Detailed Management Accounting Report: Imda Tech Analysis

This report provides a detailed analysis of management accounting practices within Imda Tech. It begins by outlining the core functions of management accounting, emphasizing its role in achieving organizational objectives, strategic planning, and risk management. The report then explores various management accounting systems, including inventory management, job costing, cost accounting, and price optimization systems, highlighting their importance in decision-making. A significant portion of the report focuses on marginal and absorption costing methods, demonstrating their application in preparing income statements and analyzing profitability. The report also examines the merits and demerits of different budgeting techniques and introduces the concept of the balanced scorecard. The financial statements were prepared using both marginal and absorption costing. The report concludes with an assessment of the financial performance, revealing that Imda Tech is experiencing net losses using both costing methods. The report emphasizes the significance of management accounting in enhancing business performance.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P.1 Functions of management accounting:.............................................................................1
P2 Management accounting systems and its kinds:...............................................................3
M1...........................................................................................................................................3
D1 ..........................................................................................................................................4
TASK 2............................................................................................................................................4
P3 Marginal and absorption costing for making income statement:......................................4
M2...........................................................................................................................................7
D2...........................................................................................................................................7
TASK 3............................................................................................................................................7
P4 Merits and demerits of the various budgets......................................................................7
M3...........................................................................................................................................9
D3...........................................................................................................................................9
P5 Balance score card.............................................................................................................9
M4.........................................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is a mandatory tool which is used in the business for attaining
their pre-set objectives. Now, this has been seen that the management accounting becomes the
most imperative tool for making the business sustainable and prosperous (Baldvinsdottir,
Mitchell and Nørreklit, 2010). For applying the management accounting practices, the talented
staff is required in order to assess the business in a great manner. Under this report, Imda tech
company would emphasis all the factors which are carried out and through which developed be
attained. Management accounting helps the business to communicate across the department in
an efficient manner. MA is the combination of accounting, finance and management with the
firm skills and tools which are need to add real value to any firm. Management Accountants
implement information of all types which covers financial and non financial information that
would help out the firm to gain the competitive advantages.
TASK 1
P.1 Functions of management accounting:
The enhancement of the value of the firm is the ultimate objective and this could be attain
with the help of implication of management accounting practices within the cited organisation.
For attaining the pre-set objectives of the firm, there are various methods which can be used. All
the policies which are framed in order to attain the pre set objectives, complies in such a way so
that the optimum outcome could be generated (Banerjee, 2010).
MA reports helps the various key managers to frame the policies in an effective manner.
MA helps the business to analyse the various reports, to frame strategies for making business
sustainable, to control risk in order to attain the manage risk, to frame planning and
communication in order to attain management objectives.
BASIS FINANCIAL
ACCOUNTING
MANAGEMENT
ACCOUNTING
Definition FA is the systematic recording
of finance related transactions
which are connected to the
firm. This additionally covers
It is the tool which covers
financial and non financial
information which helps for
achieving pre set goals and
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summarizing, examine and
reporting these transactions to
oversight agencies and tax
collection firms.
objectives.
Format In this case, there are certain
standards which are need to be
considered while formulating
financial reports.
Under this, there is no certain
standards through which the
data could be framed.
Aim FA report helps investors and
other outsiders to analyse
about the company and then
take their discretionary
decisions.
MA helps the mangers to
frame the decisions in order to
attain the pre set targets and
goals.
Time frame Financial accounting report are
generally having the time
frame. Which is basically for
one year.
While management accounting
does not have any specific
time limit.
Legal requirement Financial accounting is much
essential as there are so many
regulatory bodies which are
required to be complied.
Management accounting does
not have legal requirement in
relation to it.
Importance of management accounting
In order to control the work in an adequate way, there would be need for using of such
accounting practices. The business is performed in an optimum manner via using management
accounting practices. The key benefits of MA are:
 Different strategies for the benefits of the firm would be framed.
 Efficiency in terms of cost is assessed by using management accounting and the
unnecessary cost are being avoided (Chenhall and Smith, 2011).
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 MA helps the firm to boost the profitability that would help out the firm to develop the
firm in a great extent.
