Comprehensive Management Accounting Report for Tech UK Analysis

This report provides a comprehensive analysis of management accounting principles and their application within the context of Tech UK, a company specializing in phone chargers and gadgets. The report begins by differentiating between management and financial accounting, highlighting their respective focuses on past versus future data and internal versus external stakeholders. It then explores the essential requirements of management accounting systems, including strategic, performance, and risk management. The report details various types of managerial accounting reports, such as budget reports, accounts receivable reports, and inventory management systems, emphasizing their importance in decision-making. Furthermore, the report delves into cost calculation methods, including marginal and absorption costing, and demonstrates the preparation of income statements using both approaches. The report then examines different budgeting techniques, including their advantages and disadvantages, and discusses the use of management accounting to address financial problems and make informed decisions. Finally, the report concludes with a summary of the key findings and recommendations for Tech UK.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Management accounting and essential requirements of management accounting systems..1
M1 Benefits of management accounting with its applicability..............................................2
P2. Different types of managerial accounting reports and their importance..........................2
TASK 2............................................................................................................................................3
P3 Calculation of cost and preparation of income statement.................................................3
M2 Appropriate financial reporting on the basis of profit.....................................................6
TASK 3............................................................................................................................................6
P4 Different kind of budgets and their advantages and disadvantages..................................6
M3 Use of different planning tools and their application for forecasting budget and planning. 8
TASK 4............................................................................................................................................8
P5 Use of management accounting to respond financial problem.........................................8
M4 Analysis of financial problems which should be resolve by applying relevant concept. 9
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Accounting determine as major process in business unit where each and every
information required to prepare and maintain properly. Management accounting depicts as a
process of maintain financial records of a company so that they could be utilise whenever such
aspects required to analyse (Burritt, Schaltegger and Zvezdov, 2011). This project is based on
Tech, UK whom prepare special chargers of phones and other gadgets for retail outlet. For this
consideration, this report will going to include about the difference between management
accounting and financial accounting system. Along with this, it will also define about the use of
management accounting system as a decision making tool. Although, such information need to
be presented in a definite manner so that better and appropriate judgement lead to carried down.
Although, it will also discuss about budgets and their advantages and disadvantages and its work
as major planning and control purpose. All these sections will going to discuss in this report to
senior management of Tech UK.
TASK 1
P1. Management accounting and essential requirements of management accounting systems
Management accounting:
Various activities and consideration lead to get done by using management accounting
report system for making appropriate records of each and every conciliation (Dillard, 2014). This
system facilitate in improving decision making process of stakeholders by inspecting the data
properly. This accounting tool enable in controlling the risk measure which support and promote
in made appropriate plan. Thus, chances of low risk and high gain suppose to become possible in
tenure for better growth and development.
Thus, it define about the important information about each and every function properly so
that better and feasible working options could be derive in order to reflect positive outcome.
Thus, performance of all three major functions of an organisation become possible through
utilising management accounting system:
 Strategic management: This aspect enable the accountant to manage and organise
diverse range of activities properly at senior level so that suitable strategies lead to craft
in better and effective manner.
 Performance management: The another aspect is performance management where
authority need to work towards in improving employees performance. Hence, chances of
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determine suitable judgement with less risk become possible as well as each and every
employee lead to utilise their skills in define manner.
 Risk management: Various risk factor need to assess by manager properly with
appropriate information of each and every division (DRURY, 2013). This will contribute
in minimise the risk factor which further enable in control of it.
There are some differences amongst management and financial accounting which are
stated as beneath:
Management accounting Financial accounting
This will concentrate on future as well as past
data so that an appropriate planning will be
done as this assists in judgement making
procedure.
This will focus on past information of
enterprise.
Organisation will describe time horizon. This will be completed for fiscal year.
It will assist to prepare plan, control and in
addition judgement making.
It helps to cater chance to superior of firm so
that he will record financial data and will
inform others regarding financial position of
business.
This will comprise non financial and financial
data which will assist to examine employees
performance.
It includes financial factors of enterprise which
aid to prepare budget for each department.
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Administration bookkeeping framework utilizes different arrangements for the upkeep of
cost bookkeeping, work costing and stock administration bookkeeping, and so on. All these
diverse records help the chief of Tech (UK) Limited to translate vital data from these records and
make successful strategies and basic leadership about various elements of organization. Some
major kinds of management accounting system which could be utilise by an organisation define
as follow: Cost accounting system: This management accounting system utilise by managers of a
company in order to determine the cost of products which manufacture by them so that
profitability, inventory lead to determine (Elbashir, Collier and Sutton, 2011). This
system provide an overview for an organisation to evaluate that their products are
profitable in nature or not. Tech UK could use this consideration while manufacturing
differ kinds of products and services. Inventory management system: Another management accounting system for every
business unit is inventory management system. In this, managers need to manage and
determine appropriate level of their stock (Flamholtz, 2012) . Thus, chances of wastage
could be reduce as well as better utilisation of resources could be gain. All kind of data
related with stock kept into aspect so that minimum production as per demand could be
done. Although, proper allocation of stock in each and every department lead to get done
by using inventory management system at workplace.
