Financial Analysis: Management Accounting Report for TECH (UK) LTD

This report provides a detailed analysis of management accounting principles and their application within TECH (UK) LTD. It explores various cost accounting systems, including actual, normal, and standard costing, alongside inventory and job costing methods. The report delves into different types of management accounting reports such as job cost reports, inventory reports, and budget reports, emphasizing their importance in business operations. It compares marginal costing and absorption costing, illustrating their impact on profit calculations. Furthermore, the report examines budgeting processes, discussing their advantages and disadvantages. Overall, the document offers insights into how management accounting tools and techniques support financial planning, performance measurement, and decision-making within the organization, aiming to achieve sustainability and improve operational efficiency.

MANAGEMENT
ACCOUNTING

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1:...........................................................................................................................................1
P2:...........................................................................................................................................4
M1:.........................................................................................................................................5
D1...........................................................................................................................................5
TASK 2............................................................................................................................................5
P3:...........................................................................................................................................5
M2:.........................................................................................................................................8
D2:..........................................................................................................................................9
TASK 3............................................................................................................................................9
P4............................................................................................................................................9
M3.........................................................................................................................................11
D3:........................................................................................................................................11
TASK 4..........................................................................................................................................12
P5..........................................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
references.......................................................................................................................................16

INTRODUCTION
Management accounting is the most crucial technique which can be used by the
organisation in order gain the sustainability. Nowadays, various management accounting systems
are used in order to gain the competitive advantages in an effective manner. Here are certain
tools which can be used by the management accounting while adopting these certain
management accounting systems. Here, some of the management tools are to be discussed in
this. Here are certain tools which can be used in order to gain the sustainability in an effective
manner. In this report, various management accounting systems are used hereunder so that the
objectives could be attained in an effective manner (Amoako, 2013). Various management
accounting reports are made so that the sustainability can be attained. Net profits are calculated
by using marginal costing and absorption costing approach in an effectively. This report is totally
based on the various planning tools which can be used for budgetary control. Various
management accounting tools are used in order to respond the financial problems in an effective
manner. The management accounting is a service function in which the desired information is
provided to the management of the company for formulating policies and making decisions in
time. This information relates to the cost, price, income, profit etc. to be utilized by the managers
in achieving the goals of the company (Management, 2017). This report includes the various
management accounting systems and their useful and essential components which are merged
with the various reporting of management accounting. This report is also including the planning
techniques which are used to prepare the effective budget statements to monitor the overall
performance of the company. Overall tools and techniques of management accounting helps the
TECH (UK) LTD. to sought out the problems of departments and improve their decision making
process.
TASK 1
P1:
Management accounting plays a vital part for identification, analysing and assessing the
management related issues which could be overcome by an organisation in state to gain the
sustainability in an impressive ways (Amoako, 2013). Accounting systems aid to make the
accounting report which would further help out to gain the sustainability. However, there is a
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strong need to make certain tools is being utilised in respect to gain the sustainable development
in an effective manner. on the other hand, it is an essential aspect for getting professional
knowledge and skill in preparation of final account in the manner to assists and organisation to
attain the aims and objectives in more quick time.
1. Financial accounting and management accounting:
Basis of difference Financial Accounting Management Accounting
Scope The scope of the financial
accounting is not immense as
compared with the
management accounting
because it does not involve the
tools and techniques.
Management accounting scope
is wide because cost
accounting, financial
accounting, and other methods
are used in it.
Reporting Financial accounting provides
information regarding the
financial soundness and
earning capacity of the
company to the outsiders.
Hence, it relates to external
reporting.
Management accounting
provides information to the
management for efficient
operation of business. Hence,
it relates to internal reporting.
Exactness It is an effective aspects for
paying maximum emphasis on
precision and considers only
on actual amount during the
preparation of final accounts.
There is less emphasis on
precision in case of
management accounting
because the objective is find
out the trend which does not
reflect the accurate financial
position.
2 Significance of using appropriate accounting information in an organisation:
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Its enhances the skilfulness of an organisation: Management accounting enhances the
business of the concern. The aims of various divisions of the company are determined in advance
and the attainment of these objectives is taken as a tool for calculating their productivity.
Increase decision making: It refers as one of the most effective systems which is
needed to make use of accounting data in order to increase overall profitability of the company’s
by getting the standard and assessing actual performance regularly enable the management to
have management by exception (Vinayagamoorthi and et. al., 2012).
Measuring of action: The budgetary control techniques modify the management to
measures the performance of each department. The management also uses the standard costing
