Analyzing Management Accounting Techniques in Business Operations

The report explores various management accounting practices including absorption and marginal costing techniques, with a focus on their impact on income and expenditure. It highlights the significance of variance analysis in understanding cost behaviors and improving financial control. Furthermore, it discusses key performance indicators (KPIs) and their role in motivating employees to enhance operational efficiency. The implementation of robust financial governance is emphasized as critical for achieving effective revenue generation and business growth. Through the integration of these practices, businesses can achieve better financial stability and operational success.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Management accounting system and costing concepts..........................................................3
P2 Types of reports in management accountings........................................................................6
TASK 2............................................................................................................................................8
P3 Analyzing the income expenditures of Tech UK with considering different costing
techniques....................................................................................................................................8
TASK 3..........................................................................................................................................11
TASK 4..........................................................................................................................................15
P5 management accounting methods for protecting financial problems...................................15
CONCLSION................................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
The implication of various costing and budgeting techniques which brings informative
knowledge relevant with organizational ability and growth in the market. Management
accounting concept determines as the accounting for internal operations which will be based on
various reports will help the business as to have proper managements of work. It brings the
balance between work and workforce which will be indicative, motivating to have productive
efforts. Similarly, in the present study there will be discussion based on managements accounting
system, costing, budgeting and various techniques to overcome with financial obstacles. The
income system based on marginal as well as absorption method will be beneficial in identifying
the profit through this concept. Moreover, this will be a funneling report which elaborate the
managements accounting concepts as well as suggest the suitable techniques to the manager of
Tech UK.
TASK 1
P1 Management accounting system and costing concepts
Management accounting acts as a funneling agent to the business in terms of improving
the operational health of the business. Therefore, it brings the records of al the transactions
which were held in the business as to have the most sufficient and important information relevant
with the costs incurred in business operations as well as revenue retrieved from such activities.
These accounting techniques help in enhancing the managerial control in the business
(Eldenburg, Krishnan and Krishnan, 2017). Tech UK will have efficient growth in production
and revenues per the internal control an execution will be improved through managements
accounting techniques.
Difference between management and financial accounting

Basis Financial accounting Management accounting
Operations It helps in disclosing the
financial ability of the
business among various
external users.
It comprises with implicating
the use of various reports and
transactional details of internal
business operations for
decision making.
Users The communication of all the
information among external
users such as government for
tax purpose, bankers for loans
and interests purposes and
among investors for return and
dividend payable by the
company in a year (Goddard
and Simm, 2017).
This analyzed data and
information will b used by the
internal users such as
directors, owners, partners,
managers, employees,
auditors, accountant, risk
management team etc. which
helps them in proper decision
making.
Regulatory framework The preparation of financial
reports which will be based on
international standards such as
GAAP, IAS, IFRS etc. which
brings the information about
the universally accepted
financial statement format
There are not any influences
of any interrelation standard of
rules. Everyone can prepare
the books of records, analyses
the data set and make
appropriate decisions.

Usefulness It comprises over the previous
records and performance made
by the firm in relation with
meeting the business
objectives. This will be
helpful for investment
decisions.
It collects the information
from all the units in the
business and analyses the
costs as well as income from
such activities. This will be
helpful for operational
decisions.
Importance of managements accounting:
There are several benefits of implicating the management accounting technique into
business operations. It comprises with all the detailed data set and transactional entries of the
various departments of the organization. There will be proper records of funds utilized in the
operations as well as revenue gathered from the same. It enforces the managerial professionals,
accountants and auditors to analyses the fruitfulness and make effective decision. The efforts
made by them will help in improving the financial performance and productivity of Tech (UK)
Limited.
Costing system
This technique helps the managerial professionals in relations with keeping the records of
all the costs incurred in the business operations. However there will be fruitful gains in the
proposed period which in turn makes the favorable influences as to have the most appropriate
revenue generations. Therefore, there various cost accounting techniques such as variable costs,
fixed costs, semi variable, batch costing tec. This all keeps the fruitful records of the transactions
as well as operations made by the business professionals as to have appropriate execution and

control over the expenses made by firm. In accordance with Tech (UK) Limited there will be
profitable revenue generation as if the business will have proper control over the expenditures
(Jermias, 2017). In addition it also comprises with the costs and expense made on direct labor,
material overheads etc. this all together will be managed and control for better utilization of the
resources as well as productive gains to the business.
Inventory management system:
To have the proper utilization of all the resources in organization which in turn will be
helpful in managing the production level in accordance with generated demand in market.
However, this technique comprises with making the effective records of all the transactional
activities which will be beneficial as to have proper administration of the funds. It consists of
recording the inflows and outflows of the stock from stock which in turn will have proper record
as per their costs, quantity and date (Leotta, Rizza and Ruggeri, 2017). It will bring the efficiency
to the managerial professionals in terms of decisions making and analyzing the required level of
production.
Job costing system:
It ascertains the proper analysis over the costs incurred in business operations. It will be
over the business operations and the costs incurred in performing a job (Narasimhan, 2017).
Direct labor, material and overheads which will be useful to the business as to have proper
analysis over expenditures made by professionals.
P2 Types of reports in management accountings
The duties of each managerial heads in the diffrenyt business units are to present and
prepare the accurate records of data set. It must be comprises with the proper records of the
income and expenses incurred in the activities as well as the available funds for the operations.
Moreover, these are the reports making system which brings all the details of the business units

