Comprehensive Management Accounting Report: Tech UK Limited Financials

This report analyzes the management accounting practices of Tech UK Limited, covering key areas such as the differences between management and financial accounting, the importance of management accounting for decision-making, and various cost accounting and inventory management systems. It delves into the types of managerial accounting reports, including budget reports, and emphasizes the significance of presenting information in an understandable manner. The report includes an income statement using absorption costing and explores budgeting for planning and control, along with the advantages and disadvantages of budgeting. Furthermore, it examines the application of management accounting to address financial problems and the implementation of a balanced scorecard for Tech UK Limited, concluding with a comprehensive overview of the company's financial performance and strategic planning.

Management Accounting
Tech (U.K) Limited
5/9/2018

MANAGEMENT ACCOUNTING 1
Table of Contents
Introduction................................................................................................................................2
Task 1.....................................................................................................................................2
iii. Cost Accounting Systems.............................................................................................5
Iv Inventory Management Systems....................................................................................6
v. Job Costing System........................................................................................................6
i. Types of Managerial accounting reports.........................................................................7
ii. Importance of presentation of the information in an understandable manner...............8
Task 2.....................................................................................................................................8
Absorption Costing................................................................................................................8
Income Statement of Tech (UK) Limited using Absorption Costing......................................10
Marginal Costing..................................................................................................................10
Task 3...................................................................................................................................12
Kinds of Budget...............................................................................................................12
Advantages of Budget......................................................................................................14
Disadvantages of Budget..................................................................................................14
Task 4...................................................................................................................................16
Use of Management Accounting to overcome financial problems..................................16
Balanced Scorecard for Tech UK Limited.......................................................................16
Conclusion................................................................................................................................19
References................................................................................................................................20

MANAGEMENT ACCOUNTING 2
Introduction
Accounting means the procedure of recording, categorizing and summarizing the events and
transaction of the business in financial terms, and understanding the consequences (Bazley,
Hancock and Robinson, 2014). This report is being prepared in order to highlight the
functions of Management Accounting systems which will involve four tasks. Task one will
provide the description of management accounting and important requirements of the system
of management accounting in the Tech UK Limited. In Task two income statement of the
company will be presented. Task three will explain the use of budget for planning and control
purposes and in Task four different ways will be explained by which the balanced scorecard
method can be utilized to respond company’s financial or economic problems.
Task 1
a) i. What is Management Accounting and difference between Financial accounting and
Management Accounting.
Management accounting and financial accounting are the two accounting branches.
Management accounting objects at offering both quantitative and qualitative information to
the administrators, so as to support them in the process of decision making and therefore
maximizing the profit (Nørreklit, 2017). On the contrary financial accounting focuses on
providing a fair and true review of the company’s financial position to different parties
(Narayanaswamy, 2014).
Basis Management Accounting Financial Accounting
Meaning Management accounting is
the system of accounting
which offers significant
A system of accounting that
emphasis on the financial
statement preparation of a

MANAGEMENT ACCOUNTING 3
information to the
administrators in order to
prepare plans, strategies, and
policies for continuing the
business properly.
company to offer the
financial information to the
parties is known as Financial
accounting.
Information Non-monetary and monetary
information
Only monetary information
Is it compulsory? No Yes
Time Frame The reports are created
according to the requirements
and need of the company.
The financial reports or
statements are created at the
finishing of accounting
period which is normally one
year.
Objective To support the administration
in the process of decision
making and planning by
offering thorough
information on different
matters.
To offer financial
information to the outsiders.
Reports Detailed and complete
reports of different
information
A concise report of the
company's financial position.
User Internal management External and internal parties
Publishing and auditing Neither audited nor published
by the statutory auditors
Vital to be audited and
published by statutory