 Job costing system: This framework gives data with respect to cost and income produced
by work in organization. To help this framework, work numbers are relegated to singular
things of costs and incomes. To apply work costing in assembling organization, there is
the need to track different kinds of direct costs, for example, coordinate work and direct
materials which are engaged with fruition of specific employment. This strategy has
gigantic significance with respect to assurance of the gainful procedure and territories
which helps in regards to change of general gainfulness. This procedure have substantial
significance with respect to decrease of cost and move toward becoming cost proficient.
Such system required to utilise by Tech UK when they are going to operate in an appropriate and
suitable manner. With these aspects, better and effective decision making get promoted.
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M1 Benefits of management accounting with its applicability
TECH UK need to understand about the benefits of management accounting system and
its applicability on business and its functions properly for that better and efficient results could
be drawn.
 One of a major benefit could be drawn from the side by using cost accounting which
enable in evaluate that products are profitable or not in nature. This will assist them to
gain better and future outcome as well as Tech UK used to estimated better and efficient
results.
 Another benefit is related with managing of inventory. Tech UK need to maintain stock
of their products and services which provide benefit for a company in order to compile
value and minimise chances of wastage.
P2. Different types of managerial accounting reports and their importance
Reports are the crucial part of business especially when it all about regular investigation
and study. Management accounting report reflect about the decision making process by
evaluating regular basis consideration of a company. Thus, managers of a company required to
determine the various kinds of management accounting reporting with their importance so that
better and effective working lead to get carried down (Granlund, 2011). This enable an
organisation like Tech, UK to manufacture high standard quality products and services. Along
with this, regular determination of stock lead to underpin. With support of these reports, chances
of getting better and appropriate judgement tend to rise which further assist in determine that
business is in right state which further enable in attracting more and more stakeholders.
Following are the various kinds of reporting system which need to utilise by management of a
Tech, UK:
Budget report: This report signify about the budget of a company which need to inspect
on regular and weekly basis. As budget includes about all expenses and investment of a company
in near future course whether they are long term or short term. With appropriate utilisation of
management accounting system, management become able to take judgement regarding short
term aspects and elements (Jaber, 2016). This enable in taking and deriving better decision by
reducing all major expenses and losses. It also support in reduce the chances of uncertainty
which arise due to lack of appropriate planning. Moreover, it provide strength to company
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financial position as well. Tech UK need to underpin all major advantage of using budget report
so that better implementation lead to get done.
Account receivable report: This report gives the data to the administration of refereed to
organization about sum remarkable from account holders. This gives the chance to viably deal
with the income and credit period given to their clients. This causes the director to comprehend
about what are their current credit polices and need to enhance them with respect to quick
recuperate of contribution frame clients. Tech UK need to determine their debts properly so that
amount could be recover in define time course like 30 days, 2 months or etc.
Inventory and manufacturing:Another reporting system or process is inventory or
manufacturing. In this, management take care the information which define about their stock
process. Inventory need to manage and underpin in a define and appropriate manner so that
chances of waste could be control. Manufacturing is completely based on inventory which need
to assess on regular basis. With effective and appropriate focus on inventory and manufacturing
business could become able to minimise chances of duplication (Koh and Tan, 2011). With this
aspect, they also become able to generate more and more revenue with effective utilisation of
resources. Tech, UK have to underpin this section as well so that they are going to work properly
with suitable utilisation of resources so that further considerations could be improve.
TASK 2
P3 Calculation of cost and preparation of income statement
Costing is considered as a factor which will help to determine expenses that occur in
manufacturing of goods and services (Laudon and Laudon, 2016). There are two kinds of cost
which will comprise into this, stated as beneath:
Marginal costing: At the time of calculation, many kinds of cost will be comprise. As
indicated by this methodology, only variable cost will be comprise. It will modify if there is any
modification in production procedure. Along with, it will affect profits of Tech (UK) limited.
Absorption costing: According to this method, both fixed as well as variable cost will
comprise. This will render influence on entire profits of affiliation either directly or indirectly.
Hence, fix cost will be classified into overall product units which are produce by enterprise.
Income statement on the basis of Marginal costing method:
Working 1: Calculate variable production cost £
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Direct material cost 8
Direct labour cost 5
Variable production O/h 2
Variable production cost 15
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 2000*15 = 30000 500*15 = 7500
Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Cost of production
Closing stock
Variable sales overheads
Contribution
Less Fixed costs:
Fixed Production overheads
Fixed Selling overheads
Net loss
0
30000
(7500)
15000
10000
52500
(22500)
(7875)
22125
(25000)
(2875)
Income statement on the basis of Absorption costing method:
Selling Price per unit £35
Unit costs
Direct materials cost £8
Direct Labour cost £5
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Variable Production overhead £2
Variable sales overhead £5.25
Budgeted production for the period is 3000
units
Fixed cost for a month:
Production overhead: In this budgeted cost is £15,000and Actual cost is £10,000
Selling cost: In this budgeted cost is £10,000and Actual cost is £7875
Absorption costing working notes
Working Note 1: Calculate full production cost
Direct material £8
Direct labour £5
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 = £40000 500*20 = £10000
Working Note 3: under/ over absorbed fixed production overhead
Actual fixed production: £15000
Fixed overhead: £10000
Total £5000(under absorbed)
Net profit using absorption costing £ £
Sales value
(-) Cost of Sales:
Opening stock 0
52500
5

Cost of production
Closing stock
(Under)/ Over absorbed fixed prod.
