Management Accounting Report: TATA Motors Financial Analysis

This report provides a comprehensive analysis of management accounting practices within TATA Motors. It begins with an introduction to management accounting, its essential requirements, and a comparison with financial accounting. The report then evaluates different types of management accounting reports, including job cost reports, inventory and manufacturing reports, and accounts receivable reports, highlighting their importance in strategic planning and operational efficiency. The report also explores various management accounting systems, such as inventory management, job costing, and price optimization. The report further delves into the application of absorption and marginal costing techniques and analyzes the use of planning tools for forecasting and budgeting. Finally, the report examines how management accounting systems can respond to financial problems, analyzing financial issues and evaluating the role of planning tools in resolving them. The report concludes by emphasizing the importance of management accounting in enhancing organizational performance and decision-making.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting and its essential requirements...................................................3
P2 Evaluation of the three different types of management accounting reports......................6
M1...........................................................................................................................................7
M2: Different types of accounting techniques.......................................................................7
D1: Critically evaluation on how management accounting system and its reporting can be
integrated within organisational process................................................................................8
TASK 2............................................................................................................................................8
P3 Application of absorption and marginal costing techniques.............................................8
M3 Analyse the use of various planning tools and its application for forecasting and preparing
budgets..................................................................................................................................11
D2 Data Interpretation..........................................................................................................11
TASK 3..........................................................................................................................................11
P5 Application of management accounting system to respond financial problems.............13
M4 Analyse financial problems, management accounting lead organisations to make success
..............................................................................................................................................14
D3: How planning tools for accounting respond appropriately to resolve financial problems15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is a tool which assists the manager of organisation about better
planning of different aspects which ensures higher control over their business operations. It is
refers as the process which involves the aspects regarding identifying, measuring, evaluating,
interpreting and communicating information which is directly or indirectly related to
organisation and contributes in accomplishment of organisational objectives. Application of the
different accounting systems provides opportunity in improvement of the understanding of the
different departments through which their support is ascertain in the completion of common
objectives of organisation. There is huge importance of these systems in the process of providing
effective response to financial issues which results in loss. This will provides the opportunity is
to make the internal structure more strength and reliable. TATA Motors is global brand which
manufactures different utility vehicles according to the needs of customers (Albelda, 2011).
In the present report explain about, application of management accounting systems to
gather different information about organisational performance along with their requirements and
various kind of management accounting reports and their importance. Also, advantages and
disadvantages different kind of budgets and contribution management accounting systems to
respond financial issues.
TASK 1
P1 Management accounting and its essential requirements
Management Accounting: It is important concept which is used by the managers of
TATA Motors is adopt the principles of accounting to improve their information before taking
important decisions in relation to the different matters of organisation. This will helps them to
perform control functions in adequate manner. It is stated by AICPA that the practices of
management accounting used mainly in three area which includes strategic, performance and risk
management.
Definitions
According to IMA, Management accounting is important profession which contributes in
decision-making, planning and management of performance in effective manner. The different
provisions also provide expertise in financial reporting and controlling functions which assist in
the formulation of effective organisational strategy.

According to CIMA, management accounting is the process of identification,
measurement, analysis, preparation, accumulation, interpretation and communication of
information which is used further by the manager of organisation regarding planning and
controlling of different aspects of organisation (Arroyo, 2012 ).
Difference between management and financial accounting
Management Accounting Financial Accounting
This concept helps in internal management It is used regarding providence of the
periodical reports about their financial
performance to owners, creditors and
government
It is related to making of future plans and
policies which assist the employees in
performance of different function in
appropriate manner
The more emphasis is provided to historical
records
These system has limited coverage as it
includes the preparation of different reports in
respect of the performance of departments
This will deals the business as a whole
It is not compulsory adopted within the
organisation in voluntary basis
It is statutory for every business
Functions of management accounting
TATA Motors is branded vehicles company which provides different style of vehicles
according to need of different segment of society. The different types of vehicles which are
provided includes SUV, MUV, hatchback etc. They customised the vehicles according to the
local conditions and perform their work with high standards of quality, safety, environment
norms etc. Implementation of management accounting systems helps to accomplish standards
which are defined about regarding their vehicles through performance of four major functions
through the support of these systems (Baldvinsdottir, Mitchell and Nørreklit, 2010). Such major
functions are defined below:
Planning: It is the process of formulating short and long term plans which assist the
employees of TATA Motors to attain particular end. It is financial planning which shows about

