Management Accounting Report: Imda Tech Performance Analysis

This report delves into the realm of management accounting, providing a detailed analysis of its functions and importance within organizations like Imda Tech. It explores various management accounting systems, including cost accounting, inventory management, job costing, and price optimization, highlighting their significance in decision-making and performance enhancement. The report further examines costing techniques, specifically absorption and marginal costing, and demonstrates how to prepare income statements using these methods. Additionally, it covers different budgeting types, their advantages and disadvantages, and the implementation of the balanced scorecard for effective performance measurement. The report emphasizes the practical application of these concepts, offering insights into how they contribute to improved financial management, cost control, and strategic decision-making within a business context. The report concludes by summarizing the importance of management accounting and its role in achieving organizational goals.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Functions of management accounting...............................................................................3
P2 Explain the different management accounting system......................................................5
TASK 2............................................................................................................................................7
P3 Prepare a income statement by using absorption and marginal costing............................7
TASK 3..........................................................................................................................................10
P4 Different types of budgets and their advantages and disadvantages...............................10
TASK 4..........................................................................................................................................12
P5 How implementation of balance score card can deliver performance measure..............12
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................15
.......................................................................................................................................................15

INTRODUCTION
Management accounting is used by the organization in order to manage their overall
information and data. The accountant has to ensure the overall cash inflow and cash outflow so
that overall financial growth can be improved (Ahadiat, 2013). They have to perform some of the
functions such as identifying, analysing, measuring, interpreting and communication. Through
this, they will be able to enhance their performance and goals can be achieved in more effective
manner. On the basis of this, accountant can take the quality decisions so that they will be able to
perform well than their competitors. The present report is based on Imda Tech which perform
their operations United Kingdom. They are focusing on their overall management of accounts so
that they will be able to achieve competitive advantage. In this context, it explain the importance
of management accounting and how this help the firm in making their effective decisions. Along
with this, it explains the different types of management accounting system. Further, it focuses on
the advantages and disadvantages of different budgeting techniques.

TASK 1
P1 Functions of management accounting
Management accounting is a kind of process which is used by the accountants in order to
provide the accurate and valuable data so that effective decisions can be made. On the basis of
this, different balance sheet and account has been prepared so that overall financial growth of the
company can be prepared in more effective manner (Ajibolade, Arowomole and Ojikutu, 2010).
These reports are made in monthly and yearly so that overall investments can be done in more
appropriate manner. Along with this, they will be able to manage their operations by providing
the details to the higher authority. On the basis of these, they can make more appropriate
decisions so that their overall growth can be increased.
There is some difference between financial and management accounting. Some of these
are as follows:
 The main aim of financial accounting is to prepare the financial statement of Imda Tech
in order to provide the information to all interested parties. On the other hand, the main
aim of management accounting is to provide the data to people so that effective strategies
can be formulated.
 Financial accounting is necessary so that investors will be able to know about the
companies financial information. On the contrary, management accounting is not
necessary but this play an important role while making the effective decisions.
 Financial statements are prepared at the end of the accounting period and management
accounting is followed as per the requirement of the company.
 In the first approach both internal and external parties are involved. In another accounting
only internal management is involved so that they can form the strategies and achieve the
goals.
So, in this manner company follow these approaches so that they can achieve their goals
in more effective manner (Caglio and Ditillo, 2012). Further, the overall needs and demands of
the people can be fulfilled so their satisfaction level can be increased.
Management accounting play a vital role in the overall success of the company as
through this they will be able to achieve their goals. On the basis of this, they can make decisions
which are beneficial for an enterprise. Some of these importance are:

Cost analysis: On the basis of accounting information, an individual will be able to know
about the current market trends and the needs of the people. Through this, they can identify that
what needs to be sold into the market and how this should be sell. The business owner will be
able to know about the different cost which is attached with the advertising and promotional
activities.
Make or buy analysis: On the basis of this kind of analysis, company will be able to
make their effective decisions regarding to the buy and manufacture (Chenhall and Smith, 2011).
Through these, they can identify the more profitable products so that they can enhance their
overall performance in more effective manner. More effective decisions can be formed so that
goals can be achieve in successful manner.
Costing techniques: The accountant manager can use different type activities so that
effective products can be manufactured. On the basis of cost analysis, it is beneficial for the
company to achieve the profits. Through this, Imda Tech can also analyse that which consumers
are more profitable for the firm or not.
Utilization of information: The manufacturing company can utilise the data in an
efficient manner so that they can enhance their growth in the market. So, in this manner
management accounting is more useful for the company and high revenues can be generated
(Cinquini and Tenucci, 2010).
Furthermore, this kind of information is useful for the business organization as they will
be able to achieve their growth in more effective manner. This can lead an enterprise towards
success so that competitive advantage can be gained.
P2 Explain the different management accounting system
There are different types of management accounting system which can be used by the
manufacturing company so that business can be lead towards the success. On the basis of this
kind of management accounting, an enterprise will be able to track the cost which is associated
with the products and services. It is the responsibility of accountant to select an appropriate
system as per the needs and requirements of Imda Tech (Ellul and et. al., 2015). By adopting
these, they will be able to manufacture the goods at the lowest cost so that their overall
performance can be improved in more effective manner.
By using these an enterprise will be able to generate financial reports so that effective
decisions can be made. These statements and reports should be circulate in all the other