P2 Management accounting systems and its kinds:
For gathering of essential information, there are so many frameworks which are available and
they are described in details hereunder:
1. Inventory management system: For manufacturing of any item, there is a need of stock
and that will be control in a best possible manner. Under this, there would be so many
decisions that are required to be framed and for that information is to be gathered with the
help of this framework. With an effective implication of inventory management system,
problems are to be resolved and the firm is managed in an effective manner.
2. Job costing system: There are so many frameworks which are need to be performed and
cost are to be covered in relation to them. However, this is not possible for the
manufacturer to apportion the cost of each job for entire products henceforth, it is
essential that entire cost would be assembled and after that the cost would be distributed
among all (Cinquini and Tenucci, 2010). For controlling the cost, there is a need to
determine the factors which affect the cost and then measure would be taken in order to
control it.
3. Cost accounting system: This system is used specifically in the manufacturing segment.
As there are so many cost which are to be incurred and they are to be distributed among
all in an efficient manner in order to attain the pre-set objectives. The key cost which
would be covered that are connected to material, labour and other overheads. For this
standards, that would be fix through which entire cost would be controlled as this will be
covered on the basis of the pre-set parameters.
4. Price optimisation system: The price and demand are those factors which are inversely
connected to each other. If the product price would go high then demand will goes down
and vice versa. Henceforth, it is very much important that price is need to be maintained
in an optimum level so that the utmost profits could be attained and for this aim this
system would be used.
M1
Under this cited business, there is dependably an extension for the development and for having
diversification, the primary concern that is required to be done is to settle on the best choices by
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which this can be made conceivable (Fullerton, Kennedy and Widener, 2014). For this data will
be required and that will be gathered with the assistance of the diverse MA system. Imda tech
will have the capacity to keep up its position in the market and will have the capacity to get by
for long period of time.
D1
With a specific end goal to make the upgrades in the business, this is required that
execution of the organization might be assessed on general premise. For this there are different
arrangements which are made with the goal that this can be accomplished. Likewise, the
frameworks will help in acquiring the extra advantages in the aggressive market and this will be
finished with the assistance of the different reports that are defined in the entire procedure.
TASK 2
P3 Marginal and absorption costing for making income statement:
The income statement is framed so that the income statements could be prepared and the
profits could be derived from. For preparing these statements these are implemented below:
Marginal Costing: Under this method, the cost of production of any product are divided into
two parts which are named as fixed and variable cost (Haiza Muhammad Zawawi and Hoque,
2010). Fixed cost includes those cost that remains same irrespective of change in the level of
units and variable cost are those which very as per the change in production of the product. With
the help of marginal costing, the contribution can be calculated and this would be help out to
draw a valid conclusion. With the help of this the decisions would be framed and under this the
fixed cost is not required to be considered.
Absorption costing: Under absorption costing, the total cost of the product is required to be
considered and for that the entire cost is need to be apportioned. Under this the over and under
absorption cost are made available that would be covered in the calculation of the amount of
profits which are framed.
With implementing these methods, income statement are required to be framed that would assist
in attaining financial firmness and the issues which are required that the profit.
Income statement as per Marginal costing method:
Working 1: Calculate variable production cost £
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Direct material cost 8
Direct labour cost 5
Variable production expenses 2
Total Variable production cost 15
Working 2: Calculate value of closing inventory and production
Opening inventory Production Closing inventory
Nil 2000*15 = 30000 500*15 = 7500
Net profit in case of marginal costing ￡Amount £ Amount
Sales value
Less: Variable costs
Stock at the opening
Cost of production
Stock at the closing
Variable sales overheads
Contribution
Less: Fixed costs:
Fixed Production overheads
Fixed Selling overheads
NIL
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
Net loss -2875
Income statement as per Absorption costing method
Selling Price per unit ￡35
Unit costs
Direct materials cost ￡8
Direct Labour cost ￡5
Variable Production overhead ￡2
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Variable sales overhead ￡5.25
Budgeted production during the year is 3000
units
Production overhead: In this Actual cost is £10,000 and budgeted cost is £15,000
Selling cost: In this Actual cost is £7875 and budgeted cost is £10,000
Absorption costing working notes
Working Note 1: Calculate full production cost
Direct labour ￡5
Direct material ￡8
Variable cost ￡2
Fixed cost ￡5
Total ￡20
Working Note 2: calculate value of inventory and production
Opening inventory Production Closing inventory
0 2,000*20 = £40,000 500*20 = £10,000
Working Note 3: under/ over absorbed fixed production overhead
Actual fixed production: ￡15000
Fixed overhead: ￡10000
Total £5000 (under absorbed)
Net profit in case of absorption costings ￡Amount £Amount
Sales value
Less: Cost of Sales:
Opening stock
Cost of production
NIL
40000
52500
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Closing stock
(Under)/Over absorbed fixed prod. O/h
Gross Profit
Less: Selling Expenses
Variable sales expenses
Fixed selling expenses
(10000)
7875
10000
(30000)
(5000)
17500
17875
Net loss -375
M2
During the time of preparation of financial statements, there will be necessity of the
different strategies that should be connected (Herzig and et.al. 2012). By them the data will be
obtained and that will be utilized as a part of the report development. Administrators will be
utilizing them keeping in mind the end goal to settle on the choices that will be in general
enthusiasm of the organization.
