Management Accounting Report: Financial Analysis for Imda Tech Ltd.

This report provides a comprehensive analysis of management accounting principles and their application to Imda Tech Limited. It begins by differentiating management accounting from financial accounting and explores various management accounting systems, including cost accounting, inventory management, job-costing, and price-optimizing systems, highlighting their benefits for Imda Tech. The report then delves into the application of absorption and marginal costing methods, providing calculations and interpretations of the data, and discusses the advantages and disadvantages of budgeting. Furthermore, it examines the balance scorecard approach and its relevance to addressing financial problems. The report aims to provide insights into financial and cost accounting, along with strategic decision-making for Imda Tech Limited's product launch.

Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management Accounting V/S Financial Accounting.............................................................3
P2 Management Accounting Systems.........................................................................................4
M1 Benefits & Application of Management Accounting Systems in relation to Imda Tech
Limited.........................................................................................................................................5
D1 Critical evaluation on Management Accounting Systems with organizational processes.....5
TASK 2............................................................................................................................................6
P3 Absorption and Marginal Costing..........................................................................................6
M2 Application of Techniques and Reconciliation of Profits.....................................................7
D2 Interpretation of Data.............................................................................................................8
TASK 3............................................................................................................................................8
P4 Advantages and Disadvantages of Budgets............................................................................8
M3 Preparation and Forecasting of Budgets................................................................................9
TASK 4..........................................................................................................................................10
P5 Balance Scorecard Approach................................................................................................10
M4 Response to Financial Problems..........................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management Accounting is as important in the business as food for the human body.
Management accounting is comprises of two accounting which is financial accounting and cost
accounting. Management accounting these days have become more famous and many
organizations have adopted this technique in order to make things clear at the workplace and
make decisions for the future operations(Chiekezie, Egbunike and Odum, 2014). Management
accounting is a vast subject in which various departments of organizations are studied and cost
related matters are studied in it which in turn makes the decision-making easier.
The present report is undertaken in order to make necessary understanding related to
Management accounting concepts to the senior as well as departmental level and further
decisions related to financial information can be made so that it will benefit the Imda Tech
Limited to launch its new unique product of charger for mobile telephone and other
gadgets(Ghasemi and et.al., 2016). Further this report will discuss Imda tech Limited problem
solving capabilities in relation to financial problem.
TASK 1
P1 Management Accounting V/S Financial Accounting
Management Accounting is a concept which covers a wide area of business which in
turn gives the managers a view at different prospects of carrying out the businesses thus
involving this type of accounting in business is of utmost importance because it facilitates the
decision-making process and decision making in every business is an essential part which in turn
facilitates the existence of the organization. Management accounting is nothing it is the process
of evaluation of operations of business of different departments. Management accounting can be
understood as measuring, preparing, accumulating, analyzing, preparing, communicating and
interpreting the information related to financial or cost factor of the business(Luft, 2016). Thus
by this report an attempt has been made to understand the concepts and conventions of
management accounting practices and go beyond the practicality of them, like how they are
applied etc.
Management accounting is somewhat different from financial accounting. Management
accounting deals with the financial aspect as well cost aspect of the products and services thus it

can be said that Management accounting is a broader concept than financial accounting. In
financial accounting the finance related matters are been discussed among the finance
professionals because they have the knowledge of the respective subject which in turn will help
in making appropriate decisions and same is with management professionals also as they are
more concerned with the vision of looking company at the upper positions they will make certain
adjustments which will help in gaining competitive advantage(Myrelid and Olhager, 2015).
P2 Management Accounting Systems
In management accounting there are different set of systems which in turn will help in
gaining the knowledge regarding the management accounting more and they are:1. Cost Accounting System: Imda company follow this system on a continuous basis and
keeps records of cost incurred on goods and services of different departments which in
turn is taken into consideration to know actually how much the expenses are(Du and
Taylor, 2013). This system is a common system for many of the organizations and thus it
meets the competition and also helps in analyzing the profitability.2. Inventory Management System: Since Imda is a retail sector company and deals in
supplying daily usage products it is important for Imda to make the inventory levels keep
up to date in order to meet the demand of the customers who comes to buy the
products(Orelli, Padovani and Katsikas, 2016). So managers of Imda also should as per
the knowledge of the subject matter that they have to introduce the mobile charger in the
market should keep a record of inventory time to time and makes them aware about the
need of future.3. Job-costing Systems: This method is used where the individual customer has different
demands and has the desire of something unique. Which means for every customer there
is a customized product which is likable by people and there is a different set of product
which the customer likes. It is suitable where the work is done as per the customers
requirement is.
4. Price-Optimizing Systems: It is a system which makes or allows Imda to know how
sensitive its existing clients are to changes in product prices to enable it arrive at defined
profitability levels.