MANAGEMENT ACCOUNTING 4
auditors (Surbhi, 2014)
ii. The importance of information of the management accounting as a tool of decision-
making for the managers of department
Management accounting is very essential for every company so as for Tech (UK) Limited.
Some of the management accounting importance is:
Support in making the plan – Current era is the period of planning. Producers who are said
to be the most successful producers are those who produce articles as per the needs and plan
of the consumers. Before making any plan the administration of the Tech UK Limited
Company should study and evaluate the future and present of the business.
Better services to the consumers – Management accounting which is also called as cost
control device allows the decrease in the product prices. Every employee in the concern is
made cost Curious. The product quality of the Tech UK Limited will become effective due to
the implementation of quality standards. The consumers are delivered goods at reasonable
prices.
Easy to make a judgment – Before making any plan or defining policies, there are various
policies or plan in front of the management based on which they decide which policy and
plan need to the adopted such that may become more helpful and useful.
Performance Measurements – The budgeting control standard costing techniques allows
measuring the presentation or performance. In the standard costing, standards are defined first
and then the actual or definite cost is associated with the standard costing. This system will
support the management of Tech UK Limited to identify deviations between actual cost and

MANAGEMENT ACCOUNTING 5
standard cost. The effective performance of the company can be identified if the actual cost
does not surpass the standard cost.
Increase effectiveness of the business - The business effectiveness increases through
management accounting. The objectives of various subdivisions of the company are defined
in advance and the success of these goals is considered as a instrument for assessing their
competence (Management study online, 2018).
iii. Cost Accounting Systems
A framework utilized by the companies to identify the product cost for inventory analysis
cost control and profitability analysis is known as Cost accounting systems. Identifying the
precise product cost is serious for lucrative operations. It is very important for Tech UK
Limited to see which product is moneymaking and which one is not effective, and this can be
determined when it possesses projected accurate product cost. In addition to this, a system of
product costing supports in approximating the concluding cost of materials inventory,
finished goods inventory and work-in-progress inventory for the drive of financial
preparation (Accounting Explained, 2013). The types of costing system are:
Historical Costing – In this, the costs are determined only when they have incurred. The key
purpose of it is to determine costs which had been incurred in past. The historical costs are
utilized for investigation of incurred actual costs and it will be very late to control or manage.
The actual statistics can be associated only when the performance standards exist.
For instance: The Washington Company built a building in 2005, with a cost of $45,000. On
December 31, 2017, the building’s fair market value is $65,000 however still stands on it
original cost of $45,000 on balance sheet.

MANAGEMENT ACCOUNTING 6
Absorption Costing – Under this system, all variable and fixed costs are assigned to the cost
units and entire overheads are engaged as per the level of activity. In this, fixed overheads of
manufacturing are assigned to products, and these are comprised in the valuation of the stock.
Direct Costing – In direct costing, the amount of the product is charged with those costs that
vary in terms of volume. Direct or variable costs such as direct labor, expenses of variable
manufacturing, and the direct material are some of the examples of costs charged to the
product (Aisha, 2018).
Iv Inventory Management Systems
Inventory management system supports business in tracking the goods by the overall supply
chain or the part of its business functions in. That involves every aspect from manufacture to
retail, warehousing to delivery, and all the stock movements (Marder, 2017).
Examples of inventory management system are radio frequency identification, barcode
tracking, and manual inventory (Hamlett, 2018).
v. Job Costing System
The procedure of collecting information of the cost related to a certain production or service
job is known as Job Costing system. This type of information might be needed to submit the
information of cost to the consumer under a contract where costs are repaid (Accounting
Tools, 2018).
For instance: XYZ Corporation starts up Job 1001. In the initial operation month, the job
collects direct material cost of $10,000, direct labor costs of $4,500, and is assigned overhead
expenses of $2,000. Therefore, at the end of the month, the system has accumulated $16,500
total of for Job 1001. This cost is provisionally kept as an inventory asset. XYZ then finishes

