Management Accounting Report: September Analysis for Tech UK Limited

This report analyzes the management accounting practices of Tech UK Limited, a company producing chargers for retail outlets. It covers essential requirements of a management accounting system, distinguishing it from financial accounting and highlighting its importance in decision-making. The report explores cost accounting systems, including actual, normal, and standard costing, alongside inventory management and job costing systems. It includes an income statement prepared using absorption and marginal costing techniques for September 2010, followed by an interpretation of the results. Furthermore, the report examines the use of budgets for planning and control, discussing master and operating budgets. It concludes by presenting management accounting approaches to overcome financial problems, offering a comprehensive overview of financial management strategies for the company.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Explaining management accounting and essential requirements of management
accounting system 560 ...............................................................................................................1
P2. (b) Determining the financial information............................................................................4
TASK 2............................................................................................................................................5
P3. Preparing income statement for the month of September.....................................................5
TASK 3............................................................................................................................................6
P4 Explaining the use of budget for planning and control purposes...........................................6
TASK 4..........................................................................................................................................10
P5 Presenting the management accounting approaches to overcome with financial problems in
organization...............................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Management accounting is the process of preparing management reports and accounts
that provide accurate and timely financial as well as statistical information required by managers.
It is the necessary for the company to manage the functions in a better manner. Management
accounting is the overall scenario which helps company to make financial accounting system.
Present report will be based on management accounting of Tech UK limited who is produce
special charger for mobile telephone and other carry on gadgets for retail outlets in the UK. This
report will be based on how company manages their financial resources in a productive manner.
Through they enhance the better opportunity growth. Further, assignment will discuss about
essential requirements of management accounting system which help to distinguish management
accounting information as a decision making tool for department managers. It will explain about
the importance of cost accounting system as well. Inventory management systems, job costing.
Moreover, it will describe the essential aspects of management accounting system.
TASK 1
P1. Explaining management accounting and essential requirements of management accounting
system.
Management accounting system is the basic and necessary system to manage the
company’s financial resources in a systematic manner. Focus of financial accounting is on the
preparing information for external parties such as stockholders, public regulators and lenders.
Besides, management accounting system is based on some essential principles which help
company to develop the reports for internal and confidential use by managers for decision
making and identifying ways to run company efficiently (Ax and Greve, 2017). Moreover, it
enables Tech UK limited to make product costing, trend analysis and forecasting as well as
market constraints.
Distinguishing Management Accounting from financial accounting
Similarities:
Both; financial and management accounting system are the part of accounting
information system. Accounting systems enable company to analyze its financial statements and
take the suitable decision making approach. Another similarities between both of them is they
are economic events are dealt in both system accounts. Financial accounting has given more new
challenges and opportunities to adopt new portfolio of investment (Bromwich and Scapens,
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2016). Besides, management accounting is the system that manages those systems on certain
principles. Besides, another similarities between management accounting and financial
accounting is both the terms are equally concerned with financial statements, revenues, expenses,
assets, liabilities and cash flow (Fayard, 2015). Both determining and measured of costs for
different accounting periods and even for different departments and sections.
Differences:
Basis Financial Accounting Management Accounting
Accounting Method Financial accounting follows
the double entry accounting
method while entering the
business transactions such as
transactions, summarizing,
recording, etc (Fullerton,
Kennedy and Widener, 2014).
Management accounting
system only manages the
system. It is not based on any
double entry system.
Accounting Principles Financial accounting system
adopts Generally Accepted
Accounting Principles
(GAAP)
(GAAP) is not important for
management accounting
system.
Period of time Financial accounting system is
based on one year.
Management accounting
system relies on the situation.
Purpose of Report Financial accounting system’s
main purpose is to present
potential investors,
shareholders, customers,
creditors, regulatory
authorities, suppliers and
employees (Maas, Schaltegger
and Crutzen, 2016).
Management accounting
system. Is the moreover,
transport and making good
goals. It also makes good
changes and better
opportunity, Management
accounting make when.
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Importance of management accounting information as a decision making tool for
department managers
Tech UK limited company took advantage from management accounting information for
various decision making approaches (Messner, 2016). Management accounting system is the
most required and cost effective approach in order to meet the needs of organization. It helps to
analyze the cost accounting system. It helps to determine what company should sell and how
they will be going to sell it. With the help of this, Tech UK limited will easily make their
marketing cost evaluate process. Along with that, it is the activity based costing technique in
which company decides to whom they sell the products. For that the same, management
accounting helps to use the activity based costing technique.
Cost accounting system
Cost accounting system is used by big firms to estimate the cost of their product and to
analyze their inventory product. Mainly, it is of three types which are discuss as below:
 ACTUAL: Actual costing is recording the product cost which directly affect their factor
like material, cost of labor and overheads incurred during that period (Nitzl, 2018).
