Management Accounting Report: IMDA Tech Case Study Analysis

This report provides a comprehensive analysis of management accounting principles, focusing on the case study of IMDA Tech. It begins with an introduction to management accounting, differentiating it from financial accounting and exploring its various applications in business decision-making, plann...Read More

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...................................................................................................................................................3
TASK 1....................................................................................................................................................................3
P1. Definition of M.A and differ with financial accounting...............................................................................3
P2.Types of M.A systems with respect to several sections.................................................................................5
TASK 2....................................................................................................................................................................6
P3 Income statements of absorption and marginal costing.................................................................................6
TASK 3....................................................................................................................................................................8
P4 Types of budgets............................................................................................................................................8
TASK 4..................................................................................................................................................................10
P5 Balance score card conceptualization..........................................................................................................10
CONCLUSION.....................................................................................................................................................11
REFERENCES......................................................................................................................................................12

INTRODUCTION
Management accounting is the procedure which helps an organisation to keep record of their data. It
enables them to make provision of their financial data and advice to the company to use such provision in
development of an organisation .There are wide variety of a scopes associated with this type of accounting.
Some of them are directing plan of action, execution and risk governance. It aims at applying an individual
professionalism related with the accounting terms in o preparing and presenting the accountancy and money
management determinations. This is done according to envisages several regulations and policies at the
management level related in order to plan and coordinate the overall functional financial structure. The auditors
of management are considered as the worth Making. IMDA tech was established in 15 June 2015 to determine
the actual global trade issues. The basic motive of this company is to adopt modern innovative technology and
come up with new concepts and ideas by neglecting the old methods to resolve difficulties for attaining better
results. Moreover for a new plan firm creates a budgetary plan in which all the advantages and disadvantages
are going to elaborate briefly (Yahya-Zadeh, 2011).
TASK 1
P1. Definition of M.A and differ with financial accounting
Management accounting is a type of auditing process related with governing all the rules and regulations
according to the financial, banking, budgeting and investment sources. In general it is based on a
profession of partnership in management decision making, planning and executive
management system with the help of financial reporting expertise and involving
management in developing and implementing administrative plan of action. The basic
functions of management accounting are cash flow analysis, ratio analysis, fund flow
analysis and budgetary control, it is used in increasing efficiency in the operating
company, maximizing profitability, determination of simple and financial statements,
taking complex business decisions and controlling business. Distinctions of
management and financial accounting are as follows:-
Fiscal accountancy Management accounting
Financial accountancy is based on calculating
methods of ratio assessments.
This is carried out with the future and existing
aspects of budgetary control

The assessment is carried out through
quantitative methods of several graphs ,
diagrams, tales and calculations.
Measuring of certain variations and
assessment of decisions are carried out through
the budget estimations.
The decisions are made as per the cash flow
analysis.
Enterprise prognostication defines a fresh
concepts and methods of improvements which
needed enormous amount of a flowing capital.
Basically its an accounting related with the
financial terms therefore it posses a deficiency
at the success level of the undertaking.
For better evaluating projection there is great
need of generating an effective decision.
These are the above functions and differences with respect to the financial and administrative accounting.
Importance of M.A information at the decisions
M.A is based on planning and decision support criteria in the field of
management. It is related with any transactions or banking sources instead of related
with business decision making, planning, organizing, controlling, staffing and directing.
According to IMDA tech management accounting is a non financial data capture
method. It involves several steps of implementing and controlling operations related
with audits. Planning involves what when where and how to make plans in a systematic
and organised way. Organising is considered through complete systematic process of
maintaining a consistency level ( Quattrone, 2010). Directing is done through managers by
giving orders by following instructions or controlling is the process of dominance.
Staffing is carried out by making an organization fully professional and follow certain
rules and regulations in the organizations. Management accounting is generally based
on additive and wrapped costing, adjustive operation and cost based planning,
budgeting and prediction, processing products, channel, customer plan of action
adaptations and enterprise improvement. There are several sections at the
administration level. These are manufacturing , supply unit , procurement, human
resource , commercial enterprise and investigation and improvement . According to
these sections the decisions are made as follows.
Governing plan of action – this is a plan of action process in relation with audit
governance for making advancements in the functions or duty of accountant in order to
consider as a strategic partner in the organization (Angelkort, 2011).
Execution direction – this based on the further implementation in business
decision making practices and directing organizational performance.