D2
During the time spent accomplishing targets just count of the benefits is insufficient in
actuality there assessment should be done as such that execution can be measures and afterwards
promote change can be made. In the given case it can be seen that Imda tech is confronting
misfortunes which are 2875 and 375 in regard of minimal ans retention costing. The misfortune
is more in peripheral costing on the grounds that in that the settled cost is not allotted so the
entire sum is assumed and by that misfortune is expanded. During the time spent arrangement of
money related reports there will be necessity of the different strategies that should be connected .
By them the data will be obtained and that will be utilized as a part of the report development.
Administrators will be utilizing them keeping in mind the end goal to settle on the choices that
will be in general enthusiasm of the organization.
anded.
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TASK 3
P4 Merits and demerits of the various budgets.
In the business there are various decisions which will be made and for that proper
planning will be required to be made. In this the budgets will be made in which the estimation
will be made in relation to the amounts of the expense and incomes which will be made. The
data of the past years will be examined and then the research will be conducted with the help of
which the future projections will be made and then they will be used in the preparation of the
budgets. They will be made for the fixed time span and for that the standards which will be set
will have to be followed (Lukka and Modell, 2010).
They will be useful in the calculation of the performance and that will be done by
comparing the various figures of the actuals and the budgeted data. By the help of this the
deviations among them will be found and they will be used to know the reasons which will be
involved behind them. This will be then used to take the measures by which the elimination of
them will be made possible. The work will then in performed in the better manner and by that the
highest level of the efficiency and effectiveness will be maintained. The different forms which
will be used in this are mentioned below:
 Master budget: this budget will be the one in which the summary of all will be provided.
The decisions will be taken by the managers on the basis of it in relation to the various
departments and in them the time will be saved due to this.
Advantages: In this the requirement to make the different budgets will be removed as all of the
task will be performed with the one budget so the time and money both will be saved.
Disadvantages: The changes which will be occurring will be difficult to be included in the
budget as there will be lot of amendments and this will not be easy to know about all of them.
 Operating budget: The incomes and expenses which will have to be incurred in relation
to the various operations will have to be controlled and for that this budget will be very
useful. The expenses which will be required to be made in the particular time will be
incorporated in this. By this the chances of the wastage will be reduced and this will be
the main advantage.
Advantages: in this the manner in which the expenses will have to be met will be identified
before so they will be arranged in the advance and then the problems will not have to be faced in
relation to them.
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Disadvantages: They are made on the basis of the estimates and it is not possible that they will
be relevant so there will be chances that mistakes will be made.
 Cash flow budget: all the transactions of the cash will be included in this and by this the
cash deficit will not be involved and also the other problems will be eliminated. The
sources by which the cash will be obtained will be identified and then the theyw ill be
utilised in the manner which is specified in this (Macintosh and Quattrone, 2010).
Advantages: The company will be able to deal with the problem of the cash deficit as they will
be arranging the funds in advance and that will be of great help.
Disadvantages: In this there will be no accuracy and that will be the major disadvantage.
Budget making process: In this there will be various steps which will be involved and the first
one will be to collect the information and for that historical data will be used and then the
research will be conducted so that the required information can be collected and then the
planning will be made and the budget will be prepared on the basis of it. The risk will be
measured and it will be reduced to the required level. Also the help of the professionals will be
taken in this.