the procedure regarding acquirement of different resources and their application in different
departments over the specified period of time. Management accounting plays an important role
in accounting as it provides information for decision-making.
Organising: It is the important function which is need to perform effectively in TATA
Motors for distribution of the roles and responsibilities among the employees of organisation for
accomplishment of common goals of organisation. It contributes in establishment of effective
organisation structure.
Controlling: It is the process which includes the activities regarding monitoring,
measuring, evaluating and correcting the actual performances of employees to attain business
goals and targets.
Decision-making: Application of the provisions of management accounting systems to
gather information which contributes in selection of best possible choice from large number of
alternatives. It helps to operate their day to day operations effectively (Christ and Burritt, 2013).
Different management accounting systems
TATA is manufacturing organisation which produces different utility vehicles as per the
requirements of customers. To attain the trust and loyalty of customers, it is important to
understand the preferences of customer and bring changes in their functions. It helps to build the
organisational structure more profound. Functions of different systems are defined below:
Inventory management system: This system is used within the organisation for
effective management of stock and non capitalised assets. It helps the manager of TATA Motors
is to track their different stock to ascertain the information about the availability of stock.
Integration of the different provisions of this system with organisational process contributes in
effective flow of inventory within different departments. Th two mail tools which are used in this
regard in TATA Motors includes Just in Time and ABC.
Job costing system: This method is important for TATA Motors to implement because it
manufactures different types of vehicles. This method is used by the manager of TATA Motors
to assign the cost to individuals product and keep effective track on their expenses. This method
provides the opportunity to control unnecessary costs and improve profit margins.
Price optimisation system: It is important to implement this system within TATA
Motors because it helps to attain control over the prices of their different resources. As
competition is high in auto mobile industry, need to adopt effective prices through use of this

system. It helps the manager of organisation is to assess the variation in demand at different
pricing levels.
P2 Evaluation of the three different types of management accounting reports
There are many kind of reports which are formed by the management of TATA Motors
through the information which is gathered from the application of provisions of different
systems. There is huge importance of these kind of reports within TATA Motors regarding
development of the effective strategies and plans for the guidance of employees. It provides the
opportunity regarding building of standards which are required to adhere by the employees in
performance of their different tasks. It enhance the quality of the vehicles which are produced by
TATA Motors through which they attain competitiveness in their operations. There are different
benefits which are associated with the formulation of reports which is attained by TATA Motors
in market includes high market share, high customer base, build good position in market, good
brand image etc. The different kind of reports which are formulated by the manager of TATA
Motors are defined below:
Job cost report: It is one of the important report which refers the activities regarding
identification of cost, expense and profitability of each vehicle which is produced by TATA
Motors. Such kins of evaluation helps the management of organisation is to identify the most
earning segment of vehicle where they need to provide more efforts to make them more better
and satisfy the current trends of market ( DRURY, 2013). These reports has huge contribution in
the process of controlling cost and expenses through removal of such activities which are
unusual.
Inventory and manufacturing reports: These kind of reports are prepared in the big
organisation is to make their inventory and manufacturing process more effective and efficient.
The different information which is contained by this report includes labour cost, per unit
overhead cost, wastages which are happened related to inventory etc. It enhance the decision
making power of the manager of organisation to further use this information regarding its
comparison in different assembly lines which helps in determination of the areas of improvement
which are exploited by the different departs through their bad performance.
Accounts receivable report: It is also one of the kind of report which necessary to
maintain by the manager of TATA Motors for maintaining the liquidity within the organisation
to perform their different functions effectively. Here, debtors of organisation are apportioned on

