Management Accounting Report: Analysis of Tech (UK) Limited's Finances

This management accounting report focuses on Tech (UK) Limited, providing a comprehensive analysis of various management accounting principles and their application within the organization. It covers the essential requirements of a management accounting system, including the difference between management and financial accounting, and the use of management accounting as a decision-making tool. The report evaluates the benefits of management accounting systems and their integration within organizational processes. It also includes a detailed cost analysis using marginal and absorption costing techniques to prepare an income statement, discusses different types of budgets and their advantages and disadvantages, and examines the budget preparation process. Furthermore, the report analyzes the use of planning tools for preparing and forecasting budgets and evaluates how management accounting can lead organizations to sustainable success, including a discussion on the balanced scorecard approach. The study is aimed at providing a clear understanding of how effective management accounting practices can contribute to the financial health and strategic decision-making of Tech (UK) Limited.

Management Accounting report for Tech (UK) Limited

Contents
Introduction:....................................................................................................................................4
Task 1...............................................................................................................................................5
a) Explanation of management accounting and the essential requirements of management
accounting system........................................................................................................................5
b) Presenting financial information.............................................................................................9
M1 Evaluate the benefits of management accounting systems and their application within an
organizational context................................................................................................................10
D1 critically evaluates how management accounting systems and management accounting
reporting is integrated within organizational processes.............................................................11
Task 2.............................................................................................................................................12
a) Calculate costs using appropriate techniques of cost analysis to prepare an income statement
using marginal and absorption costs..........................................................................................12
M2 accurately apply a range of management accounting techniques and produce appropriate
financial reporting documents:..................................................................................................14
D2 Produce financial reports that accurately apply and interpret data for a range of business
activities:....................................................................................................................................15
Task 3.............................................................................................................................................16
a) Different kinds of budgets and their advantages and disadvantages.....................................16
b) The budget preparation process including determination of pricing and different costing
systems that can be used............................................................................................................19
c) The importance of budget as a tool for planning and control purposes.................................20

M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets....................................................................................................................21
D3 Evaluate how planning tools for accounting respond appropriately to solving financial
problems to lead organizations to sustainable success..............................................................22
Task 4.............................................................................................................................................23
a) Balance scorecard approach..................................................................................................23
M4 Analyse how, in responding to financial problems, management accounting can lead
organizations to sustainable success..........................................................................................24
Conclusion:....................................................................................................................................26
References......................................................................................................................................27

Introduction:
Management accounting is the subject of managing all managerial things sophisticatedly in order
to achieve some goals and make arrangements for further targets. This report study will revolve
around management studies and their evaluation related to Tech UK Ltd. to analyse each and
every phase of management accounting and their significance in the decision-making process.
This report will include a brief description of costing techniques in order to understand each
situation and management & financial changes within the management. It will reveal about cost
analysis process budgetary control process via analysing various planking tools as budget. This
report will include an explanation of marginal and absorption costing to monitor business
activities and managerial tasks within the organisation.

Task 1
a) Explanation of management accounting and the essential requirements of management
accounting system.
I). Difference between management accounting and financial accounting:
Management accounting: it is a study of analysing, observing, evaluating and interpreting data
and facts related to business activities in order to achieve long-term profit. It can be taken as
long-term decision-making process in which management needs to focus on cost, production and
sales activities to maximise more profit. This management accounting tool is based on principle
and analogy and causality to provide effective and relevant information as per managerial
requirements and connectivity.
basis Financial Accounting Management accounting
1. Nature Financial accounting is
basically used in observing
and analysing financial terms
of the business. It provides
transparent and relevant
information to the
management to observe
financial problems.
These are flexible in nature.
This managerial accounting is
used as a profession to making
the decision process easier.
2. objective Its’ major objective is to Through this company
Financial accounting
Management accounting

maintain records,
documentation and financial
information to produce
financial statements.
becomes capable to observe
and changeable situation and
make accurate decisions to
meet long-term requirements.
3. relevancy Financial accounting is used in
the company based on past
and previous movements and
action of business.
It provides relevant results
based on historical plus
futuristic environment.
mandatory It is mandatory for all business
operations
But it is not compulsory for all
apply it in the business.
ii) Use of management accounting as decision-making tools:
1. Inventory management decisions: using management accounting as decision-making tools
helps in the business to measure inventory level and storage process as per requirement in the
business. It allows the manager to observe and avoid stock risks to reduce situation of under and
overvaluation in an inventory while making production decisions. It helps to reduce inventory
shortage problem and to allow manger to make a quick assessment of inventory process.
2. Forecasting decisions: management accounting is the tool which helps the management of an
organisation to make profitable decisions as sales forecasting, demand forecasting and gives
inventory decisions
forecasting decisions
pricing decisions
Investment decisions