M1 Benefits & Application of Management Accounting Systems in relation to Imda Tech
Limited
Management accounting in Imda tech limited can results in upliftment of this retail
company through the usage of different techniques which in turn will help in making the
company work efficiently and draw decisions which favors the working of the company for long
term purpose thus making certain adjustments and alterations is necessary as they will provide
Imda Tech Limited the competitive edge(Smith, Brännström and Jansson, 2015). Through the
application of management accounting company can know about the financial of the
organization as a whole and makes them know whether the company is going in right direction
or not for introduction of new charger and gadgets. By applications of management accounting
the Imda tech Limited will endeavor these benefits:
 After the implementation it will help in organizational planning and selection of best
alternatives.
 Management Accounting will help the company in monitoring and evaluation of the
activities that are being undertaken.
 Through M.A accounting manager is able to make sound strategies and decisions.
 Through application of Management accounting performance can be measured which
results in achieving the vision and mission of the organizations(Ossadnik and Kaspar,
2013).
D1 Critical evaluation on Management Accounting Systems with organizational processes
Management accounting systems with in relation to main purpose of organization can be
understood as in the broad manner through which we can find that where what impact the
different systems have on the main purpose of the Imda Tech Ltd. and it is as follows: Cost Accounting System: Here in cost accounting system, Imda can undertake this system
to introduce the new gadgets and mobile charger but the cost factors should be kept in
mind to make after wards necessary adjustments(Zaleha Abdul Rasid and et.al., 2014).
Since they are into the retail sector they have to carry out different cost related techniques
ion order top attract the customers to buy there product. Inventory Management System: In management accounting system of inventory proper
care of inventory should be taken care of because this will facilitate in making the people

buy the product conveniently and smoothly as the demand of the product will only be met
when the inventory management is up to the mark for Imda. Job-costing Systems: Job costing will not be used in this organization because here
company is focusing on making of charger and if charger is prepared as per customers
preferences than this act will not drive the profitability rather it will make more mistakes
from then or now.
 Price-Optimizing Systems: This particular system is kind of strategy where the firm
implements in order to make the clients of the products deliver good value to the product.
Optimizing the price levels at regular intervals will not fetch the customers attractions
rather making it smooth and offering the deal will(Zaleha Abdul Rasid and et.al., 2014).
TASK 2
P3 Absorption and Marginal Costing
Calculation of cost and profit is an important element in managing the business plus in
management accounting determination of cost and profit is important because in a business
incurred cost is seen as tool for decision making(Hopper, 2013). Decision making can be done at
various levels but to finalize the budgets for the coming year cost plays a major role as the
current or actual cost incurred will gives an idea to the management about the future costs which
cab be incurred buy the company so it helps in making sound decisions and strategies. There are
two methods of costing which can be adopted by Imda Tech Ltd. and they are:
Marginal Costing: In Marginal costing only variable manufacturing is considered at the time of
calculation because product costs and the fixed one's are treated as period costs. and for the
computation For computation purpose contribution and then fixed cost are charged as full and
gets subtracted from the contribution to get the profits that are being earned(Bryer, 2013).
Marginal costing has always been concerned with one additional unit of production.
Income Statement As per Marginal Costing
Sales revenue 52500
Less: Cost of goods sold
Direct labor 7500
Direct material 12000
Variable production overheads 3000
Cost of goods sold 22500
Gross profit 30000