as well as all the records of operations. There will be appropriate gains and revenue generation
which in turn have huge impacts over industrial performance. However, there are various reports
such as:
Budget report: these fundamental tools funnel the knowledge of managerial
professionals in terms of managing the operations work of the entity. There will be records of
[past transactional activities of the business which in turn will be acknowledge to plan the future
budgets, costs and revenue of the firm (Shojaeezand, Mohammad-Khani and Azmi, 2018). It
needs the expert analysis and valuable thinking which in turn helps in managing the operational
framework of Tech (UK) Limited.
Accounts receivable aging report: To determine the ability of firm in receiving the
payments from its debtors such as suppliers, retailers and consumers ob the purchased goods.
Therefore, to keep the records of such transaction will be beneficial to Tech (UK) Limited. It
comprises under several categories which ascertains the ability of debtors in making the
payments to their dents in business such as 30, 60 and 90 days.
Job costing report: This is consists of all the records of the details and information
relevant with the costs incurred in the business operations. However, implication of various
techniques which will be helpful and adequate as to have fruitful revenue generation and growth.
Tech (UK) Limited retail stores costs which are mainly relevant with the direct material, direct
costs and overheads expense will be administered and executed by business professionals
(Srinivasa, Kaura and Gilman, 2017).
Inventory and manufacturing report: Tech (UK) Limited will be fruitful in terms of
analyzing the labor cost, machine expense etc. overheads expenses were incurred while
producing and distributing the goods and services (Schaltegger and Burritt, 2017). It ascertains
the information relevant with the consumer demands and the level of production made by firm in
satisfying those consumers.

TASK 2
P3 Analyzing the income expenditures of Tech UK with considering different costing techniques
Absorption costing:
Income statement for Tech (UK) Limited as per absorption costing method
Particulars Details Details Amount
Net Sales 1500*35 52500
Less: Cost Of Goods Sold
Direct material (2000*8) 16000
Direct Labor (2000*5) 10000 26000
Fixed Production overheads 15000
cost of production 11000

Closing stock (500*20) 10000 1000
Gross Profit 53500
Less: Variable overheads (2000*5) 10000
Less: Fixed production overheads (2000*5) 10000
Less: selling and administrative fixed over heads 10000
Less: selling and administrative variable overheads 7875 37875
Net profit 15625
Marginal costing:
Income statement for Tech (UK) Limited as per marginal costing
Particulars Details Details Amount

Net Sales 1500*35 52500
Less: Cost Of Goods Sold
Direct material (2000*8) 16000
Direct Labor (2000*5) 10000
Less Closing inventory (500*20) 10000
Less: Variable overheads (2000*5) 10000 6000
Contribution per unit 46500
Less: Fixed production overheads (2000*5) 15000
Less: selling and administrative fixed over heads 10000

Less: selling and administrative variable overheads 7875 32875
Net Profit 13625
Interpretation: in consideration with the above measurements it can be said that
absorption costing technique will be helpful in managing the business operations in entity.
Moreover, the most favorable and accurate measurement of cost will be derived from absorption
techniques such as 15625. It comprises with considering all the costs incurred in the business
during the period. On the other side the marginal costing technique only comprises with all the
variable costs in the organization which is amounted to 13625. Moreover, it will be suggested to
the professionals of Tech UK limited that they must make implication of absorption costing
technique.
TASK 3
P4Different kinds of budgets and their advantages and disadvantages:
Budget is used in all level of management, budgets is a financial plans which helps to
directing and to analyze the person or an organization. Budget is to forecast the financial
function of the organization, it includes income and expenses for a specific period of time.
Budget is a management tool of an organization. It is an estimation of expenses and revenue. It
is prepare for an individual, a group of person, a business, a government etc. who is spending
the money. Tech UK limited company also used budget for forecasting their financial results. It
is a private limited company it represents the companies and technologies. Budgeting is to
identify and help in setting the business objectives and goals (Cooper, Ezzamel and Qu, 2017).
In the present scenario budget is play an important role in organization for their growth, budget
mainly used in to control the cost of an organization and for maximize the profit. And it is also
helps in sourcing of funds for future investments. Budgeting types are:

1) Incremental budgeting
2) Zero base budgeting
3) Activity based budgeting
4) Kaizen Budgeting
Zero base budgeting: In this type of budgeting the base of the budget is zero, this budget
is prepare and not to consider old budget and even not to take any relevant data of last year
budget data. This budgeting helps the management to eliminate the unrelated data from budget
and its results is accurate and appropriate results and it also help in controlling the cost. Budget
is used for achieving the organizational goals by gaining more profit. For example if previous
budget have many errors and drawbacks so if we consider the last year budget in present year so
in this year the error is also occur.
Advantages of Zero base budgeting:
 This budgeting mainly is used in a non profit organization.
 In this budgeting resources are allocated properly for their proper utilization.
 Its main aim is to maximize the profit and to control the cost so its ensure the careful
planning.
 This budgeting does not carry any inaccuracy for the next year budgets
Disadvantages of zero base budgeting:
 Zero base budgeting is very time consuming.
 For preparing this budgeting it involves too much paper works.
 And it is more expensive
 In this budgeting administration creates many problems for the organization.
Activity base budgeting: This type of budgeting is to prepare to find or to identify the cost of
the each activity in an organization and to evaluate the value of the firm. This budgeting is used
for to evaluate overhead cost from activity.