the basis of the time period from their their amount is due to pay organisation. It provides the
opportunity regarding bring changes in their credit policies to collect the outstanding amount
within stipulated period of time.
M1
Management accounting system is a part of strategic planning of the company, further it
aids in formulating effective balance sheet and controls purchasing actions. The finance
department of Tata Motors has acquired the concept of management accounting thus to look in
the matter of enhancing performance level of the company. Management accounting plays a
crucial role in decision making process of business organisations by excelling profit margins as
well as raising possibilities to make competitive place over the world. There are various
applications of management accounting, such as - Job cost report, Inventory and manufacturing
reports and accounts receivable report. in which, Job costing is contributes to remove unsual
expenses and controlling costs whereas Inventory and manufacturing reports are beneficial in
recognising the availability of raw materials in order to produce effective products and services.
At last, accounts receivable report helps to understand changes in cash inflows and outflows of
the company. By considering them, management of TATA Motors will take effective financial
decisions.
M2: Different types of accounting techniques
It has been analysed that accounting technique consists of large number of methods that
can be incorporated by companies so as to determine net operating income which can further
influence business operations and profitability as well.
 Standard costing: This is determine as an accounting and management tool that assist
company in identifying difference between standard and actual cost of commodities.
Therefore, standard costing is recorded periodically so that variations can be identified
and evaluated.
 Marginal costing: This is used for analysing computing net profitability of company that
consist of variable costs which will be required for production. Thus, through this, firm
improves net profit of organisation.

D1: Critically evaluation on how management accounting system and its reporting can be
integrated within organisational process
Type of reporting Integration with organisational process
Performance Reports Performance report supports manager of TATA
motors in planning future production according
to its companies operations.
Job Cost Reports Various activities of TATA Motors helps
management in accomplishing objectives
related with cost and its integration with
reports. Along with this , it helps in decision
making process related to pricing strategy for
minimising overall cost.
Inventory Management Reports This report emphasize on managing inventory
level effectively for improving process. This
also guides in managing manufacturing cost
while placing order. .
TASK 2
P3 Application of absorption and marginal costing techniques
Cost: It said to be the value of money which is used up in the process of manufacture
something or delivering service. In context of business, cost is the amount which is spend by the
organisation in acquisition of different types of materials which are used in the process of
production of product (Herzig and et. al. 2012). Determination of actual cost helps in fixing the
profit margin which contributes to recover their all costs from sell of products in market. The
different aspects which cost is included in total cost of product is mentioned below:
 Raw materials

 Time
 Labour
 Risk
 Opportunity cost
The costs are further classified into fixed and variable. Fixed costs are such which remain
constant over the period of time and not change with the change in the production level. The
different costs which are considered under this includes rent, depreciation etc. On the other hand
variable cost is such which varies with the change in production level.
Absorption costing: As per this method, all off the manufacturing cost are apportioned
to the units which are produced within the organisation. This will provides the cost of finished
product includes the amount which is spent upon direct materials, labour and variable and fixed
overhead. It is full costing method where all the costs are included whether fixed or variable in
nature in the total cost of product. This method of costing is more significant for external
reporting and income tax reporting. It assists the management of TATA Motors in improvement
of the long term decision making of management (Kotas, 2014).
Marginal costing: It is variable costing method which consider only variable cost in the
process of calculation of cost of product. According the provisions of this method only variable
cost is distributed to the units and fixed cost is write-off against contribution. This will improves
short term decision making power of manager of TATA Motors regarding determination of the
change in cost if one extra unit of good is produced.
Difference between marginal and absorption costing
Marginal costing Absorption costing
Apportionment of only direct cost into the cost
of product
Charging of all manufacturing cost to cost of
production whether in fixed or variable
The amount of cost which is ascertained from
the use of this method is lower in comparison
to absorption method
The cost of product is higher in this method
because involvement of fixed cost
The value of closing stock which is ascertained
from this method is lower then absorption
costing
The value of closing stock is higher

