Management Accounting System Analysis for IMDA Tech Limited

This report provides a comprehensive analysis of management accounting systems, focusing on IMDA Tech Ltd, a retail firm producing mobile chargers and technical gadgets. It explores the essential requirements of different management accounting systems, including price optimization, cost accounting, inventory management, and job costing, outlining their applications for IMDA Tech Ltd. The report then delves into various methods of management accounting reporting, such as account receivable reports, performance reporting, job costing reports, inventory management reports, and budget operating reports, emphasizing their importance for effective decision-making. A critical analysis of the reporting system is also included. Furthermore, the report examines different costing methods like absorption costing and marginal costing, comparing their applications. The report also covers the advantages and disadvantages of different planning tools. Finally, it addresses how enterprises adapt management accounting systems to respond to financial problems, highlighting the advantages of these systems and the application of various techniques and planning tools, concluding that management accounting leads to the sustainable success of an organization.

Management
Accounting

Table of Contents
FROM: MANAGEMENT ACCOUNTING OFFICER..................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
IMDA tech limited...........................................................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM .....................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting system and essential requirements of its different types..............1
P2 Methods of management accounting reporting......................................................................3
D1 Critical analysis of reporting system.....................................................................................5
TASK 2............................................................................................................................................5
P3 Few costing methods considered in management accounting...............................................5
D2 Critical analyse of income statements...................................................................................8
TASK 3............................................................................................................................................9
P4 Advantages and disadvantages of different type of planning tools.......................................9
TASK 4..........................................................................................................................................11
P5 Enterprises are adapting management accounting systems to respond financial problems.11
M1 Advantages of management accounting systems and its applications...............................12
M2 Application of various techniques of management accounting..........................................12
M3 Use of various tools of planning.........................................................................................12
D3 Planning tools for accounting respond to solve financial issues.........................................13
M4 management accounting leads to sustainable success of organisation...............................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
IMDA tech limited
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management refers to managing business operations and activities in a way that
enterprise can achieve its set objectives and goals. Management accounting is a provision of
various financial and non financial data which help managers in take effective decisions. This is
one of the most essential part of every business enterprise whether it is small, medium or large.
One of the main feature of this concept is that it help managers in achieve set goals and
objectives and contribute more in growth of company. This tool help managers in collect
information related with financial situation of firm which help enterprise in take effective
decisions related with various activities such as planning, organising, directing and controlling.
Different type of financial reports are made in an enterprise in order to record daily financial
transaction of company. IMDA tech limited a retail firm who produce mobile charges and other
technical gadgets is taken under this report for study. Different type of management accounting
system and various methods which an enterprise can use for reporting is all detailed in this.
Further, different planning tools with their advantages and advantages is given in this report.
Along with this, adaption of various system of management accounting by different enterprises
to solve financial problems is also given.
TASK 1
P1. Management accounting system and essential requirements of its different types
If an organisation desire to gain benefits in business and commercial industry it is not a
hard process if there is appropriate sources available (Albelda, 2011). Decades back, the
organisation used to work on the monetary and financial activities focusing over solution through
the help of them, but with increasing business activities, the new issues and problems emerged
such as glocalisation, high competition, governments etc. Management accounting render a
company many perks in the sales increments and decision making process regard of investments.
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The financial accounting is majorly utilised for stakeholder which company successfully
accomplished objectives. There are various distinct between the financial and managerial
accounts which is mentioned here:
Financial Accounting Management Accounting
The major aim is to convey the work or
performance from organisation to the
stakeholder.
It is made by managers of the firm so that they
can analyse different kinds of data and make
right decisions.
For building various process, the GAAP
principles are applied.
There are popular knowledge and principles
which a company make for the development an
accomplishments.
In financial accounting, only quantitative data
is utilised.
In managerial accounting, both quantitative and
qualitative data is used.
This sections cover entire organisational
departmental.
Those specific elements which is linked with
the profitability is undertaken in this process.
The information and data is accurate and
should be complete.
Few times, the information is presented in the
figures.
The small business companies majorly face the issues related to the finance and funding
which is why the IMDA Tech Ltd. is focusing over the various system of accounting and
management for availing in various business areas (Otley and Emmanuel, 2013). Here are some
of them:
Optimisation of Price: Products cost in main elements which relay on the production
process. This framework play a wide role in decision of pricing products of company best for
company as well as consumer. Buyer prefer lower rates and good quality whereas less sales lead
enterprise toward loss. The only option left is selling low values of products but it render
company for short and long term targets loss.
System of Cots Accounting: Importance of costing is emerged ion the last few deceased
as the many companies like IMDA Tech Ltd. have earned competitive edge benefits through
working on various techniques for avoiding production cost (Bennett, Schaltegger and Zvezdov,
2013). The administration system of according is able to increase the benefits through
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recognising and removing the resource wastages, This can also deliver information linked with
profitability through
Inventory Management System: This system allows their worker in managing and strong
the information or data in the inventory software which have entered in stores as well as in
warehouse. This framework render the information about products quality that a company should
keep in their stores. This can help IMDA Tech Ltd. in managing commodities and tracking the
system through using various effective techniques as well as avail in production and
manufacture process. Through this, conflicts in context of supply chain can be resolved.
