Management Accounting Report

This report on management accounting for Tech Limited covers various aspects including the requirements of management accounting systems, types of reports, absorption and marginal costing, budgeting processes, and the balance scorecard approach. It emphasizes the importance of management accounting in decision-making and planning, providing a comprehensive overview of the tools and techniques used in the field.

Management accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a) Various requirements of management accounting and its systems.........................................1
b) various reports to be made......................................................................................................2
TASK 2............................................................................................................................................4
a) Absorption and marginal costing............................................................................................4
TASK 3............................................................................................................................................7
a) Different kinds of Budget.......................................................................................................7
b) Budget preparation process.....................................................................................................8
c) Importance of budget for planning and control purpose.........................................................9
TASK 4..........................................................................................................................................10
a) Balance scorecard approach..................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is the process in which there are many processes which are
undertaken so that all the accounts can be managed in best possible manner (Zimmerman and
Yahya-Zadeh, 2011). Under this all of the transactions and functions are identified, measured,
recorded and then analysed. Under this report all aspects that are related to are to be discussed in
relation to Tech (UK) Limited. Financial and management accounting both will be compared
below and also various systems are defined that can further be used for making of several
reports.
TASK 1
a) Various requirements of management accounting and its systems.
Management accounting is the tool which is used for the internal functioning whereas
there is another approach known as financial accounting. There are certain difference which are
present among them and they are provided below:
FINANCIAL ACCOUNTING MANAGEMENT ACCOUNTING
Under this all the outcomes of business are to
be disclosed and this will represent the position
of business at a particular time.
The main objective of this is to provide
managers with required information so that
they can formulate appropriate plans with the
help of it.
This is carried for external users and so
information will be used by them for various
purposes.
Only managers and employees will be allowed
to have access to the information which
produced under this (Management Accounting,
2017).
In this reports consideration is given to past
period and by that reports are to be made for a
specified period of time.
Under this forecasts are made and also present
period is taken into consideration.
Regarding this various legal requirements are
mentioned which are to be fulfilled and
because of them reports are made that are
There is no legal rule due to which they are
required to be prepared on compulsory basis.
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provided to investors.
By the help of this comparison can be made in
easy manner as reports are to be made in
specified format.
In this company decides that in which format
all the documents and reports shall be prepared
as there is no specified requirement in this
regard.
All the information which is made available with the use of management accounting can
be used by all departments for the process of decision making (Macintosh and Quattrone, 2010).
In business there are various operations which are carried out and so in order to perform them in
best manner it is required that proper decisions shall be taken in respect of them and this will be
done by taking all the data available into use. This is because by that they can analyse the
situations which are present and then interpretations are made which draws the conclusions.
Several systems are there that are used for this purpose and they are explained below: Cost accounting systems: Under this all the information which is related to various costs
that are associated with business are collected. For this different methods are used and
they include actual, standard and normal. In the actual method all the expenses which are
made actually are used, under normal all the cost that are related to product are used and
in this rate is predetermined (Sisaye and Birnberg, 2010). Last is the standard costing in
which all the cost are taken on basis of standards which are expected to be achieved in it. Inventory management systems: In business there are many operations which are
performed in respect of inventory. In this order quantity, level of stock to be maintained
and issuance of it to all departments are considered. It is very much necessary that all of
them shall be adequately decided so that there are no issues which are faced in relation to
it.
 Job costing systems: Under the process which is involved in manufacturing there are
several costs which are incurred and under this system it is considered that how they shall
be allocated to all the products. This is used in such situations under which all units
which are made are different from one another.
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b) various reports to be made.
An organisation maintain its financial and accounting records to run its operations with
exact figures and counts (Baldvinsdottir, Mitchell and Nørreklit, 2010). These records help an
organisation to make and represent a fair report of performance on annually basis. These reports
called as managerial reports. These reports help to the management of the organisation to make
future plans and important decisions for the future growth. These are the types of different
managerial reports below :-
Budget Report :- Budget reports are the estimated analysis of an organisation performances
comparing last year. Its an overview and planning for the current so that company can
evaluate its estimated performance during the year (Ward, 2012). Budget reports helps to its
owners and management to evaluate its performance of the year. While making budget
report actual data of last year is taken for estimated analysis.
Cost reports: Cost reports differs according to organisations type and scales, for example for an
manufacturing organisation its cost reports represent the raw material cost, factory cost etc.
and for an office or administrative organisation the cost report will be administrative cost
like office expenses or administrative expense (ex. Office expenses, electricity, stationary
expenses). Basically a report which contains the yearly cost figures according the segments
is called cost records.
Accounting Reports: Accounting reports are the group of records which contains different reports
like sales reports, purchase reports, balance sheets, profit and losses accounts, final
statements. These reports are maintained by the organisation in the end of a financial year.
The annual reports show the status of its expenditures and the income in the form of profit
and loss accounts, the liabilities to its assets in the form of balance sheet.
Performances Reports: Performances reports are the summarized way to show the overall
performance of an organisation to the management and the directors of an organisation. Its a
combine formation and result of multiple reports (ex. budget reports, accounting reports).
Performance report is the most important report because it shows the organisation's real
picture on that basis the future plans and models are designed.