Income statement under absorption costing
method
Particular Amount
Revenue 2500*200 500000
Less: Cost of sales
Direct material 150000 150000
Direct labour
Machine 3000u divided by 100u= 30times 600
Finish 3000u divided by 20u = 150u 2700
Dispatch 2600u divided by 20u=130u 650
Packing boxes 2600*1 2600
Fixed overheads
Machine dep
3000unit divided by 100u=30u 720
Finishing dep 3000u divided by 20u=150u 1800
Dispatch Dep 2600*1 2600
Total cost of 3000u 161670
Value of unpacked closing stock of 400u 20776
Value of 2600units 140894
Value of packed closing stock of 100units 5419
Value cost of sales 135475
Net profit 364525
Income statement under marginal costing
Particular Amount
Revenue 2500*200 500000
Less: Cost of sales
Direct material 150000 150000

Direct labour
Machine dep 3000u*100=30 600
Finishing dep 3000u*20u=150times 2700
Dispatch 2600u*1 2600
Fixed overheads
Machine dep 720
Finish dep 1800
Dispatch 2600u divided by 20u=130u 5120
Total cost for 3000u*400 20440
Value of 2600units 136110
Closing stock for 100untis packed 5235
Variable value cost of sales 2500units 130875
Total net profit 364005
M3 Analyse the use of various planning tools and its application for forecasting and preparing
budgets
In Tata Motors, planning tools are adopted by organisation in order to have knowledge about
buyers needs. Along with this, management need to make system as per crisis which have
changes of occur in future. It will help top authority in budgetary control from future and past
trends. In this, it separate funds limit which is set by every activity in order to run proper
activities of enterprise. Along with this, risk and uncertainties have possibility in future are
acknowledged which gave advantage to administration in order to take decisions. Hence,
management can make effective use of resources as well as organise operations as per market
situations.
D2 Data Interpretation
With the help of income statement, it has been interpreted that under absorption costing
method the net profit was calculated in the amount of £364525 by TATA Motors. On the other
hand, based on marginal costing it has been calculated that net profit that was made by this
organisation was in amount of £364005.

TASK 3
P4 Advantages and disadvantages of different planning tools in budgetary control
Budget- It is that plan which is made for specific time period which help in giving
accurate data and information towards different functioning of an organisation. This can be
prepared for future time period which assist in providing correct direction and path of their staff
members regarding particular goals and objectives which they required to reached in given
accounting year ( Lukka and Vinnari, 2014). There are different types such as operating budget,
finance budget, etc. for example, financial budget assist in making appropriate allocation of
funds which are providing different division of an organisation. Along with this, operation
budget working as standard that are required to adhere by staff members in performance of their
various functions and activities.
Budgetary control- This can be determined as it is essential techniques and methods of
budgetary which assist in management of TATA motors for carry out their various business
operations in effective manner that includes coordination, planning and analysis. In addition to
this, there are such sections of budgets which are separated into different parts which are called
as budget centre.
Procedures of budgetary control: Consultation with managers- It is necessary for TATA motors company manager is to
consult with another managers of other departments. It will assist in determining the
accurate data and information along with major perceptions that assist in making
effective budgets. This will delivering and contributing the communication maintenance
between each division for the high level of growth and success level. Effectual prediction- It will depend on the ability of firm manager of TATA motors
which explaining assumption from these data which mainly derived from other
administrator in better manner (Macintosh and Quattrone, 2010).
 Calculation of actual data with budgeted- In this, actual performance of TATA motors
company is mainly compared with desired budget which are prepared by administration
to predicting their profitability and growth rate (Nandan, 2010).
Planning tools- It is that method which are used by management of TATA motor
organisation for increasing their planning skills and abilities. These are as follows:

Forecasting tools- This tool incorporates with some specific suggestion on management
knowledge, skills and also effective judgement. It is mainly used by an organisation which help
in estimating their future time operations. This will help in creating budgets, management
required effective skills, judgement ability (Ward, 2012. ).
Advantages:
 This tool is considering the past performance and major objectives for making future
plans
 It is used for forecast future issues and problems (Advanced Management Accounting.
2017). This will help in analysing upcoming trends.
Disadvantages:
 It is not provide actual facts and figures
 This is very time consuming
 This does not analysing the sales achieved by organisation
Scenario tools- Company apply this tools in order to assessing some alternative options
on the basis of condition,. It helps in develop planning, conduct function and operations. It is that
process which are used of alternative method according to this situation that occurs in front of
TATA motors managers ( Qian, Burritt and Monroe, 2011).
Advantages:
 This will assist in evaluating and understanding the specific situation
 It provide great opportunities for implement this method for improving efficiency This tool helps in provide the proper ideas regarding chosen, performance and
opportunities which are uncertain.
Disadvantages:
 It is considered as time consuming method
 Scenario tool does not provide accurate forecasting.
 This is cost effective method
Contingency planning tool- This planning tools is developed for company to react in
proper manner during the critical conditions. In this, developing contingency plan includes
making analysis related to financial and human resources.
Advantage:

 It helps in minimize cost in order to cut additional cost.
Disadvantage:
 This planning tool has complex nature, so it is difficult to find the complex
situations.
Other Budgetary tools are explained below:
Cost volume profit analysis: Tata Motors use this tool in order to determine company's
operating and net income by determining cost and volume which can have an effect on operation
system of an organisation.
Advantages:
 With the help of this company can easily calculate amount by simply put set formulas
which can assist them in evaluating the calculative amount. Whether data are complex or there is accounting jargon, CVP makes all the data simpler
to understand which can further be used for making strategies and action plan.
Disadvantages:
 In terms of disadvantage, CVP analysis doesn't provide accurate information all the time
because of which Tata Motors can face issues in estimating material and labour cost.
Standard Costing: It is a cost that is developed after comparing actual cost by
considering the chances of issues and complication company can face. Therefore, it is an
estimated price which company decide for executing its plans and other activities.
Advantages:
 It provides Tata Motors with guidance about different management functions when
company develop various prices and production policies. With the help of this Tata Motors can identify different inefficiencies and mistakes so
that management can evaluate the reason for the problem.
Disadvantages:
 Implementing this technology can be quite costly as dealing with standard costing
includes high degree to tools and technologies. As Tata Motors is not small but changes
in tools and create problem for employees to understand the procedures in a better
manner.
 With the change in course of time standards can change according to the market scenario,
thus, Tata Motors has to modify strategies which will be quite difficult for them to do.

P5 Application of management accounting system to respond financial problems
TATA Motors is multinational organisation which provides their vehicles in many
countries. The conditions which are present in countries are different which impacts the
performance of organisation negatively. There are many big competitors in market like Toyota
which have negative impact upon their customer base. Due to the presence of such situation the
profitability organisation is hampered (Shah, Malik and Malik, 2011). It also observed there are
many employee’s are working organisation worldwide and their effective management is
difficult task which lowers down their performance. In this regard, organisation is need to design
the appropriate training programmes which helps in improvement of their skills and knowledges.
It is identified by the management of organisation that need to adopt the different tools and
techniques which provided by the management accounting system to remove such issues and
improves their profitability (Vasile and Man, 2012).
Tools to overcome financial issues
KPI: This is refers as key performance indicators which provides the information about
the actual performance of organisation and issues. This can be further classified into two parts
Financial and non financial KPI. Financial KPI includes income statement and balance sheet
which helps in identification of the issues which impact their financial position and provides
appropriate approaches to resolve. On the other hand, Non financial indicators helps in
determination of the issues which are present within the employees and management which
hampers future growth (Van der Stede, 2011).
Benchmarking: This tool helps in development of the new standards which are required
to adhere by the employees. Such guidance helps in removal of mistakes and duplication of work
which bring more coordination in their workings. This will provides the opportunity regarding
align their interests to accomplish common goals of organisation.
TATA Motors Toyota
TATA Motors uses KPI technique for
accomplishment of their objectives in more
appropriate manner.
This will uses the tool of SMART objectives to
clear the vision of employees
It uses the techniques of Benchmarking for
fixing the standard which are required to attain
It uses the technique of Financial governance
to effectively follow the guidelines which are

