Management Accounting System Introduction Report - TECK (UK) LTD

This report provides a detailed overview of management accounting systems, focusing on their application within TECK (UK) LTD. It begins by differentiating management accounting from financial accounting, emphasizing the importance of non-financial information and its role in strategic decision-making. The report then explores various management accounting tools such as cost accounting systems, inventory management, and job costing, highlighting their significance in achieving sustainable development and competitive advantages. It further discusses the presentation of financial information through diverse managerial accounting reports, including budget reports, account receivable aging reports, and job costing reports, and the importance of their structure in supporting investment decisions. The report also examines different costing methods, such as absorption costing and marginal costing, and analyzes the advantages and disadvantages of various budgeting techniques, including operational and static budgets, providing a comprehensive understanding of management accounting principles and their practical implications.

Management
Accounting

Contents

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
TECK (UK) LTD
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management Accounting system is the best tool which can be used by the organisation in
order to render an effective and efficient business strategy which would be used to gain the
sustainable development in an effective manner. For survival in this world, this can be rightly
said that the management of the cited organisation is required to gain the competitive advantages
in an effective manner. now, the world is totally reliable upon the sustainability. In this report,
this can be rightly said that various management accounting tools are mostly used to gain in an
efficient manner (Wickramasinghe and Alawattage, 2012). Various tools are used by the Tech
UK company for making the business sustainable and reliable. Various planning tools are used
by the organisation for budgetary control in an effective manner. Diverse financial issues are
used by the Tech UK organisation for making the business sustainable and reliable.
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TASK 1
A). Management Accounting systems:
Management accounting is the procedures which identify, assess, and evaluate and
analyse the non-financial statement in an effective manner. Now, this can be rightly said that the
management of the cited organisation is required to adopt this by way of an efficient strategy
which would ultimately assist the organisation to gain the sustainability in an effective manner.
now, this can be rightly said that the cited organisation is required to make certain tools for
making a certain tool that could help out to gain the sustainability.
1. Difference between management accounting and Financial Accounting
Management Accounting Financial Accounting
This can be rightly said that management
accounting consists whole of the information
which are related to the financial and non-
financial information.
Financial Accounting only consists of financial
information which can be used to make an
effective and efficient financial statements.
Management accounting is the vast term which
consists financial accounting in itself.
While financial accounting is a part of
management accounting.
Management accounting reports does not
mandatorily required.
This is required as per the law.
This covers monetary and non-monetary
information.
Financial accounting comprises only monetary
information.
To helps management in planning and decision
making procedure by rendering detailed
information on the diverse matters.
This render financial information to the various
stakeholders.
The reports are formed according to the need
of the cited organisation.
Financial statements are formed during
accounting period which is normally one year.
Detailed reports related diverse information. Summarised reports about financial position of
the cited organisation (Lavia López and Hiebl,
2014).
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2. Importance of management accounting information:
Management accounting is the process which is used by the organisation in an effective
manner. management accounting assist in forecasting future: Future aids decision making and
answering questions, like- should the organisation invest in higher equipment? Management
accounting assist in answering these critical questions and forecasting future trends in
organisation.
Assisting in make or buy decisions: This is clear that the management accounting helps to
assist for knowing make or buy decisions in an effective manner. which ultimately help out to
gain the sustainability in an effective manner (Christ, 2014).
Forecasting cash flows: Management accounting helps to forecast cash flow which
would ultimately help out to gain the competitive advantages in an effective manner.
Assessing rate of return: Before marking on the project which needs heavy investments,
organisation will have to assess forecasted rate of return.
These all will be assessed after analysing management accounting for making decision in
order to gain the competitive advantages in an effective manner.
3. Cost accounting systems:
This is the cost accounting systems which are used by the manufacturing units in an effective
manner. now, this can be rightly said that the cost accounting system helps out to remove
sustainability in an effective manner. This capture organisation’s costs of production by
analysing input costs of each stage of the production and fixed costs, like depreciation of the
capital equipment. Cost accounting would first calculate and record these costs individually,
henceforth, compare input results to the output results in order to assist organisation management
for calculating financial performance in an effective manner (Moser, 2012).
Normal costing is implemented to value production with actual material costs, actual
direct labour costs, and manufacturing overheads relied on forecasted production overhead rate.
These three costs are referred to as manufactured costs which are assigned to goods, and
overheads costs actually incurred, difference is known to the variance. If the amount of variance
does not important, this would implemented be assigned to the cost of sales.
Standard values its production goods with the forecasting material cost, direct labour cost
and forecasted production overhead costs. These standard costs would be implemented for
valuing production’s cost of sales and stocks. If actual costs changes only slightly from standard
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costs, emergence variances would be assigned to the cost of sales. If variances are crucial, they
must be prorated to the cost of sales and to stocks.