Risk management – basically deals with contribution framework to identify
measure, manage and risk reporting for attaining targets and objectives.
This is a type of accounting process used by the managers in provisions of
accounting information to themselves before they determine matters between the
organizations which helps in the controlling and directing functions according to
management by managers. Generally it is based on a profession of partnership in
management decision making, making planning and executive management system
with the help of financial reporting expertise and involving management in developing
and implementing administrative plan of action. The basic functions of management
accounting are cash flow analysis, ratio analysis, fund flow analysis and budgetary
control, it is used in increasing efficiency in operating company, maximizing the
profitability, determination of simple and financial statements, taking complex business
decisions and con troll of business funds. These are the above points in decision
analysis in management auditing
P2.Types of M.A systems with respect to several sections.
There are several types of management auditing system . Some of them are discussed below.
Cost accounting systems
1) Standard costing- This is a costing in which the stocks presents only on the standardised price and
not considering actualized or mean price. In general it is a method of using cost and revenue standards on
reasons of deviation assessments controlling. It describes the formal methods of performance and efficiency
assessments. It is helpful in budgeting settlement process. It provides motivational criteria towards the
administrative staff. It helpful in estimations and modifications. The basic aim is to furnishing the employees by
giving certain instructions and assistance (Angelkort, 2011).
Mean activity – it is funded or expectable and considerations are the more than four years of
forthcoming time period. In a abstractive hypothesis the industrial plant production is based on negligible
disruptions and difficulties.
Practical activity – The extreme working act in which an industry attaining targets including the given
difficulties or disruptions.
Standard kinds
Current standards – it enables for a small span of time in relation with the existing situations.
Basic standards – it is apply for large time span with respect to the matured present regulation.
2) Actual cost – it is the sum amount which is paid in return in order to get goods and assets. This
includes historical, past, or existing price of the goods. It is an real expenses design to get assets.

3) Normal cost – it includes through working class and real material prices. The estimations are based
on the overheads only.
Inventory management systems
Basically it is a scrutiny for non-capitalized assets and stocks. It investigates the products flowing
through fabricators to storage installation to the marking point. The management of inventory consists of
requesting about the materials, indulgent response , constituents, company and project components, yearly and
serial basis of records and distributions.
Job costing systems
It consists of increasing material , labour and overhead prices to a given occupation. This method is
useful in tracking particular requirements for several jobs and determining the reduction level of the costs in
coming employment. It is used in collecting of small size units.
Material allocation – the utilization of materials such as goods and services firstly get into the
provision and then passes to the merchandise.
Overhead allocation – The goods which are not oriented are concentrated into more than one
operating costs excavation. traditional cost accounting is based on allocation of
manufacturing overhead costs to the products obtained. It is the conventional method
of cost accounting which apportion the factory's indirect costs to the the factory-made
items in no of units produced like the direct labour or machine hours. Machine hours
are main reason of the factory overhead (Sirén, 2010).
Labour allocation – there are certain charges applicable to the workers at job costing systems. The
production-al labours are recorded in the costing of the job if they are traceable. By this method labour
allocation can be done.
Price optimizing systems- this is very valuable and beneficiary method used in mathematical approach
of calculating several reactions of consumers in accordance with prices of different products and services by
certain networking links. This method is providing in price determinations in order to attain goals and
accusatives.
These are the above management accounting systems.
TASK 2
P3 Income statements of absorption and marginal costing
There are several techniques used by an organisation to prepare the income statement. Such methods are
helpful in finding out the cost which affects the project. The company uses this approach in calculating profits
and net loss. It helps in creating an effectual information through which it becomes easier to take decision. One
of the two best suitable methods in framing of income statements is