techniques of the costing which enables it to find out the abnormal in between the actual and
standard cost. The execution will be great, if actual cost does not more than the regular cost.
3. Cost accounting systems: (ACTUAL, NORMAL, & STANDARD)
The cost accounting system provides the information for financial and management
accounting. This system measures and reports information which is related to the cost of utilizing
and acquiring resources. The cost management identifies the approaches and activities of
managers in short and long run planning and control decisions. It is the internal part of a
company’s strategy.
4. Inventory management systems: Inventory management system is a system for tracking
inventory levels, orders, sales, and deliveries. This system is basically used in the manufacturing
industries to make a work order, materials bill and other production related documents. Company
uses this system to eliminate the overstock of the product and outages.
Following are the purposes why the company uses inventory management system:
 To maintain the balance in between too little or too much inventory.
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 Tracking the inventory level in the business.
 Receiving the units into a warehouse
 Keep tracking of sales of product.
 Cutting down on product obsolescence and spoilage.
5 Job costing systems: A job costing system includes the information which is gathers from
various jobs conducted by the company. The information is related to the costs which are
connected with a peculiar production of the job (Macinati and Anessi-Pessina, 2014). This useful
information is required by the company in order to render the information regarding the cost to
the customer who wants to manufacture their product. This information can also have utilized to
allot inventor able costs to the manufactured product. TECH (UK) LTD. utilized this information
to keep track on the specific order and associated expenses.
P2:
1. There are different types of reports which helps the management accountant and managers by
providing the accurate and essential financial information which are given below:
Job cost report: The job cost report is the report which contained the lists of each job the
business of the company is working on and also shows the lists of total costs occurred on the job
in the previous year (Lim, 2011). The job costs are broken down into the following categories:
Labor cost, Material cost, Manufacturing overheads, Liquidated damages. The cost which is
shown on this report are those that can be directly assigned to a job and also remember that this
report only shows the costs accrued not cash paid.
Inventory report: It is a brief statement of items belonging to a business. It produces a
comprehensive account of the inventory of various items. A good inventory should be simple
and clear. By accessing the inventory reports, the management improves the inventory in
accurate manner. They also track the cost of goods sold, eliminate over stock and under stock in
the warehouse of the company.
Budget report: It is used within the organization by the management to compare the
budgeted projections with the actual. In other words, a budget report is framed to compare how
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close the budgeted performance was to the actual during the financial year (van Helden and Uddin,
2016). A company budget report will have various sections, depending upon the financial needs
for the business.
2. Importance of using management accounting reporting systems:
The management accounting reporting smooth the functioning of the business because all
the information related to the failure and success are stored in these reports. These reports help
the management of the company to keep tracking the business activities. Some reports like
Budget, Job, and Inventory reports help the managers to analyze the performance of the
departments, eliminate the wastages and helps in sustainable development of the company.
M1:
Cost accounting system assists the company in order to calculate the performance level of
the production processes. It is use to improves the costing system in the company and also helps
the cost accountant to reduce the unnecessary costs, fix the price and maintain the cost of the
product. TECH (UK) LTD. can improve the efficiency by using the inventory system within the
company by maintain the stock levels, EOQ and avoids the danger level of stocks. Job costing
system helps TECH (UK) LTD. to estimating the cost of the specific job and also gives the
important information to the customer who under the contract with the company. It keeps track
on the quality and fair work done by the labour.
D1
The integration in between the management accounting systems with the reporting helps
TECH (UK) LTD. in order to prepare the reports for smooth functioning of the business
operations. With the help of the reporting, the company achieved their targets and goals at the
predetermined time (Gates, Nicolas and Walker, 2012). Hence, the integration in between both
helps the company to achieves their pre- decided objectives and targets.
TASK 2
P3:
Marginal costing vs. Absorption costing:
Fixed manufacturing overhead under the absorption costing is considered as product cost
whereas in the marginal costing, fixed manufacturing overhead is considered as period cost.
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Absorption costing is mainly prepared for external reporting whereas the marginal coting is
mainly prepared for internal reporting.
In the absorption costing, there may be over or under absorption of fixed manufacturing
whereas in the marginal costing there won’t be over or under absorption of fixed overhead.
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M2:
In this case, the company is required to apply the management accounting methods like
cost accounting tools and techniques to increases the profits margin. This will helpful to the
TECH (UK) LTD. to focus on their business operations in accurate manner (Hiebl and et. al.,
2015). The above methods are utilized by the cost accountant for improving the productivity of
the product. This tools and techniques are useful for each and every departments of the company
for preparing the strategies for the company’s development.
D2:
By applying the method of costing, the net profits or losses are different. As per the
absorption costing and the marginal costing, the company faces the loss. In the marginal costing
the company loss of (£) 2,875 whereas in the case of absorption costing the company also in loss
of (£) 375. So it is benefit to the company to use the method of absorption costing because in tis
costing the company faces little bit loss as compared to the marginal costing.
TASK 3
P4
a). Budgets and its advantages and disadvantages
A budget is forecast the financial position and results of the company for more than one
future period. It is used for performance measurement purposes, planning. It also contains an
estimated income statement for future periods. A more rigid budget involves a sales forecast, the
cost of goods sold, and expenses required to make support to the projected sales. A budget assists
in planning the actual operations of the business by forcing the managers to consider how the
conditions might be change and what steps should be taken now. It also assists to coordinate the
business activities of the company by compelling mangers to survey the relationship between
their own operations and those of other divisions (Jalaludin, Sulaiman and Nazli Nik Ahmad,
2011). Budget includes essentials elements which are:
- To communicate plans to various responsibilities center managers
- To control resources of the company.
- To motivate the managers and others to achieve the budgeted goals.
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