 NORMAL: Normal costing is used to derive the cost of the product. Normal costing
applies actual direct cost and standard overhead rates. STANDARD: Standard costing is a difference between the expected cost and the actual
cost.
Inventory management systems
In the modern era, inventory is managed by system application and in earlier days, bin
cards are used to identify the things which are known as Cardex System. Inventory Management
System tracks goods from the business chain. It may be from warehousing to shipping, from
production to retail and all other small parts of chain too. Company manages their inventory on
daily basis by keeping in and out records of their inventory by manual method or by software
system through computer (Otley, 2016). It is the means by which company put all the stock
maintained and sold the item.
Job costing systems
Job costing is an accounting which tracks the cost and revenues. Job costing is the
accumulation of the direct material, cost of labor and overheads incurred. This is the best method
to examine the price of specific product is decreased during the later job. Job costing is used to
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derive the cost of constructing a custom machine, designing a software program, constructing a
building and even small units too (Quattrone, 2016). Job costing is a system which is mainly
used for assigning manufacturing cost of the individual product or batches of the product. It is
mainly used when the product manufacture differs from another.
P2. (b) Determining the financial information
Different types of managerial accounting reports
Illustration 1: Managerial accounting reports
Source: Renz and Herman, eds., 2016
Budget Report: Budget report is perhaps the most fundamental report in managerial
accounting. It helps to understand the control costs in across the company. Whether, its unified
organization or has several departments. Along with that, budget report also analyzes the
essential growth factor in order to meet company’s final activities. It helps to determine the
actual process to determine the actual budget task and take decision on the basis of which they
also cut the cost.
Job Cost Report: It is another job costing report which helps to analyze the side by side
view of the total cost accrued in the single project as compared to the expected revenue yielded
by that project. With the help of this report, Tech UK limited can easily measure their
profitability of specific types of jobs and optimize their operations by focusing on the jobs that
are most profitable and growth full (Quattrone, 2016).
Inventory and Manufacturing report: It is the another fundamental and significant
report which enables company to make most essential growth and enlarging part they help to
centralize data inventory costs, labor and other forms of overhead can easily calculate. This
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report is also helpful to Tech limited to analyze the material availability in the company in order
to manage the product deliver ability approach.
Presenting financial information
Presenting financial information has been formed on the basis of given information of
other related information such as all given reports. It helps to give monthly, quarterly and annual
results of company position (Renz and Herman, eds., 2016). It helps to analyze the financial
information. Complete financial presenting data has been given on the basis of presenting
essential data. Besides, facts and figures are generating more revenue and enlarging situation to
balance the financial position of the company. Complete information must be clear or
understandable through which company can easily make their own position and market.
TASK 2
P3. Preparing income statement for the month 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 Labor 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:
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Income statement for marginal costing Tech (UK) Limited as on 1st September 2010
Particulars Amount
Sales 1500*35 52500
Less: COGS
Direct material 2000*8 16000
Direct Labor 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:
Interpretation is an essential process of working. It makes better task oriented
performance as per the determining object and to observe the best productive task oriented
performance level (Schaltegger and Burritt, 2017). Besides, it is also essential to keep the file
making process. It makes the better objective process. As per the condition, it has been analysed
that Tech UK limited earn 15625 profit in month of September. Calculation has been done by the
absorption or marginal costing.
TASK 3
P4 Explaining the use of budget for planning and control purposes
Budget forecast enables to describe the actual expenses or the actual capital of the company
invested on the particular activity. This budget helps company to allocate the different areas of
departments of the business to accomplish the overall activity and growth. Budget is useful and
an essential tool for every organization to predict the future actual performance of the company
(Suomala, Lyly-Yrjänäinen and Lukka, 2014). There are different types of budgets through
which company sustain their set budget and fulfil their target goals.
Master budget
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The master budget is the budget which defines sum total of company budget which
includes all expenses and business activities in order to fulfill the business objectives. It helps to
determine cost center within the organization. Master budget is helpful to develop company’s
different activities such as operating expenses, income, sources, etc. Overall, master budget
report explains about the actual targets of the company.
Advantage
 Master budget is helpful to develop company different activities such as operating
expenses, income, sources etc (Schaltegger and Burritt, 2017).
 Master budget report explains about the actual target of the company.
Disadvantage
 It does not provide specific requirement of department. It involves lack of understanding and lack of specificity
Operating Budget
Operating budget explains about the costs related to the operational activities. It includes
overall budget of operating costing includes. Besides, it includes various better activity and
better opportunity costs. It includes overall activities of business through which company can
easily measure their expenses in operational activities. This budget is generally prepared on the
basis of monthly, yearly or quarterly. On the basis of manager’s evaluation, overall, activities
will help company to make better growth decision making approach.