Costing of Job: In last few years, this system have gained popularity in business
industries and have positive impact. Every job benefits is checked in the job for increasing
revenues and reducing job that are not useful for burden for additional organisation.
Management Accounting System Application for IDEA Tech. Ltd.: Price Optimisation: IMDA Tech Ltd. Is selling various item on their stores as well as
through optimising this framework, they can determine proper prices of products. This
can impact on the pricing system and satisfy needs of consumer as well. System of Cost Accounting: IMDA Tech Ltd. Can use it for removing waste of resources
as well as recognising various working areas. It can avail in decreasing downs and
increase benefits. Inventory management System: For a tech. Companies like IMDA Tech Ltd., there are
various areas of expenditure and sales. Through this system company can manage entire
information system linked with billing, production, expenses, sales etc.
 Job Costing: Some of job at IMDA Tech Ltd are not benefiting company as much as they
should. From this report, organization can increase more abilities and beneficial jobs that
can enhance the profitability of enterprise.
P2 Methods of management accounting reporting
Meaning: This refer to a systematic information delivering procedure to the management's
reflective stages so as altering potency analysing in responsibility centre. This have become
proper base for making the proper action which is necessary for the organisation as well.
Professional and developing practices of accounting is fundamental for any business
organisation. Management accounting dissent from system of financial accounting that avail in
developing reports from internal stakeholders from IMDA Tech Ltd as outside stakeholder
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opposed. In the company (Bodie, 2013). This is required to attain the objectives and goals for
which work occur. Development and sustainability is initial part of any manager accounting. For
it they make use of system of reporting in order to track and store records or transactions. This
can help in securing and collecting various gathered information from differ Dept. such as
Operations, marketing, JHR and other. The IMDA Tech. Ltd can utilise to review entire
statements and reports for proper decision making.
Importance of Reporting System
Here is the importance of reporting system in management accounting:
 This can avail in employer in seeking the several different mistakes that organisation is
going through linked with debtors, creditors and investors.
 It can help in utilising the various important strategies in effective way so strategies can
be built on accomplishing aims step for long terms business. It can support entire divisions as well a avail in establishing an organised process for
worker to make it more beneficial.
Types of Reporting System
Account Receivable report: According to this system of reporting, each data and
information linked with the bills and unpaid customer as list would be described along with
dates. The major objectives of this techniques is to evaluate payback time of prominent amounts
of debts.
System of Performance Reporting: IN this system, it states that the financial system of
company is analysed in a way to review performance of company. IN order to make the better
decision or judgements for company, the organisation need to make the report of performance
every year. This consist of analysing accounting details of IMDA Tech. Ltd as well as various
working members. This evaluation is done by gathering and reviewing past and present data of
organisation.
Report of Job Costing: This is linked with the entire costs of IMDA Tech Ltd that is
linked with entire produced and manufacturing gods during the period of time. This consist of
linked information with labour, maternity, expenses that are utilised. The major purpose of
utilising this report is to analysing the entire cost of the products of enterprise of each products
size.
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Inventory management Report: This is one of the significant system of reporting that is
optimised for controlling and managing purpose for enterprise (Boyns and Edwards, 2013).
There are several tools in IMDA Tech. Ltd which can affect in operations including inventory
turnover aggregate, EOQ, costing of ABC etc.
Budget Operating: It is associated with the cost of manufacture that is straightly linked
with the expense and income of IMDA Tech. Ltd. Organisation during the year. The objectives
of utilising this report is to decide the exact cost that is going to obtain to review or investigate
expenses of operations such as budget of sales, manufacture etc.
D1 Critical analysis of reporting system
In IMDA Tech Ltd, each worker and divisions of organisation is performing and working
their roles for attaining common objectives. The utilisation of proper system of reporting can
avail in organisation toward positive and effective outcome as well as benefits to the company.
The growth and profitability relay entirely on the system of reporting as this includes several
data and information related to statements of finance of organisation. The purpose of reporting
can be decide company performance along with working of every individual on company
operations (Macintosh and Quattrone, 2010). Critical investments on judgements or decision
making is made by the stakeholder through evaluating organisation reports in various
departments. Thus, this system can avail company organised functioning and lead to better
profitability or productivity of company.
TASK 2
P3 Few costing methods considered in management accounting
In the commercial and business environment, the statements of income can be adopted
through technique of management accounting involving absorption costing and marginal. Prior
one is trending concept as well as this focus over the decision making or judgements of
managerial activities along with dealing with the activity of production. Marginal Costing: The cost of manufacture and production process is linked with this
type of costing. This involves the cost of variable along with fixed cost on the same point
of time (DRURY, 2013). These methods can be utilised for the calculating cost purpose
of products and services through making the account of straight direct and overheads.
 Absorption Costing: This refer to incurred cost of an organization like IMDA Tech. Ltd
with one extra unit production (What is absorption costing? 2017). If the cots can
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charged higher for per unit then manufacturing extra marginal units cost, then this would
be effective for organisation to manufacture that units.