functional areas so that they can make their strategies on the basis of companies financial
performance. In this manner, the overall performance of an entity can be enhanced and specified
goals can be accomplished. Some of these systems are as follows:
Cost accounting systems: In this type of accounting system, the financial manager is
responsible in order to track the flow of manufacturing process (Figge and Hahn, 2013). This is
also known as product costing system as through this company can set the price of their products
and services. When cost is analysed then this will help the enterprise in achieving the profits and
high revenues can be generated.
Standard costing is a type of cost accounting which help the firm in enhancing their
overall performance. In this, ratios are uses so that current labour and manufacturing process can
be compared with the past data. Through this, they will be able to enhance their overall
performance in more effective manner. The cost can be managed in more effective manner so
that their goals can be achieved. Actual or normal costing can also be used under costing
technique so that high revenues can be generated.
Inventory management systems: This type of management accounting technique can be
used by an enterprise so that they can track their inventory level and other related activities
(Fullerton, Kennedy and Widener, 2014). For example, Imda Tech can use the bar code tracking
so that their overall performance can be improved. Through this, overall data of total
manufactured items can be recorded when they manufactured into the warehouse. Along with
this, the firm can use more advanced technological system so that they can enhance their growth
and profitability can be achieved. When inventory is managed in more appropriate manner then
overall demands and supply can also be met. Furthermore, the customers expectations can be
fulfilled.
Job costing systems: In this kind of costing approach, the manufacturing cost is allot to
each and every products in an efficient manner so that their goals can be achieved. The cost is set
for the different batches in which the overall production process is carried out. This is a modern
approach of management accounting so this is very helpful for the business organizations.
Price optimising systems: This is another accounting approach in which price has been
optimised for the different products and services in more effective manner (Gupta, Pevzner, and
Seethamraju, 2010). Here, in this mathematical model is used so that manager of Imda tech will

be able to identify the behaviour of the consumers towards the price of the goods. By adopting
this system, manufacturing company will be able to generate more profits and revenues.
The accountant of Imda Tech can use different type of systems in order to make the
effective decisions. On the basis of different reports and financial statements, other functional
area will be able to enhance their performance in more successful manner.
M1
Management accounting is an effective process that is used by the manufacturing
company in order to enhance their performance. There are some of the advantages are attached
with this process so their overall growth can be improved in more effective manner. Some of
these benefits are like overall expenses can be reduced so this may help the firm in enhancing
their overall performance (Kaplan and Atkinson, 2015). The cash flow can be improved by
implementing the budget so that spending level can also be managed in an appropriate manner.
Through this, the manager of Imda Tech will be able to take the business decisions so that
success can be achieved. Furthermore, the overall returns on the different investments can be
increased so this help the firm in enhancing their revenues.
D1
When an organisation perform their operations then they will be able to achieve their
goals in more effective manner. Here, overall management accounting systems and accounting
reports are related to each other as these help the firm in improving their process. There are
different systems such as cost accounting, inventory management, job costing and price
optimising. So, on the basis of these financial statement can be prepared so that stakeholders will
be able to know about the companies position in the market. Through these, they can manage
their overall operations at internal as well as external level.
TASK 2
P3 Prepare a income statement by using absorption and marginal costing
The manager of Imda tech can use different costing techniques so that they can control
their cost and make the effective decisions. There are various techniques that can be used by an
enterprise such as marginal and absorption (Lukka and Modell, 2010). Through this, the income
statement can be prepared so that net profits and loss can be identified.

Absorption costing approach: In this type of costing method, the overall cost of the
products can be calculated on the basis of direct cost and indirect expenses. Through this, overall
cost can be minimised and more valuable and accurate data can be gathered at the end of
accounting period. The profits and income statement can be generated in more effective manner
so that their high revenues can be achieved. Through this, manufacturing of the products can be
increased so that their overall performance can be improved.
Income statement on the basis of Absorption costing method:
Selling Price £35
Unit costs
Direct materials £8
Direct Labour £5
Variable Production overhead £2
Variable sales overhead £5.25
Budgeted production for the period is 3000
units
Fixed cost for a month:
Production overhead: In this budgeted cost is £15,000and Actual cost is £10,000
Selling cost: In this budgeted cost is £10,000and Actual cost is £7875
Absorption costing
Working 1: Calculate full production cost
Direct material £8
Direct labour £5
Variable cost £2
Fixed cost £5
Total £20
Working 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2,000*20 = £40000 500*20 = £10000

Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £15000
Fixed overhead: £10000
Total £5000(under absorbed)
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 selling expenditure
Net loss
0
40000
(10000)
7875
10000
52500
(30000)
(5000)
17500
17875
(375)
Marginal costing approach: This approach is used by Imda Tech so that they will be
able to identify the production and outcome that is achieved from different processes. Marginal
costing is related to the change that is arise in the opportunity cost when production is get
increased by on unit. Through this, their overall performance can be improved in more effective
manner and financial goals can be achieved (Macintosh and Quattrone, 2010). In this, additional
cost is required in order to manufacture the services and goods. On the basis of this management
accounting, effective decisions can be made regarding to the cost and prices. The overall
performance of the firm can be improved in more effective manner so that financial growth can
be improved.
Income statement on the basis of Marginal costing method:

Working 1: Calculate variable production cost £
Direct material 8
Direct labour 5
Variable production O/h 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 2000*15 = 30000 500*15 = 7500
Net profit using marginal costing £ £
Sales
Less Variable costs
Opening stock
Manufacturing
Closing stock
Variable sales
Contribution
Less Fixed costs
Fixed Production expenses
Selling cost
Net loss
0
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
(2875)
M2
The organisation can use different techniques in order to manage their overall operations
so that high profits and revenues can be generated. Imda Tech can use absorption and marginal
costing so that income statement can be prepared. Some more techniques like planning, decision
making and budgeting as through this an entity will be able to enhance their overall performance.
By adopting the costing they will be able to increase the profitability and reduce the cost while

manufacturing the products (Otley and Emmanuel, 2013). Through the absorption the overall
profits which is achieved is £17500 and net loss which is achieved through marginal is £2875.
D2
Imda Tech can perform their operations in more effective manner by using some tools
and techniques so that overall growth and revenues can be achieved. The accountant manager
have to use some of their skills and experience so that high revenues can be achieved. On the
basis of the financial reports, the data and information can be interpreted in more effective
manner so that every functional area will be able to achieve their objectives. So, in this manner
an income statement can be prepared.
TASK 3
P4 Different types of budgets and their advantages and disadvantages
Many types of budgeting tolls can be used by the Imda Tech which can help to them to
make an effective and accurate budget for their future cash flows; some of them are here with
their merits and demerits;
Capital Budgeting: It is having focus on those expenses and investments which are huge
for the company (Pipan and Czarniawska, 2010). Projects which are having a need of the huge
capital investments and organisation's has to make a proper analysis before investing finance in
the project. It can help to them to make a decision on the finalisation of the project. Many of the
companies are using this and it helps them to make a proper analysis of the capital investment in
a particular time of period and as well as it can help to the company to make a proper analysis
and set their priorities for the company. It is having some advantages and disadvantages which
are:
Advantages are:
 It can help to the company to make an analysis on the threats which are involved in a
future project and make proper and appropriate precautions for it. It can help to the
organisation to evaluate the impact of the risk factor on the company.
 It helps to the organisation to find out the funds requirements of the company to make a
proper investment in a year.
Disadvantage are:

 Most of the decision which are related to the capital budgeting has take a long time which
impacts on the current needs of the company. It is having huge risk of the inappropriateness of the decision for the company which may
impact for a long time duration.
Zero based budgeting: It is a type of flexible budgeting in which budgets are based on
the zero cost. It is a type of traditional budget which is not having any type of loop where a
company can make some changes (Scapens and Bromwich, 2010). All of the expenses which is
made by the company has to take all of the expenses combine for a particular time period and
they have to make a proper analysis of the organisation and will be expenditures in a time.
Advantage and disadvantage are here;
Advantages It is having higher accuracy cause it is having based on the zero based and having
included all of the expenses.
Disadvantage
 It is highly time consuming process to find out what types of expenses will be done by
the company in the coming year.
Process of preparing budgets
Process of preparing zero base budgeting is given under here; Identify the points: Management has to make an analysis on which points company has
to make a investment and expenses on particular time of period. It is essential for the
company to identify points and note down a particular pattern of the zero base budgeting. Taking decisions on these points: as the company is having many of the finance
investments so they have to set priorities of the investments so they haver to take a bunch
of decisions in which the can make a better investments against the needs. Allocation of sources: Now management has to allocate their resources which can help
them to make a better work by using their allocated resources (Schaltegger, Gibassier and
Zvezdov, 2013). As well as in this stage it will be identified that which types of resources
they are having a need. Controlling and monitoring: At the last management has to make a proper control on the
process of the budget making by proper monitoring on the process.