MANAGEMENT ACCOUNTING 7
the job and bills the consumer. At that point of time, the $16,500 is moved out of inventory
and into the COGS.
(b) You then need to present financial information to the management covering:
i. Types of Managerial accounting reports
Reports of Managerial accounting are considered as tools for recognizing what is being done
in the business quantitatively. Additionally, reports of standard accounting that are completed
for the purpose of tax; managerial accounting comprises any accumulation of data that can
provide valuable information about the operations. Whereas reports of standard financial are
arranged to normally accepted principles of accounting, reports of managerial accounting can
be prearranged in any form that makes some logic for the business (Gartenstein, 2018).
Budget report - The budget reports are possibly the most important report in the managerial
accounting. It supports holders of the business to recognize and control costs in the company,
whether it’s a combined organization or has numerous subdivisions. By assessing expenses in
previous years, it becomes conceivable to approximate the budgets for the next years and find
spaces to cut costs.
Account Receivable Aging Report – These types of reports are very vital for all the business
same as for Tech UK Limited that provide credit to customers. It delivers a summary of
credit balances as per age, classically comprising distinct sets for items that are 30, 60, and 90
days late. This can support in adjusting the policies of credit in order to arrange them with
customers’ reimbursement abilities.
Job Cost Report – Job cost report offers a side-by-side vision of the overall cost ensued in a
sole project associated with the predictable revenue produced by that project. This type of

MANAGEMENT ACCOUNTING 8
report supports leaders in evaluating the profitability of particular kinds of job and enhances
their processes by concentrating on the jobs that are classically the most lucrative overall.
Manufacturing and Inventory Report - Businesses that create physical products particularly
that part of manufacturing with a low fault lenience consider these reports important. They
support unify data on inventory costs, labor, and other types of overhead comprised in the
procedure of production, offering raw data to enhance machining (Hoddy, 2014).
ii. Importance of presentation of the information in an understandable manner
The owners of the business are the bosses that operate the show. They have reasonable goals
to develop their businesses and increase their profits. They attain their aims by being
innovative, without having fixed hours working, by possessing a vision and by acting on
instinct.
In order to achieve the goals of business Tech, UK Limited owners need a dependable
method to evaluate activity and growth. They have to do comparisons of the performance of
business with preceding periods, with economic yardsticks and with industry. Deprived of
these comparisons and measurements they will not be able to know how well or severely
their business is operating. Besides this, they will not be capable to steer their operations of
the businesses towards the direction of success and achievement of their goals (Constantine
Savva Accountants, 2015).
Task 2
Absorption Costing
1- Statement showing the calculation of Production cost per unit of Tech (UK) Limited:
Particulars Amount per unit
Direct-labor cost per unit £ 5

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Direct-material cost per unit £ 8
Variable-production o/h per unit £ 2
Fixed-production o/h incurred in the month £ 15,000
Total-units manufactured in a month 2000 units
Fixed-production o/h per unit [£ 15000 / 2000 units] £ 7.50 per unit
Standard production cost [£ 5 per unit + £ 8 per unit + £ 2 per
unit + £ 7.50 per unit]
£ 22.50 per unit and per
month
2- Calculation of Total Cost of Production of Teck (UK) Limited:
Particulars Amount
Cost of production (Standard) £ 22.50 per unit
Total units produced in a month 2,000 units in a month
Cost of production [2000 units X 22.50 per unit] £ 45,000
3 – Calculation of Total Closing Stock of Teck (UK) Limited:
Particulars Units
Total production in a month 2000 units
Total units sold in a month 1500 units

MANAGEMENT ACCOUNTING 10
Closing stock [2000 units – 1500 unit] 500 units
Income Statement of Tech (UK) Limited using Absorption Costing
Particulars Amount
Sales [15,000 units x £ 35 per unit] £ 52,500
Cost of goods £ 45, 000
Add: Opening stock Nil
Less: Closing stock [500 units X £ 20 per unit] (10,000)
Gross Profit £ 17,5000
Selling, Distribution, and Administration Expenses
Fixed expenses = £ 10,000
Variable expenses = £ 7, 875 (15 % of £ 52,500)
£ 17,875
Net Loss (£ 375)
Marginal Costing
1- Statement showing the calculation of Production cost per unit of Teck (UK) Limited:
Particulars Amount

MANAGEMENT ACCOUNTING 11
Direct-labor cost £ 5 per unit
Direct-material cost £ 8 per unit
Variable-production o/h £ 2 per unit
Total Marginal Cost of Production [5 per unit + 8 per unit + 2
per unit]
£ 15 per unit
Total units produced in a month 2000 units
Total marginal Cost or variable cost of production [2000
units x £ 15]
£ 30,000