for ascertain effective position in market provided by government. It helps to improve
image and prevents from penalty.
M4 Analyse financial problems, management accounting lead organisations to make success
In Tata Motors, management and accounting plays essential role in success of business.
These are different ways which help them to overcome financial issues which are stated below:
It helps in many ways to overcome from financial issues in following manner:-
 Manager uses management accounting techniques and tools which help them to build
efficient strategies which help in sustainability of business.
 Managerial, absorption, break-even analysis and many other costing tools aid manager of
Tata Motors to integrate sustainable matters to make appropriate decision for firm.
 Management conduct reporting about financial and non-financial terms to acknowledge
issues and make management accounting beneficial for development of reporting policy.
D3: How planning tools for accounting respond appropriately to resolve financial problems
For addressing and resolving financial problems, a firm can use various planning tools
and techniques of accounting management. It provide many methods by which managers can
take proper decisions for utilising resources of company in appropriate manner. It will also help
in overcoming from financial issues by implementing effective system of management tools of
accounting. In addition to this, interpretation and break-even analysis helps in preparation of
external reporting. Thus, all these processes help managers of TATA motors to ensure
sustainable growth of business by implementation of effective tools of management.
CONCLUSION
It has been concluded from the above report that, management accounting is important
system which is used within TATA Motors for improvement of their internal strength and bring
coordination in their different activities. Application of inventory management system provides
helps the TATA Motors is to manage their inventory effectively in the organisation. In this
regard, just in time method is used which improves their insight about ordering such amount of
raw material in actual quantity for the purpose of reduction in the amount of wastages. Also,
application of management accounting systems within the organisation provides insight about

different tools like KPI, Benchmarking, Financial governance to respond financial issues and
improves profitability.

REFERENCES
Books and Journals
Albelda, E., 2011. The role of management accounting practices as facilitators of the
environmental management: Evidence from EMAS organisations. Sustainability
Accounting, Management and Policy Journal. 2(1). pp.76-100.
Arroyo, P., 2012. Management accounting change and sustainability: an institutional approach.
Journal of Accounting & Organizational Change. 8(3). pp.286-309.
Baldvinsdottir, G., Mitchell, F. and Nørreklit, H., 2010. Issues in the relationship between theory
and practice in management accounting. Management Accounting Research. 21(2).
pp.79-82.
Christ, K.L. and Burritt, R.L., 2013. Environmental management accounting: the significance of
contingent variables for adoption. Journal of Cleaner Production. 41. pp.163-173.
DRURY, C. M., 2013. Management and cost accounting. Springer.
Herzig and et. al. 2012. Environmental management accounting: case studies of South-East
Asian Companies. Routledge.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting
research. Accounting, Auditing & Accountability Journal. 27(8). pp.1308-1338.
Macintosh, N.B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Nandan, R., 2010. Management accounting needs of SMEs and the role of professional
accountants: A renewed research agenda. Journal of applied management accounting
research. 8(1). p.65.
Qian, W., Burritt, R. and Monroe, G., 2011. Environmental management accounting in local
government: A case of waste management. Accounting, Auditing & Accountability
Journal. 24(1). pp.93-128.
Shah, H., Malik, A. and Malik, M.S., 2011. Strategic Management Accounting-A Messiah For
Management Accounting?. Australian Journal of Business and Management Research.
1(4). p.1.
Van der Stede, W.A., 2011. Management accounting research in the wake of the crisis: some
reflections. European Accounting Review. 20(4). pp.605-623.
Vasile, E. and Man, M., 2012. Current dimension of environmental management accounting.
Procedia-Social and Behavioral Sciences. 62. pp.566-570.
Ward, K., 2012. Strategic management accounting. Routledge.
Online
Advanced Management Accounting. 2017.[Online]. Available through:
<http://www.bristol.ac.uk/efm/courses/undergraduate/units/level3units/
efim30003.html>.