Advantages
 On the basis of managers evaluation, overall, activity will help company to make better
growth decision making approach.
 It makes clear about the actual requirement of all resources.
Disadvantages
 It involves heavy cost and low impact full decision making approach. It requires heavy changes in order to meet the changes process making task.
Financial Budget
It is another budget which is the most essential and prominent budget in the organization.
Financial budget ensures the company to adopt right types of funds which is helpful productive
for the organization (Maas, Schaltegger and Crutzen, 2016). It helps in the decision making
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process in order to take better advantages. Financial budget includes strategy of assets, cash flow
as well as income and expenses. It will be more challenging and essential market growth.
Advantages
 It helps in decision making process in order to take the better advantages growth.
 They enable to need the best productive task making project in order to beat the business
organization.
Disadvantage
 It involves high or long process of making task performance.
 It involves high risk factor.
Static budget
A static is a fixed that remains unaltered of change. It must not be the change rather than
some emergency. This must be according to the nature where function or sales budget has been
retained same and rigid. Along with that, it will be the total quality management according to the
nature.
Advantages
 This is the best method which implement in the business budget report. In other words. It
is the easiest way to implement the process.
 It is the strongest cost budget in order to meet the challenging market conditions.
Disadvantage
 It involves lack of flexibility (Renz and Herman, eds., 2016). This gives the negative impact on the business revenues plans
Cash flow budget
Cash flow statement is the statement which helps to define the proper cash flow statement
process. Under which how much cash entered into the company, how much fund has been
introduced in the new management function. Along with that, it helps Tech limited can also
helpful to make better decide to be take decision on the basis of better opportunity and task.
Advantages
 Cash flow statement helps to identify the actual requirement of cash in the business
system.
 Cash budget helps to make proper plans for utilization of resources.
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Disadvantage
 This budget cause distortions
 Cash Flow budget might not be equate to profit.
(b) Process of budgeting needs to be added or a list of essentials.
Step 1: Produce budget assumptions
Every project has been produce on the basis of some assumptions this might be related to
the sales trends, cost trends or environmental conditions. Before, embarking on preparing the
budget (Quattrone, 2016). This will be based on some assumptions which is related to this
approach.
Step 2: Not available funding
Lack of funding might be hinder the growth of project success, it creates many challenges
and growth for the accomplishment of resources.
g the process of budgeting manager needs to be pay attention towards the company budget.
Besides, they try to make the proper changes in the environmental growth. It also helps to fulfill
the better objective goals.
Step 3: Step choosing Points
It is the another process of making budgeting process, in this process of making good
goals. This is the most essential and productive task making performance in order to meet the
organizational goals and policy making task. Along with that, it
Step 4: Create budget package
Budget package, previous standards related to the budgeting more apart it will be more
generating and profit making task oriented goals. This is the process under which manager of the
company will make the better task oriented goals and make better environmental growth (Otley,
2016). Along with that, previous standards are updated according to which budget has to be
prepared. Moreover, it will be the more enhancing level of task.
Step 5: Obtain revenue forecast
It is the another process of making good task under which company makes, it has been
analyzed that sales budget is the most crucial budget of all. All the budget is based on sales
budget furthermore, sales budget overall helps to determine the actual need of the budget.
Step 6: Review the budget
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This is the another process of budget processing which is the most required and essential
process of making good goals. Along with that, moreover, another major goal oriented
objectives.
Step 7: Obtain approval
Budget must be presented at top level more over, it is the long term process of making
good task along with that, obtain approval process making budget must passed from the top
management departments.
Step 8: Issue the budget
in this last process of budgeting budget has been passed from the approval of top
management.
(c) Importance of budget as a tool for planning and control purposes.
Budget is the most essential and impact full process of making goods and services.
Besides, budget is the most significant process of making good task oriented method of
processing. Besides, budget also give positive impact on the behavior of task oriented goals. It is
the elementary form had been part of almost all monarchies of almost all monarchies level of
things which helps to recover the best sales revenue. Budget is necessary to measure the actual
performance of the company by comparing with sales revenue (Quattrone, 2016). Moreover, it
has been seen that, without making budget company cannot fulfill their task oriented goals and
target market goals. It helps to fulfill the all function of the organization.
TASK 4
P5 Presenting the management accounting approaches to overcome with financial problems in
organisation
Along with that, moreover, another process is just to make the process of good learning
process. Management accounting is the moreover, process of doing things along with that, it
makes better productive environment in the organization in terms of better output learning.
Balanced score card: Balanced score card is the measurement tool through company it
makes better target market goals which helps to make the better performance area and target
market goals (Renz and Herman, eds., 2016). The main purpose of the score card is to evaluate
the better performance level. On the other hand balanced score card is the most prominent
structured and best effective performance level that helps to make the corrective action
plan for the company benefits.
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