Less: variable expenses
Variable selling expenses 7875
Total variable expenses 7875
Contribution 22125
less:Fixed expenses
Fixed selling expenses 10000
Fixed production overhead 15000
Total fixed expenses 25000
Net profit/Loss -2875
Absorption Costing: In this type of costing costs is absorbed which in turn here fixed cost as
per the production process is taken into calculation part also. Under absorption costing all the
expenditures are used whether it is fixed or variable or semi variable(Tucker and Parker, 2014).
Absorption costing under this cost is charged in an efficient manner to the product. Here cost
apportionment is not easy to implement.
Income Statement As per Absorption Costing
Sales revenue 52500
Less: Cost of goods sold
Direct labor 7500
Direct material 12000
Variable production overheads 3000
Fixed production overhead 15000
Cost of goods sold 37500
Gross profit 15000
Less:
Variable selling expenses 7875
Fixed selling expenses 10000
Total expenses 17875
Net profit -2875
M2 Application of Techniques and Reconciliation of Profits
Imda Tech limited in order to make sound decision related to its product launch should
make necessary evaluation of the techniques and understand their impact on cost scenarios of
profits such that they will make necessary inclusions and exclusions further on to achieve the
desired objectives and goals. As Imda needs to launch the various products which are charger
and mobile gadgets they nee dot make sure before that whether they want to implement which
type of system whether the absorption or marginal(Tucker and Parker, 2014). Since both the

methods of costing has their own advantages and disadvantages thus making the suitable choice
for the organization is the key. Profit reconciliation is important concept as the company will
take care of the cost first then only the appropriate measures will be achieved and thus making
the product cost is important for the company.
D2 Interpretation of Data
As per the calculation it can be said that both the methods have there own implications on
the working of the organization and costs as well thus making the most out of the products is
important in making the change. As per the above calculation it has been seen that the only
change between marginal and absorption costing is about the absorption of fixed overheads thus
because of that the cost of goods sold is marginal is 22,500 & 37,500. Contribution calculated in
marginal costing is 22,125 and absorption costing 15,000. Also fixed expenses under marginal
costing and absorption costing is shown which has quite achieved a great difference which is due
to the absorption of fixed overhead in absorption costing thus the figures are: 25,000 & 17,875.
TASK 3
P4 Advantages and Disadvantages of Budgets
Budgets have been catering to the needs of businesses from long time and makes there
managers know about the actual deviations from the main budget or expected outcome. So that
effective strategies can be developed by them in order to make necessary amendments in the
process to achieve growth. Incremental Budgeting: Herein the budget is prepared as per the ascending order, where
in the first year budget will be low then in second it will be incremented thus it follows a
certain pattern int it(Wickramasinghe, 2015). It is considered as a very simple way of
making a budget, because in this previous year's budget is added to ensure that funds
should not be lower when needed. Zero-based Budgeting: In Zero base budgeting every year the budget is prepared
considering the expenses cost to be zero for the year and then budget for the year is made
as per month wise which helps in making. As per this technique, the budget of the
company is prepared taking into account previous balance as zero and every thing starts
from zero.

