of analysing the labour cost, machine expense etc. overheads expenses were incurred while
producing and distributing the goods. Therefore, the use of such reporting technique will be help
in enhancing the operations of the business.
Presentation of Financial information:
To have the better understanding of the all the information which were being presented
by internal stakeholders in the financial data set that are need to be prepared with considerations
of international accounting standards. However, with the influence of such standards and boards
while presenting the financial statements, these works has to guide the professionals as well as
facilitate the authenticated framework. IFRS, GAAP and IASB are the main international
institutions which help in presenting the adequate financial information (Wei and Xima, 2017).
The influence of such boards will help the stakeholders, investors and various individual in terms
of understanding the profitability, efficiency as well as liquidity of the firm. Therefore, Tech
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(UK) Limited has to make appropriate disclosure of the accounts with the influence of this
accounting standards.
TASK 2
P3 Measuring the financial information of September month with the disclosure of income
statement
There has been presentation of income statements which are prepared on the basis of
absorption and marginal costing techniques and there will be helpful in terms of determining the
adequate profits will be gained by Tech (UK) Limited retail store during the period of
September.
Absorption Costing technique:
Income statement for absorption cost Tech (UK) Limited as on 1st September 2010
Particulars Amount
Sales 1500*35 52500
Less: COGS
Direct material 2000*8 16000
Direct Labour 2000*5 10000 26000
Fixed Production overheads 15000
cost of production 11000
Closing inventory 500*20 10000 1000
Gross Profit 53500
Less: Variable overheads 2000*5 10000
Less: Fixed production overheads 2000*5 10000
Less: selling and administrative fixed over heads 10000
Less: selling and administrative variable overheads 7875 37875
Net profit 15625
Marginal Costing technique:
Income statement for marginal costing Tech (UK) Limited as on 1st September 2010
Particulars Amount
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Sales 1500*35 52500
Less: COGS
Direct material 2000*8 16000
Direct Labour 2000*5 10000
Less Closing inventory 500*20 10000
Less: Variable overheads 2000*5 10000 6000
Contribution per unit 46500
Less: Fixed production overheads 2000*5 15000
Less: selling and administrative fixed over heads 10000
Less: selling and administrative variable overheads 7875 32875
Profit 13625
Interpretation: On the basis of above listed measurements which are based on marginal
and absorption techniques. Therefore, it can be said that Absorption costing technique is more
beneficial as it measures all the variable costs before gross profit. Therefore, it has being the
most preferable profit for the period as 15625. On the other side marginal costing has used
variable and fixed costs of after analysing the gross profit and that has presented the profit for
13625. However, in accordance wit such operations it can be suggested to the managers that the
absorption costing technique will be beneficial for the Tech (UK) Limited Retail stores to
implicate. It will be helpful for them in terms of having the adequate amount of revenue
generation.
TASK 3
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P4. Use of budgets in organisation
A) Types of budgets
The different types of budgets are as follows-
Master Budget
The master budget is prepared after other budgets are prepared. In simple words, it is the
sum total regarding allocation of resources. This includes budget related to operating
expenditures and sales.
Advantages-
1. The main merit of preparing this budget is that complete overview of the requirements of
departments which is compiled in one budget. It provides how much company is earning and
spending in normal business course (Jermias, 2017).
2. It will be helpful for Tech UK plc as it can plan quite effectively.
Disadvantages-
1. It does not provide specific requirement of department.
2. It is difficult to read and understand as it lacks specificity.
Operational budget
The operational activities are included in this type of budget. The costs include
production, labour etc.
Advantages-
1. It provides flexibility and as such spending can be done by analysing requirement of
departments.
2. It helps to plan for long range and as such, it is quite essential for long-term planning.
Disadvantages-
1. The information is somewhat fixed and does not change immediately and as such, leads to
inaccurate information in projecting figures (Cooper, Ezzamel and Qu, 2017).

2. It involves lot of cost and company has to devote time and money to prepare operational
budget.
Zero based budget
It prepares budget from scratch base and does not take historical figures.
Advantages-
1. It helps in efficient allocation of funds to each departments.
2. No budget inflation is found
Disadvantages-
1. It is very time consuming process to prepare budget taking zero base (Christ and Burritt,
2017).
2. High manpower is required to prepare budget which adds to cost and time.
B) Budget preparation process
The budget is important requirement of Tech UK plc and as such, it has certain steps to
be followed so that requirement of each department may be analysed and consecutively budget
may be prepared and costs may be controlled quite effectively. The steps are as follows-
1. Estimates-
The budgets are estimated regarding sales, production, expected expenditures related to
each department. This estimate is provided by departmental heads. This is formally written in
report which is given for approval to budget committee.
2. Coordinate with estimates-
Next step in preparation of budget is that budget committee assess requirements of each
departments which is given by units so that committee may be able to analyse whether the same
amount of resources is available to company or not and then approves it.
3. Considering communicating budget-
The budget is then communicated to management which is then responsible for
implementation of the budget (Agarwal, 2018). The budget committee provides final budget to
managers to take decision. Thus, it requires getting convince managers to approve budget.
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4. Implementation-
The budget if approved finally by management is then implemented so that each
organisational units can fulfil their needs with much ease. The units are required to impart
materials, labour and other facilities to support budget.
5. Reporting-
The last step in budgeting process is that reporting or providing feedback by preparing
performance reports to impart information to management whether activities are achieved with
budgeted figures or not. If not then, management takes decision to revise budget for improving
performance of organisational units quite effectually (Goddard and Simm, 2017).
C) Significance of budget
Budgets are prepared to allocate funds to departments so that they may carry out
activities with much ease. As such, it is highly significant for Tech UK as it can be able to figure
out requirements of departments and as such, expenditures can be controlled quite effectively.
The budget is also helpful to analyse expenses of departments and as a result, funds may be
provided efficiently. This helps to eradicate additional costs and enhances revenue with much
ease.
Future requirements of company can be assessed by top management and this helps to
effective and long-term planning quite effectively. The objectives and goals are met with the
help of forecasting budget (Chiwamit, Modell and Scapens, 2017). Usually, it is prepared at the
start of financial year so that funds may be allocated to departments to carry out activities. The
expansion plan may be adopted by company with the help of saving funds which is provided by
budget preparation. Moreover, effective and efficient use of scarce resources is made. This helps
organisation to achieve goals within stipulated time with much ease. Budgets provide financial
road map to company by analysing needs of departmental units. Thus, there is high significance
of budget in firm.
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