Advantage of activity based budgeting:
 This budgeting is avoid unnecessary activity to preparing in the budget so its save the
time and give the accurate results.
 It evaluates the each and every activity only eliminates irrelevant activity.
 This budgeting helps for business because it shows the business as a single unit not
divides in any department.
Disadvantage of Activity based budgeting:
 This budgeting requires understanding of implementation of the budgeting.
 Activity base budgeting is more complicated.
 In this budgeting, it consumes the many resources of the firm.
The importance of budget as a tool for planning and control purposes:
Budgeting is a tool of management. It is used for calculating the financial results through
planning and controlling. For effecting budget planning and controlling is the most important
things in this, it includes financial goals and to identify the programs according to their priorities.
Capital budgeting is the main tool of budgeting; it is used for long term investment for gaining
more profits in the subsequent year. These investment includes new machine and plant and
construction tools etc. capital budgeting has various techniques these are:
1) Payback period
2) Discounted payback period
3) Net present value
4) Accounting rate of return
5) Internal rate of return
6) Profitability index

Internal rate of return (IRR): In this techniques of capital budgeting is to calculate the
discount rate from where the net present value of project is zero. In the calculation if IRR is
higher so it will choose. Formula for calculating
IRR= ∑Ct/(1+r)t- C0=0
Where r is the internal rate of return, Ct is cash inflows at t period and C0 is initial investment.
Advantages of Internal rate of return method:
 Time value of money: this method firstly consider the time value of money for
calculating the projects
 Simplicity: this method is very simple to understand and to interpret in the
business. It also gives the easy visualization to the managers.
 Cash flow consideration: It considers the all projects which is related to cash
flows of the firm.
 Increasing investment: This method increases the investments of the firm value.
Disadvantages of internal rate of return:
 This method is require an estimation of the cost of capital to take a decision regarding
firm value.
 This method doesn’t give value maximization decision when it used for comparing the
another projects
 It is not used where in cash flow project occur changes .
Net present value (NPV): It is analyze the profit by evaluating physical assets of the
projects. Net present value is the most accurate method of capital budgeting. And it evaluates
the cash flow for forecasting (Latan and et.al., 2018). This method is evaluating the weighted
average cost of capital. This method shows the difference between present value of future
cash flows and the present value of the projects. Formula for calculating NPV
NPV= ∑(CFt*PVIIFk,t)-CF0

Where C is the cost of action, K is the appropriate discount rate , CFt is the cash flow for t
period and PVIF is the present value interest factor.
Advantages of Net present value:
 This method is used for the investment should be increases the firm value.
 It also considers the time value and money.
 This method consider risk of future cash flows by the firm’s cost of capital
Disadvantages of Net present value:
 This method is express in terms of money not in a percentage.
 This method is requires an estimation of cpost of capital to calculate the firm net present
value.
TASK 4
P5 management accounting methods for protecting financial problems
There are various risks which are associated with the business operations and which will
create the hurdles and obstacles in the business operations (Christ and Burritt, 2017). However,
in order to make the necessary improvements in the business activities there will be beneficial
growth in the financial stability and capital structure of Tech (UK) Limited. Moreover, there are
various techniques through with the professionals will have proper financial administration.
Balance scorecard:
This is the managerial tasks and operational framework which ascertains and allows the
managerial professionals in decisions making as well as analyzing the efficiency of the business.
It encourages the managers to measure the daily tasks and operation of the work and workforce

up to the required level which in turn will make effective efforts and control over the business
operations. Thus, it brings the ability to manage the business performance as well as improves
the operational efficiency of the business.
Key performance indicators:
These are the performance measurement tools which analyze the efforts made by
business and the employees in the given time (Eldenburg, Krishnan and Krishnan, 2017). Thus,
kit will be a motivating and encourages tool which in turn has the positive development of the
operations. Therefore, in accordance with the efforts made such professionals there will be
appraisals and rewards and awarded to them.
Financial governance:
To execute the financial terms and operations of the business this will be based on best
governance of the accounts. Therefore, the managers, auditors and accountants will have
effective control over the revenue generation, operational growth of entity. Tech UK Limited
will have beneficial gains as if they implicate the appropriate financial governance in the
business.
CONCLSION
The above report comprises with the all the techniques and methods which are being used
in managing the operational activities in the business. However, there will be fruitful growth and
development as per implicating the use of various techniques to analyses the financial stability of
the business. The professionals at Tech UK limited has been suggested as to make appropriate
improvements in the operational activities as well as development of the effective plans. There
has been analysis of income and expenditure on the basis of absorption and marginal costing
technique among which absorption techniques brings the most suitable outcomes.

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