 Fixed Budgeting: Fixed budgeting is also known as the financial plan which cannot be
changed. It does not vary as per the actual volume of Imda production, it always remain
fixed(Wickramasinghe, 2015). Under Fixed Budgeting, under this budget the plan does
not vary as per the level of activity of the. Flexible Budgeting: Flexible Budgeting is that budgeting technique in which, this
budgeting plan lays more emphasis on attention to more than one production unit and
this budget can be easily adjustable as per the output of Imda. By introducing the flexible
budget companies are more flexible because they are more concerned with the
comfortable type of budget which in turn gives them a positive inclination.
 Activity Based Budgeting: In this type of budgeting, Budget is prepared as per the
particular activity demands thus making the most out of that activity is what management
strives for. As budget is prepared concerning different activity thus it helps in making
different conclusions and decision making for the people.
M3 Preparation and Forecasting of Budgets
Preparation of budget is an important factor in driving the change, since at the time of
preparation only managers get to know that whether the operations conducted are up to the mark
or not further making the decision process efficient and effective and easy to use(Ahmad and
Leftesi, 2014). After preparation of budgets forecasting the budgets is important because that
shows how much knowledge the particular manager has. Different planning tools which helps in
preparation of budgets and forecasting of budgets are:
1. Budgetary Control: Under budgetary control technique, the actual are compared with
budgets thus this gives the managers to have a look at the organization with the different
mindset and make decisions in order to lower that deviations of the various budgets. This
particular tool is understood with the help of making certain things common which is
actual results are met with the standards will help in making sound strategies for Imda.
2. Zero-base Budgeting: Zero base budgeting technique is that technique where previous
budgets or research related to the budgets is of no use because herein the budgets for the
year is prepared taking the base month as zero and as per the knowledge desire and wants
figures are added into the budget.

3. Forecasting: Through the help of forecasting technique various budgets are prepared
thus by forecasting only managers make use of different tools which eventually helps in
making different set of actions which deals with decision making(Aouni, McGillis and
Abdulkarim, 2015). By applying forecasting technique many firms have achieved the
objectives set by proper and appropriate decision making.
4. Capital Acquisition Budgets: Through the application of these set of budgets a company
is able to make different set of prioritizes over the others in order to gain the competitive
advantage over the others. As per this budget a company acquires the assets by keeping in
mind the future needs and wants.
5. Cash Budgets: Cash budgets have always been catering the needs of objectives of
organization because the main budget of organization is cash budget only because here
only managers have been known that how much funds the operations of business has
generated and how much is taken in conduct of the operations. Through the help of cash
budget managers can make decisions in relation to the liquidity position of the firm.
TASK 4
P5 Balance Scorecard Approach
Balance Score card Approach is that approach under which the management of the firm
used majorly the government, non-profit organization, industry and business. It is said that
balance card approach effectively align the the all activities firm presents in making the business
grow. Imda tech company adopts balance scorecard approach which is a framework of financial
and non-financial. Under this approach in the firms who adopts the financial measures it includes
the investment in suppliers, process, technology, innovation and employees, etc(Ahmad and
Leftesi, 2014). The balance scorecard approach also includes different perspectives which is
financial and non financial perspective and learning and growth perspective is also included in it.
M4 Response to Financial Problems
There are different ways through which application of management accounting can bring
in the methods which can help in solving of the problem up to a level. Through the management
practices managers will be able to gain the issues the businesses are facing and in order to
remove them further the managers take necessary steps. There are three different indicators ofr

tools through which managers can respond to the problems prevailing at the workplace and those
are: Key Performance Indicators: These indicators are used as those indicators which helps
in making things more clear and more fortunistic which in turn helps in showing the
performance levels. Key Performance Indicators (KPI) are measurable indicators that are
used to report progress that is chosen to reflect success benchmark set by a firm(Adrian,
2014). Key performance indicators are those measures that an orgnizati8on uses to define
success and track progress in meeting its goals. Bench Marking: Bench marking is that process through which performance is improved
by having an understanding and adapting practices and processes found inside and
outside an organization to meet best practices within the industry(A. Hammad, Jusoh and
Ghozali, 2013). Bench marking focuses on the improvement of any given business
process by exploiting best practices which are the causes of best performance
 Financial Governance: Financial governance is important in making the firm build the
important decisions which can cause the company work under pressure and build a
different set of traits which help in making different traits. It helps in evaluating the
financial data and then make decisions regarding the problems prevailing.
CONCLUSION
From this report it has been concluded that, management accounting is the key in
developing the the business overall also through management accounting managers tends to have
different prospects which in turn will make them help in making sound decisions for the future
operations. Through management accounting every information whether it is cost related or
related to financial of the company all can be obtained as it is a combination of both financial
and cost accounting.

REFERENCES
Books & Journals