 Absorption costing
 Marginal costing
Absorption costing: This helps in calculating product cost or service in taking considerations the
overheads and direct expenses. They are known as full costing or absorption method. Cost of finished unit in
inventory includes direct material, direct labour , material and fixed cost variable. Cited organisation can make
their statement with the help of this costing method because it helps in finding out the manufacturing facility
employer. Absorption costing helps in preparing extrinsic financial coverage and taxation reporting that aids in
avoiding interruptions and difficulties at the company level (Emmanuel, 2013) .
Income statement using Absorption costing
Sales ( 35*1500 ) £52,500
Less COS
Opening inventory 0
Variable cost of production ( 15*2000 ) £ 30,000
Fixed overhead absorbed ( 5*2000 ) £10,000
Closing inventory ( 500*20 ) £10,000
Cost of goods sold (30,000-10,000+10,000) £30,000
Under/over absorption (1000*5) £5000
Gross profit (52,500-30,000-5000) £17,500
Less non production cost (selling and distribution) (10,000+(15%*52,500) £17,875
Profit/loss (17,500-17,875) -£375
Income statement using Marginal costing
Sales (35*1500) £52,500
Less COS
Opening inventory
Variable cost of production (15*2000) £30,000
Closing inventory (500*15) £7,500
Cost for sale (52,500-30,000) £22,500

Less other variable cost (15%*52,500) £7,875
Marginal costing: It is describes as variable costs. The marginal cost of production includes the direct
material cost, direct labour cost and direct expenses cost and variable production overhead cost. It is also an key
principle while making the decision for the company. Because with the help of this management attention
focused on such changes which are taking place due to their decisions.
Marginal costing = Change in consumption/ Change in quantity of the product.
If marginal cost of any product is high then the situation for producing the merchandise is better for the
business entity.
Contribution (52,500-22,500-7875) £22,125
Less fixed cost/actually incurred £15,000
Less non production cost (selling, distribution and administration) £10,000
Profit/loss (22,125-15,000-10,000) -£2,875
Reconciliation
Absorption profit - £375
Less fixed overhead on inventory (500-0*5) £2,500
(closing inventory(production –sales2000-1500=500) -opening inventory*fixed overhead)
Marginal profit - £2,875
TASK 3
P4 Types of budgets
Types of budgets
According to the estimates of the company IMDA tech (UK) LMT.
Budget is a financial plan, estimates and blueprints or a prediction of revenue and expenditure for a deposit
period of time.
Below are the different types of budgets as stated by the company

MASTER BUDGET
Master budget is grand total of organizations independent budgets depiction of complete financial undertaking
and health. It is the combination of factors like sales, operating expenses, assets and income series to permit
companies to manifest goals evaluate their overall competency as well as their independent cost centres itself in
the organization (Quattrone, 2010).
OPERATING BUDGET
forecasting and analysis of projecting income and expenditure over the course of given time period is called
operating budget. Operating budget accounts on factors like sales, production, labour cost, material cost,
overhead, manufacturing cost and administrative expenses for creating an canonical or precise picture. In
general or normally operating budgets are created weekly, monthly or yearly basis.
FINANCIAL BUDGET
Financial budget put forward a company's plans manipulate its assets, cash flows, income and expenses. it has
been used to establish a portray of company's financial health and extant a comprehensive analysis of its
spending to relative from its central view. A part from this they are they are time consuming and costly, there is
excessive spending on funds, conflicts in the organization.
Advantages ad disadvantages of several types of budgets
1) Master budgets are used in the company in order to keep all the managers aligned. It may subjected to
lack of specificity and difficult to read and update.
2) In operating budgets It is difficult to find out the estimates of revenue and expenses in a business
enterprise realistically. More paper work is required, it is not flexible toward management, it is not be
behaviourally anchored,very much complex,not cost effective aside from management (Quattrone, 2010).
3)Financial budgets are very are time consuming and costly, there is excessive spending on funds,
conflicts in the organization.
4) Budget is for the future period so it is difficult to predict the future value and it is not necessary that
the predicted data will always work. If the condition changed in the budget in future then it is difficult to predict
the data.
5) Budget is not substitute for the management, it is the only the tool to the management and can not
replace the decision making.
Although budgeting comes with many restrictions and shortcoming it may be wrong to come up with
conclusion that budgeting process is impractical.
Process of budget preparation
This method is carried out by the government making and authorization. The steps in budgeting
preparation are as follows
monetary fund preparation