4. Inventory management systems:
This is the system under which working capital are optimised in an effective manner. This would
ultimately help out to gain sustainable development in an effective manner (Hilton and Platt,
2013). Now, this can be rightly said that the inventory is effectively managed so that Tech UK
could attain its pre-set targets in an effective manner.
5. Job costing system:
This is the tool which is used by the cited organisation for assigning production costs to
an individual good or batches. Normally, job costing system is implemented only when goods
produced are effectively different from each other. This also said that the job costing also helps
to gain competitive advantage by slowing down the costs in an effective manner.
B). Presenting financial information:
Diverse kinds of managerial accounting reports:
Management accounting reports are made by way of management accounting systems.
These reports help the organisation for making the business reliable and sustainable in an
efficient manner. Now, this could be rightly said that the management would make various
reports which are mentioned hereunder:
Budget report: This is the statement of the forecasting of revenues and expense for a
certain period of time for a particular period of time in an effective manner. This will assist in
making an efficient marketing strategy and also tries to assess budget report in an effective
manner so that the actual and forecasted budgeted amount would be compared in an effective
manner.
Account receivable aging report: This report consists all the debtors related information which
would help out to know about the certain strategy for an organisation. This would list unpaid
consumer invoices and unused credit memos by the date ranges (Becker, Ulrich and Staffel,
2011). This report is the key tool which are used collections personnel to identify that invoices
are overdue for the payment.
Job costing report: This is the report which starts from the data captured in other
reports. This report lists each job which each member is working on and lists of the entire cost
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captured on the job in earlier period. This job costs also categorised in Labour cost, Material
cost, subcontractor cost, field overhead, liquidated damages and others.
Importance of structure of using reporting system:
The format of reporting system is most crucial as there are so many aspects of the cited
organisation. These kind of reporting systems could help division in forming reliable investment
decisions related to the future plans of the cited firms. Some of them are mentioned hereunder:
Control and visibility: With assisting of these reports managers could be comfortably
can identify the visibility of the key information on the implications of the reports which could
be crucial for the cited organisation. Reports are made for comparing the standard reports along
with the actual one.
Optimisation of the justifiability: The main aim of the manager is to gather data in a
most effective manner. With assisting these reports, organisation could assist and control
mistakes which makes effects on the manufacturing of the organisation.
Identifying performance booster and assessing it: Efficient use of assessing of these
data reports which could assist in finding an adequate solution for a provided issue that could
assist in the cited company.
TASK 2
A). Diverse kind of costing method:
Absorption costing: This is the costing method which consists of all the costs which are
totally linked to the production of the goods. Under this all the costs whether it is variable or
fixed, considered. Here, are certain tools which can be used by the organisation for making the
business objectives in an effective manner.
Marginal costing: This totally consist of the tools which are marginal cost. Now, this can
be relied that the management of cited organisation would make an efficient strategy that are
going to consider all the variable costs for calculating the contribution per unit.
Income statement on the basis of Marginal costing method:
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Production overhead: In this budgeted cost is £15,000and Actual cost is £10,000
Selling cost: under this budgeted cost is £10,000and Actual cost is £7875
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TASK 3
A). Diverse kinds of budgets and their advantages and disadvantages:
Budget is the tool which can be used by the organisation for forecasting of the revenues
and expenses for a particular period of time. Now, this can be rightly said that the management
of the cited organisation would get to know about actual and forecasted figure in an effective
manner which would help out to gain sustainable development in an effective manner. Now, this
can be rightly said that that management of the cited organisation would make variance analysis
if the budget is not favourable.
Operational budget – it is a type of budget that includes the details of different operations cost
and incomes that are earned in a time duration. It is required that this limit is set well as the
effectiveness of business depends much on this. Through this tool enterprise can successfully
lead towards growth as appropriate control over the cost of organisation is maintained which
helps in raising the profit margins of the commercial institution. it includes the details of cost
that will be incurred towards completion of the allotted projects (Weygandt, Kimmel and Kieso,
2015). This way the overall cost of the proposed activity is ascertained well in advance which
helps in making the arrangements accordingly so that the targets are maintained.
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Advantages:
 The most important benefit of this budget is that it helps in managing the current finance
of the organisation. Cash is the most important asset of the firm and hence it is crucial
that decision regarding same are taken with maximum care.
 Projecting future expenses is the another benefit which is offered by operation budget to
the enterprise. It forecast the needs of coming time before which further aids in making
the arrangements for same. This way the continuous working is maintained and risk of
non-availability of finance is avoided (Leitner, 2013).