accurate information about changes in balance sheets, changes in equity and managerial
profitability.
3. Investment decisions: investment decisions are depended on reliability and accuracy of the
financial projections in which company is going to invest. Management accounting helps the
company to make effective investment policies based accounting norms and principles. It creates
a solution by which and where the company could invest to get maximum returns and higher
ROE%.
4. Pricing decisions: management accounting uses various kinds of tools such as cost analysis,
pricing determination activities to help the management to make an effective decision regarding
prices for their products. It helps sales and production department to make an effective analysis
of the market and set the price of their product to make a higher profit.
Types of management accounting systems:
1. Inventory management systems: Inventory management systems are those systems that are
utilised in the management of control inventory storage procedure to understand the production
an inventory level of the company. The company manages their profit as per requirements and
Inventory managment system
Job cost system
Cost managment system

production level to analyse the effectiveness of inventory to increase the productivity level and
accuracy to avoid stock risk. This system is utilised to manage and take quick decisions
regarding management in case of under and overvaluation of inventory.
2. Job cost systems: Job cost systems are those systems which are applied in the management in
order possess and regulate each and every cost of job orders by tracing those projects. The
company are allowed to keep tracing their works and jobs in order to maintain the level of cost-
effectiveness and efficiency as per requirements and demand for all projects (Strelnik, et. al.,
2015).
3. Cost management systems: cost management systems are also known as product assessing
systems. These systems provide a platform for the company to regulate and control over their
cost by making effective assessment procedure of each project and product. This system is used
or adopted by the management to measure the cost-effectiveness of each cost such as
administrative, production and selling cost to operate the business properly by managing such
effectively. It is a medium of observing and evaluating sales and revenue related to maximising
profitability.

b) Presenting financial information.
Tech UK uses to prepare various kinds of a report for measuring business performance.
These reports are:
1. Budgets: Budgets are prepared in the company as a major financial report to produce financial
plans, implement them for making improvement in financial performance of the company. It is
basically utilised to enhance the financial performance of the company by measuring expenses,
budgeted cost etc. it provides effective results by making a comparison between estimated and
planned behaviour.
2. Sales report: Sales reports are produced by the company as per sales requirements and market
demands. Tech UK uses to make sales report to analyse sales volume of the company by
measuring the relationship between sales and revenue. Sales report allows the company to
understand changes and increase their sales and productivity by making changes in sales plans
and strategies (Strelnik, et. al., 2015).
3. Performance report: Performance report is produced to measure performance criteria for the
management. These performance records are based on sales, production and other activities and
utilities. This report defines company’s accuracy and liquidity level that how much it is capable
to meet its requirements and obligations.

M1 Evaluate the benefits of management accounting systems and their application within
an organizational context.
Management accounting is taken as a study of management activities based on business
management and operation criteria. It is used as a decision-making tool to analyse needs of
accurate information, data to provide it to the company at the time of making decisions such as
cost analysis, forecasting decision etc. UK Tech company can be utilised make cost-effective and
productive decision by using management accounting systems and prepare accounting report for
managing flexibility. Application of such systems in the Tech UK Ltd will provide accurate and
flexible information and allow the company to deal with future changes and obstacles.

D1 critically evaluates how management accounting systems and management accounting
reporting is integrated within organizational processes.
Management accounting systems and preparation of management reports are interrelated to
management work and organisational process in order to manage whole work and make proper
management strategies to get relevant results. Management accounting systems are effectively
used and adopted by the company to convert managerial plans into reality. It allows the
management to measure and track organisational tasks and works by analysing cost, maintain
budget and accounts to reduce disorders and run business in a stable manner with competitive
strategies. Management reports help to trace and keeping records of all activities in an efficient
manner to make productive results and decisions by observing the financial health of the
company (Lavia López and Hiebl, 2014).

Task 2
a) Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costs.
Costing behaviour and analysis can be measured and monitored with the help of various
costing techniques. Marginal and absorption techniques are utilised in the management to
observe cost effectiveness and accuracy to know funds requirements and reduce uncertainty
while making income statements through management accounting systems. Costing techniques
are one of them which are adopted by the organisation to understand the value of fixed and
variable cost within while managing any projects (Otley, 2016).
1. Marginal costing: it is the techniques which are usually utilised to manage variable cost
whether it would be measured in the form of direct and indirect variables. In Marginal cost, the
costs are ascertained by deducting total sales from total variable cost to get contribution margin.
To get total net profit all fixed cost would be reduced from the contribution in this valuation
method.
2. Absorption costing: In this method, all costs are ascertained or absorbed by reducing total
variables plus fixed both costs from total sales of production. in Absorption costing, total