O/h
Gross Profit
Less: selling Expenses
Variable sales expenditure
Fixed selling expenditure
Net loss
40000
(10000)
7875
10000
(30000)
(5000)
17500
17875
(375)
M2 Appropriate financial reporting on the basis of profit
Above statement define and support in analysing the profit and loss through marginal
costing and absorption costing. Both these techniques enable and support in determine the better
and effective outcome. Through these approach, Tech UK used to estimated effective profit
growth which facilitate in determine the better and associated outcome. Through marginal
costing difference of profit is not so high where as by including all associated cost into the
product and service. Thus, business become more able to deal with differ kinds of things in better
and appropriate frame of reference.
TASK 3
P4 Different kind of budgets and their advantages and disadvantages
Each organisation needs to develop budget for their business because this will aid them to
reduce unwanted cost and help in utilization of available resources (Liao, Chu and Hsiao, 2012).
There are many kind of budgets along with their pros and cons are defined as beneath:
Master budget: This kind of budget help to render data as well as information in relation
to profits & loss account and balance sheet as well. This kind of spending plan is connected with
other division of organisation also. By formulating this, firm will attain coveted targets and goals
within set period of time.
Operational budget: It is basically prepared on regular basis and covers entire
expenditure which will occur daily (Petty and et. al., 2015. Administrative and overhead
expenses are directly connected with this. It will help to present those income which is gained by
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firm by selling goods and services to people. By making proper plan enterprise will improve
revenues as well as decrease cost.
Cash flow budget: By formulating this kind of budget, superior will determine cash
outflow and inflow. This will help to find out expenses which is connected with daily working
operations. It will aid employer to control or monitor cash flow of business in an effective
manner.
Financial budget: It will describe data about company that how much they will spend on
operations of business. This will provide information regarding profits and expenditure of
enterprise.
Types of Budget Advantages Disadvantages
Master budget It assists to estimate revenues
of affiliation. Along with, help
to coordinate other budgets as
well.
It has been determined that,
budget is formulated on
forecasting basis.
Operational budget With assistance of this,
superior will diminish future
operational expenses.
This will consume lots of time.
Cash flow budget By formulating this kind of
budget superior will manage
cash inflow and in addition
outflow.
It is not easy for manager to
manage this sort of budget as it
includes lots of data and
information.
Different pricing systems: Price skimming: This helps to improve sales of goods and services (Roy and et. al.,
2011). Primarily, value of item is much high, but this will get less to take benefits from
rivals. Economy pricing: As indicated by this, employer has to decide low value of distinctive
products because this will assist to capture attention of numerous individuals towards
them. It is essential for organisation to reduce cost of marketing or promotional exercises.
Different costing systems:
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 Direct costing: Cost will get revised if there is any modifications in production units.
This will comprise some factors, such as direct labour, material etc. Standard costing: With help of this, unwanted cost will be reduced. It will consist stock
value, work in progress etc.
Importance of budget for planning and control: Creation of financial roadmap: Budget will assist firm to know about need of fund which
is required by division (Stair and et. al., 2011). This will made with support of past data
or information. Variance will provide affect to operational activities and will give some
chance to firm so that they will overcome from adverse affect.
 Limit expenditure: With help of this, superior will compare actual and standard
performance; thus, they will know about deviation amongst them. As a result, mistake
will get reduce and performance of people get increased. The main reason behind this,
proper coordination amongst all functions.
M3 Use of different planning tools and their application for forecasting budget and planning
There are various kinds of planning tools used to determine by management of Tech UK
where they suppose to craft a budget first and then work on financial projection of a company.
One of a major planning tool is Affinity diagram which support in organise large amount of
disorganised data into similar one so that better and effective working could be done. This enable
in craft budget properly where activities of disorganise section used to organise one. This enable
in future projection in better and suitable manner so that chances of effective and efficient gain
become possible.
TASK 4
P5 Use of management accounting to respond financial problem
Finance is a basic concern for every business which enable and support an organisation to
grow and maintain and their regular or long term activities in an appropriate manner. Problems
are another part of coin which always present in successful operations and need to determine in a
suitable manner (Wagner, Moll and Newell, 2011). Management accounting is a system which
support in prepare and inspect the records of short term derivation so that better and effective
working. Thus, with effective implementation of management accounting system, business
become able to deal with various financial problems so that better and effective working lead to
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