 Developing accountability is the most effective benefit that is provided by this budgeting
system. When budgets are provided after analysing all the possible cost of the firm than
the department is made accountable in case the budget is exceeded. It helps in keeping
control over the expenses.
Disadvantages:
 Negative aspect of operation budgeting system is that it leads to rigidity at the work place
which further restricts the capacity of an enterprise to grow.
Static budget: it is an entirely different budget which is made for a certain period of time and is
not changed when if the actual results varies with the budgeted amount. It is oftently used in the
business type where it is easy to forecast the sale and expenditures volume as does not fluctuate
much. It can be used as a base to compare the actual results which further assist in understanding
the deviations to a great extent.
Advantages:
 Since this budget is not changed frequently it is easy to be formulated and to make into
practice.
 In case when the variance analyses are performed in an enterprise this tool assist much in
knowing the companies cost.
Disadvantages:
 The most negative aspect of this budget is that it offers no flexibility.
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As the base for formulating this budget belongs to past performances it may be irrelevant for
future where business surroundings are changed (Akbar, 2010).
Flexible budget: It is another budget which is used in case where volume of sales in an
enterprise are expected to fluctuate and is a better tool than the static budgeting. It helps in
calculating the amount that is required to carry out business activities at different levels of
volume that is to be produced.
Advantages:
 It helps much in analysing the efficiency levels of enterprise to manage the fluctuations in
organisational volume of productions.
Disadvantages
 Although this budget is effective but is supported with a drawback of being a complex
procedure as its formulation is difficult.
It is of less use for those organisations where there are minim areas of operations in
which fluctuation in cost take place.
b). Budget preparation process comprise identifying of pricing and diverse costing systems:
For forming budget, past data is required so that predicting of the data could be done in
an effective manner. Although, this could be observed that management of the Tech UK required
to form specific tools for preparing process in an efficiently. For making budget, there are
various budgets that are required to be considered:
Upgrade budget prediction: This is the most effective tool which is to make identification of
the availability of the finance that are to be focused during budget formation.
Identify available finance: Next target of cited organisation is to make review of the cited
company environment that are used during forming the budget (Eierle and Schultze, 2013).
Form budget package: This is crucial to make common budget that could be implemented in
the previous period of time.
Attain capital budget requirement: This is foremost capital budget request and forward them
to optimising level division along with reliable identification.
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Pricing method: There are various efficient pricing systems that are going to be elaborated as
under:
Price skimming: As per pricing method, this assist to improve total sales of a net goods of the
organisation. During development of the product, price is getting high.
Economic pricing: In this specific tool, each firm needed to fix prices at a lower rate of the
different rate. During the period, product development would be more.
Cost plus pricing: This is one of the most important method that are used for fixing the cost of
the product and services. As per the total direct material cost, labour charges and overhead costs
are to be considered.
C). Different kinds of costing method:
There are diverse kinds of costing tool which are assisting for analysing future objectives. Here
are some of them are mentioned hereunder:
Direct costing: This can be rightly said that an effective costing tool are totally covers modified
capacity of the results. This covers direct material, labour and diverse overhead expenses.
Standard costing: This forecasting to be essential aspect for controlling cost and assess total
variance in order to compare actual results along with the budgeted one.
TASK 4
Effective use of accounting systems to resolve financial issues:
This can be rightly said that “Tech UK” must need to connect along with the manufacturing of
mobile charges and other electronic gadgets. This likewise linked with manufacturing of
different kinds of chargers to the consumers. As per the finance record, this can be totally relied
that the cited organisation has been recorded a net loss of amount of £ 1.5 million at the time of
this year. As per this, wide number of financial issues is emerging in company department as per
the fund. In this phase, management accounting plays an eminent role to issues and form
adequate planning for boosting by use of diverse their current losses (Akbar, 2010). This occurs
to be the most crucial tool which are assisting in issues whole kind of financial and non-
financial issues. There are diverse perspectives that are elaborated as this:
Financial perspective: This will identify firm’s current position and their so many users which
use resources of the organisation.
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Customer perspective: This is essential to form information related to the whole stakeholders
about the firm’s performance.
Internal process: Gathering information from inner division on a regular basis to assessing
quality of their products and services
Firms’ volume: Collecting feedback related to firm’s performance via capital, infrastructure and
other aspects.
CONCLUSION
From the above mentioned report, this can be rightly said that management accounting tools
are the best via which manager could implement of their financial transactions in a more
effective manner. for this aim, they are required to implement of these accounting systems and
make reporting accordingly. An entire assessment is completed in order to attain their destination
and to emerge higher sustainable organisation in forthcoming time.
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REFERENCES
Books and Journals:
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