Pricing strategy: There are various strategies which can be used by which the price that will
have to be charged from the customers will be determined. The main methods will be cost plus
pricing, penetration pricing and the other methods. The most beneficial price will be set and will
be the one by which the customers will also be benefited.
M3
The advantage will be gained by the business will be help of the planning tools as by
them the conduction of it will be maintained and the successful conduction will be carried out.
Also the business will be continued in long run (Parker, 2012).
D3
The tools which are present will be used so that the problems and the issues will be
resolved in the best possible manner. The main reason because of which this will be made
possible is that all the issues will be determined on time and then the growth will be achieved by
the correction of them.
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P5 Balance score card
It is said to be a strategies planning that are used by management to connect their
business operations with the vision and strategies of the organisation through monitoring the
performance against specific aims those are set in front of an organisation. In order to maintain
their level of balance in various financial and non-financial activities of an organisation that will
be performed and for that process BSC is the most important techniques used. There are various
aspect which are required to be cover under this method that are related with finance and it's
internal (Pipan and Czarniawska, 2010).
The growth and customer satisfaction can be organised through following the guideline
according to the BSC. All of them are identified and on that basis decision is being made so that
they should maintain balance among the organisational activities. Through its application of the
performance analysis is same in order to evaluate customers need on the basis of their
requirement can be identified easily. So according to the BSC all necessary requirement should
be fulfilled in order to overcome the bad performance.
Balance Score Card is an approach through which financial inadequacy can be used in
order to overcome them in an effective manner. although, this can be rightly observed that the
traditional financial methods such as return on investment and earnings per share could not
render appropriate information for regular enhancement and innovation task. But they are out of
step along with skills and competencies organisations are trying to master in the recent time.
BSC connects performance measures about:
How do customers foresee organisation? (Customer perspective)
What must we Excel at? (Internal Perspective)
Can we regular to enhance and form value? (Innovation and learning perspective)
How do we look to shareholders? (Financial perspective)
1. Customer Perspective: Various organisation earlier has corporate mission which
ponders on the customer. “To be number one in delivering value to the customers” is
a mission statement. How an organisation is performing from its consumers’
perspective has been become, thus, a focus for top management. BSC demands which
managers translate their common mission statement on the customers.
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2. Internal Business Perspective: Customer based measures are crucial, but they are
required to be translated into measures of what organisation must do internally to
satiate its customers’ expectations.
3. Innovation and learning perspective: A tough international competition needs that
organisation incorporate regular enhancements to their current products and processes
and capability to start new products along with expanded capabilities.
4. Financial Perspective: Financial performance calculates whether the organisation’s
strategy, uses, and performing are contributing to bottom-line enhancement.
There are certain issues which are related with the businesses and in relation to overcome
those issues this approaches will be more helpful as in this major location that are included with
the requirement that are need to be improve according the Balance scorecard. In relation with
this there are various measures which can be used to overcome problems which are mention
underneath:
Benchmarking: It is said to be that measure which are used to overcome financial issues.
It is a kind of techniques which are used by most of company in order to grab the strategies of
other competitor. It is said to be the most important techniques use by company in order to
increase the productivity and efficiency.
Performance indicators: There are other measure which are used to solve financial
problems with the use in relation to make more effective performance. It is set kind of
parameters that are specified that will define the identification of an individual performance. It
will be required in order to make prove that the activities perform according to the set standard.
Finance governance: Finance is the major aspect of any business concern because of it most of
the work is undertaken with it. The available funds will be distributed among various department
as per the needs of all that level of business can be maintained.
M4
In order to achieve sustainability, the problems which are identified at the work place should
be solved in effective ways. This can be achieved with the help of different tools and techniques
which are used in management according procedures. To achieve this budgets are designed
which are helpful in increasing performances and achieving growth and development in the
economy (Qian, Burritt and Monroe, 2011).
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CONCLUSION
From the above mentioned report, this has been observed that management accounting
becomes one of the most important factor for attaining pre-set objectives. In this report net
income is calculated by using marginal and absorption costing. Under this report, various
budgeting methods are used and their advantages and disadvantages are highlighted. There are
some performance indicators which used in order to respond financial problems.
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REFERENCES
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