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There are some set of standards and formats which are made for representing the annual
reports of the company or organisation. An organisation has to follow the procedure and
standards regarding showing the managerial reports and accounting reports (Lavia López and
Hiebl, 2014). These are the Following essential points that why these reports are important to
understand as the way they are designed. Providing fair information: Managerial reports are essential for many point of views,
these reports are as important to get overall analysis of an organisation (Lukka and
Modell, 2010). As a shareholder of a company it is essential to decide whether the
amount should be invested for the better outcome and as a management point of view to
decide whether any growth level is being achieving every year or not. Making future planning: Managerial reports are help the managements to making new
plans and strategies for organisational growth but and for the accurate information they
use last actual figures of the records. Control the cost: Evaluation and the identification of cost is also a major part of an
organisation because cost directly effect on its profitability so it is also important to
control the cost of the company at various stages.
 Finding the risk: Main objective of the organisational growth is to recognise the future
risk and converting them in to opportunities. And managerial reports help the managers
and the directors to make the plans accordingly.
TASK 2
a) Absorption and marginal costing.
Absorption costing: This is the method under which all the cost which are related to
manufacturing are taken into calculation of profits. In this fixed cost are also apportioned on per
unit basis and so all overheads are divided and then those which are related to selling will be
considered after them. The profits which are calculated among this are more due to this reason.
Marginal costing: Here all the costs are classified as variable and fixed. All of those which are
variable shall be included for calculation of contribution and after that fixed overheads are to be
included (Fullerton, Kennedy and Widener, 2013). All the decisions which are to be made in
accordance with it shall be taken by considering contribution that is determined. In this
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classification is not to be made by dividing expenses under various heads such as production or
selling.
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It can be noted that amount which is identified for loss is more in marginal in comparison
to that of absorption and this is because of manner in which fixed expenses are provided for.
TASK 3
a) Different kinds of Budget
 Master budget
 Operational budget Cash flow budget
1. Master budget: It is a big anticipation that how management convene entire components
of concern in the budget period. It summarizes the activity in way of cash budget, income
statement and balance sheet (Giovannoni, Maraghini and Riccaboni, 2011). It also
includes the interrelated budgets of the various departments. So these budgets are
implemented in big corporates to keep managers on same page.
Advantages:
=> budgets are in capsule form.
=> budgets are presents under one report.
=> It renders entire forecasting profit of the firm.
=> It provides information connecting ton estimating balance sheet.
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Disadvantages:
=> Master budgets are uncertain which affects the both side of financial execution but the
uncertainty on revenue side presents a most serious limitation.
=> Another advantage is behavioural bias because it affects the budget when used as control
device.
=> It takes lots of time and cost.
2. Operational budget: It covers the revenue and expenses of day to day business
operations. Revenue represent sales of product and services whereas expenses define the
costs of goods sold as well as overhead and administrative costs. While we are going to
budgeted annualy, it is subdivided into weekly and monthly periods. Managers are going
to compare results throughout the year.
Advantages:
=> It helps in managing the current expenses.
=>It projects the future expenses
=> It builds reserves
Disadvantages:
=> A budget is based on assumptions so it has lots of chances of accuracy.
=> It is very time consuming and costly.
=> It makes decision making rigid because it relates to the budgeting period not for the whole
fiscal year.
3. Cash flow budget: It analyze the inflow and outflow of cash in a business on day to day
basis (Soin and Collier, 2013). Managers display cash flow budget to know about the
shortfalls between expenses and sales. It also tells about the production cycle and
inventory levels so that company resources are accessible and not sitting idle.
Advantages:
=> It demonstrates actual cash position accessible within the company.
=> It aids in making faithful projection respect future liquidity
Disadvantages:
=> It shows only cash position.
=> In isolation, there is no implementing and this needs other financial statements.
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b) Budget preparation process
A budget is a standard that is prepared to guide the management to prepare the statements
according to that budgets. These budgets are used to compare the actual results with such
budgeted figures.
Main components of budgeting process are:
=> objectives of budgeting
=> legal requirements
=> The budget cycle
=> Estimates
=> The budgetary reserves
=> Forecasting and planning
Different costing systems:
It is depend upon the products and services provided by the company and for this there
are various systems which are as follows:
1. Process costing: It is applied in that industry where all units produced are resembled and
cannot be separately identified (Nandan, 2010). The production activity is continuous and
repetitive process that may go through the number of stages. In the process costing the
costs relating to each part of process are computed and output of each stage is transferred
at cost to become the input of that stage.
2. Job costing: It is used where each job is different and performed as per the customer
specifications. Here the direct labour and material cost relating to job is identified with
relevant portion of overheads and the costs are used in the costing of that job.
3. Marginal costing: The increase in these variable costs per unit of output is referred to the
marginal cost. The costing which is based on variable costs per unit, without taking fixed
costs into account is called marginal costing.
c) Importance of budget for planning and control purpose
1. For Planning:
=> Helps in forecasting the future costs and problems related to that.
=> Help in comparing the actual results with budgeted results.
=> Helps in preparation of reserves regarding loses.
=> Helps in preparing the financial statements as per the pre determined standards.
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