fund legislation
Execution related with budgets – This is a step in company uses its authorised budgets and in
accountability state all the associates control and assess the budget utility. In this step past analysis related with
the budgets is reviewed by the company and necessary amendments are made in the budgets (Sponem, 2012 ).
Availability of funds – this is an evaluation of present funds available at the company to prepare
budgets.
Measure costing steps - Determination of the cost that may arise during the year in the operation of the
company.
Department Budget- Company collects the requirement of fund at each department. By means funds
can be allocated.
Forecasting revenue - Company forecast the revenue and the income so that they can easily allocate
the fund to each department.
Create budget package- In this step, the instructions are followed with the recent amendments .
Issue budget package- Budget is issued and required to answer to the recipients.
Answers - When budget package is issued by the company then there are some question that may arise.
So it required for the company to answer such question and if these points are required then consider such in the
budgets.
Budget preparation - When all the data related with income and expenditure are assembled then such
information is implemented in practical sense and budget is prepared.
Issuing budget - When final budget is prepared then it is required for the company to issue it so that
funds can be allotted to each department as per the budgeted amount (Sponem, 2012).
Pricing strategies
Basically pricing strategies are used in determining the aims and objectives of the company. It is
essential for an enterprise to apply several variations in their pricing strategy for better running of company. It
depends upon increasing marketing share and widen out net income edges . There are several strategies
explained below
Cost based strategy – It determines products and services. It includes absorption pricing, break even
pricing, cost plus pricing, marginal cost pricing, time and materials pricing
Value pricing strategy – It determines the overall attitude of the customers towards product and
services. It includes ever-changing, superior, price skimming and value pricing.
Teaser pricing strategy – This includes the selling of low prices products by considering high prices
towards the customers. It includes premium prices, high low prices and loss leader prices. This is the above
pricing strategy with respect to management accounting.

TASK 4
P5 Balance score card conceptualization
Balance score card is a performance measurement tool used in administration plan of action
management for identification and developing several intrinsic operations related with business which results in
extrinsic outcomes. It is helpful in measuring performance and giving responses to administration. There are
four areas concerned with the BSC perspectives. Financial, interior business process, learning and growth. It is
short and long run of the internal business process of administration. It consists of four important parts .
Companies are adopting a method of BSC for learning, growth and implementation. The vision and strategy
determines on the basis of consumer consideration, internal process of business, learning and growth
orientations and financial appearance ( Tenucci, 2010).
Financial perspectives
 It is based on the fiscal aspects of currency flows, tax return on investment funds, fiscal
outcomes and capital return on employed. It provides some advance methods of eliminating financial
problems at an organizational level. It is helpful in finding strengths and weakness of the company to
attain goals and objectives.
 It is used in measurement of cash flow analysis
 Helps in measuring the quarterly growth of sales
 Helpful in the judgements of operating income by division
Financial governance and development
it is used to improve financial governance and development of strategy
Balance score card techniques can be used by the company to eliminate financial difficulties that are faced by
the company. This technique is used to measure the performance of the company so that corrective actions can
be taken to improve such conditions. It is used to improve financial governance and to detect the issues that are
faced by the company. There are four perspective of
Balance score card is used to develop strategy so that issues can be resolved. Balance score card approach
evaluates the performance of the company. It measure the performance in various perspective as finance related,
Internal process of the company, customer related issues, growth of the company. It provides data to the
management so that they can take decisions and formulate their strategies accordingly. This technique is used to
formulate better strategies that can solve the problems that are faced by the company (Nørreklit, 2010).
CONCLUSION
According to the above discussion it can be concluded that management accounting provides various
tools and techniques that can be used in the business to establish effective mechanism in the business and
overcome the difficulty faced due to financial issues. It covers the aspect that budget should be prepared by
every organisation so that funds can be distributed among the various sector as per their needs but there are

many advantages and disadvantages available for to establish budgetary control. Budgetary control mechanism
establish the control mechanism of budget and provide sustainable growth to the business.
REFERENCES
Books and Journals
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lean manufacturing environment. Accounting, Organizations and Society.38(1). pp.50-71.
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management accounting. The British Accounting Review.44(2). pp.83-97.
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multiple case-study perspective. European Accounting Review.21(3).pp.565-589.
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Online
Budgetary control | Meaning | Objectives | Advantages | Disadvantages. 2017. [Online]. Available through:
<http://accountlearning.com/budgetary-control-objectives-advantages-disadvantages/>. [Accessed on
20th May 2017]