COMPARISON
Absorption costing Marginal costing
In this costing, IMDA Tech. Ltd can be
measured as gross cost for proper production
of time.
Under this,. Only cost of marginal will be
given importance for the process of
manufacturing.
This can avail in decreasing the cost of per
units of mobiles and other products of IMDA
tech Ltd.
With extra Units, there is no changes in per
unit cost in this section.
It is linked with the long term costing and
planning (Lukka and Vinnari, 2014).
This refer to the planning of short term
objectives and goals managed and determined
by their authorities.
This methods is not useful or effective for the
process of decision-making.
Majorly companies make use of this procedure
for getting proper decision.
The sustainability relay on the aspects of
external environment in regard of reporting
system.
This is linked with internal system of reporting
lead company toward the growth and better
productivity.
Calculation as per Absorption costing.
Working notes:
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
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Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
Fixed overhead: £2000
Total £100(over absorbed)
Administration Cost: In this budgeted cost is £800 and Actual cost is £700
Selling cost: In this budgeted cost is £400 and Actual cost is £600
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 administration expenses
Fixed selling expenditure
Over absorption
Net Profit
0
11200
(1600)
600
700
600
(100)
21000
(9600)
11400
(1800)
9600
Working 1: Calculate variable production cost £
Direct material 6
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Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
2000
1300
600
21000
(7800)
13200
3900
9300
The company should undertake the absorption costing process because these techniques
will deliver organisation net benefits of £9600 while approach of marginal costing will render
£9300 only (Herzig and et. al. 2012). The major cause behind the differ between both is, fixed
cost against profits get entirely write off whereas the framework is not complied for absorption
providing as well as fixed costing is assigned for produced products in proper amount. The
another influence in this treatments is linked with the closing stock.
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D2 Critical analyse of income statements
According to Kotas, 2014, this report shows that IMDA Tech. Ltd can utilise two of main
costing techniques which can avail them in development and gain more reliable result but there
are distinct result according to the different resources. If the organisation is using the process of
absorption costing they will be getting £9600. However, with the technique of marginal cost the
company is gaining more than £9300 The difference in both amount is £300 because the
determined expenses that are not undertook in the marginal costing. The analysis is entirely
positive. For making desired changes, firm can choose the most reliable source for them.
TASK 3
P4 Advantages and disadvantages of different type of planning tools
Budget: A budget is known as a written financial plan for a specific period of time. This
indicate the sum of funds allocated for a specific purpose and to meet expenditures. This analyse
the expenses and funds which an enterprise invest over its business operations. It is a broad deign
of various operations of business and a accounting pan for specific period of time. Basically,
budgets are prepared for one year or more then one year as per the requirements of business and
the objectives which an enterprise want to achieve.
Budgetary control: It is one of the most significant tool of budgeting as this help
managers to carry out important activities of business such as planning, directing, organising and
controlling. This an be relate with other significant areas of business divided into various
sections such as budget centre. This guide managers how to utilise various resources at an
optimum level.
Procedure of budgetary control
 Consult with managers: In order to achieve control on business operations, it is very
essential that there must be a effective coordination among managers of various
department of enterprise so they should have all relevant information related with
business activities. It is very essential for managers to do discussion with each other in
order to achieve control on expenses of business.
 Do assumption: After collect relevant data from managers they make assumption in
order to decrease the amount of loss. One of the main aim of budget planning is to
achieve a control on business expenses. This consists every expenses occur on business
operations.
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 Fix data for budget to attain business targets: In this step, a list consist large amount of
data is prepare by manager by taking account relevant information from all department of
company. All this help managers in do planning in order to set objectives and goals of
business.
 Compare actual data with budgeted data: In this, actual business performance of
enterprise is compare with the standard one. This help managers in identify the areas of
improvements and contribute in growth of business.
 Review analysis: This is the last and final stage of budgetary control process, in this,
managers evaluate all above mentioned steps in order to known that they are in right
direction or not. Effective execution of every step ensure achievement of enterprise
objectives.
Planning tools: Planning is known as the process of decide future actions of business by consider
end objective and target of business. One of the main advantage of planning is that it provide
direction to managers and employees and encourage them to perform well so enterprise can
achieve its set goals and objectives. In order to execute planning process various tools are there
which can be use by the managers of IMDA tech limited:
1. Forecasting tools: Under this, manager undertake process of planning with some
assumptions supported by management knowledge, skills and effective judgement. Under
this manager take use of historical or past data to determine the direction of business
operations.
Advantages: It is very essential for managers to have information to have adequate
information end objectives and this same to the managers. This help managers in predict amount
of total sales and costs of business.
Disadvantages: This tool of planning fails to give accurate information about the total
expenses which will occur by enterprise. If expenses of business activities are more than the
actual cost then this affect the business objectives.
2. Scenario tools: In this various tools are used by managers in order to evaluate the
alternatives available as per the situation exist in enterprise. This assists management in
activities related with functional and operational management. This depend on the
objectives and end targets of firm and accordingly cost incur by firm.
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