Comprehensive Analysis of Management Accounting for Tech (UK) Ltd

This report provides an explanation of management accounting principles and their requirements within Tech (UK) Limited, highlighting the differences between management and financial accounting and emphasizing the importance of management accounting information in decision-making. It examines cost accounting, inventory management, and job costing systems, alongside various management accounting reports and the importance of presenting information understandably. The report includes a practical analysis of marginal and absorption costing, explores different types of budgets and their role in planning and controlling, and evaluates how management accounting and planning tools can address financial challenges for sustainable success. The integration of management accounting systems and reporting within the organization is also analyzed, demonstrating their combined impact on achieving organizational goals and mitigating risks.

Management Accounting
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Contents
Introduction.................................................................................................................................................3
TASK 1.......................................................................................................................................................4
Introduction.............................................................................................................................................4
(A) Explain management accounting and also the requirements for the management accounting
systems....................................................................................................................................................5
I. Difference between Management accounting and financial accounting..........................................5
II. Importance of management accounting information as decision making tool..................................6
III. Cost Accounting Systems............................................................................................................6
IV. Inventory Management Systems..................................................................................................7
V. Job Costing Systems........................................................................................................................7
B) I. Different types of management accounting reports.........................................................................8
II. Why information should be presented in an understandable manner..................................................8
M1) Explain benefits of management accounting systems and their application...................................10
D1) How management accounting system and management accounting reporting are integrated within
organization...........................................................................................................................................11
Conclusion.............................................................................................................................................12
TASK 2.....................................................................................................................................................13
P3) Prepare Income statement using marginal and absorption costing. (M2, D2)..................................13
TASK 3.....................................................................................................................................................15
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Introduction...........................................................................................................................................15
(A) Different kinds of budgets and their advantages and disadvantages..........................................16
(B) Process for preparing Budget.....................................................................................................18
(C) Importance of budget as a tool for planning and controlling process.........................................19
(M3) Analyze use of different planning tools for preparing and forecasting budget..............................20
(D3) Evaluate how planning tools for accounting respond appropriately to solving financial problems
to lead to sustainable success.................................................................................................................21
Conclusion.............................................................................................................................................22
TASK 4.....................................................................................................................................................23
(M4) Analyze how respond to financial problems management accounting can lead to sustainable
success...................................................................................................................................................24
Conclusion.................................................................................................................................................25
References.................................................................................................................................................26
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Introduction
This report deals with the explanation of the management accounting and the requirements of the
management accounting through which the Tech (UK) Limited can attain the success. For the
application the difference between the management accounting and financial accounting is
depicted with that the importance of the management accounting principles are also highlighted.
Various types of report which are prepared by the organization are also highlighted so that the
performance of the individuals can be depicted. The practical analysis of cost through the
marginal and absorption costing so that the cost can be controlled and the revenues are increased.
The various kinds of the budgets are prepared and how they help in planning is also depicted.
Beside this the report also explains that how management accounting and planning tools can help
in solving the financial problem of Tech (UK) Limited so that the sustainability can be attained.
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TASK 1
Introduction
This part of the report explains about the various accounting systems such as the cost accounting
systems, inventory management systems and job costing systems that are used in Tech (UK)
Limited. With this it also explains why the information in the management accounting reports
should be understandable. The various management accounting reports are also examined.
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(A) Explain management accounting and also the requirements for the management
accounting systems.
Management accounting is the process through which the Tech (UK) will be able to analyze,
evaluate and identify the financial performance and arrangement in the market of competition.
I. Difference between Management accounting and financial accounting
The financial accounting is the accounting which will help the Tech (UK) Limited in keeping the
track on financial transactions so that the profitability can be attained and the organizational
goals can be achieved.
Point of Basis Financial Accounting Management Accounting
Aim The financial accounting
focuses to make the
communication in
organization regarding the
financial position (Modell,
2012).
The main aim of the
management accounting is for
taking strategic decisions in
the organization.
Rules and Regulations It follows the specific rules as
well as the regulations such as
GAAP, IFRS, etc.
It does not require any
specified rules and regulations
(Modell, 2012).
Review The accounts are reviewed by
the external auditors and the
regulators of the business.
As there is no rules followed
so there is no need for any
specific review to be done
externally or internally
(Accounting tools, 2015).
Frequency for evaluation The evaluations are done by
preparing the annual reports
annually, quarterly or as per
the requirements.
The evaluation is done
according to the need, there
does not requires any specific
frequency.
Focus The financial accounting
focuses on whole organization
as whole (Accounting tools,
2015).
It focuses on particular
segment of the organization so
that the decision can be taken
accordingly.
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Reporting The reporting is delayed in the
financial accounting as it is
based on the historic data
(Modell, 2012).
The reporting is done timely
as it is future oriented the
decisions are taken for the
future perspective.
II. Importance of management accounting information as decision making tool.
The management accounting information plays the significant role in the Tech (UK) Limited
which will help them to take the decisions for the organization (Modell, 2012). The consequence
is as follows:
 Helps in taking make or buy decisions: Through the management accounting the
managers of the Tech (UK) Limited will be able to take the decisions related to the areas
where the investment can be done so that the returns can be maximized and the
profitability can be attained at strategic and operational levels (Ahid and Augustine,
2012).
 Helps in understand performance Variances: The variances are the difference between
the predicted and the actual one. The management accounting helps to build the variances
which are positive and at the same time manages the negative one.
 Forecasts Future: The management accounting helps in forecasting the future trends
that may impact the business operations by investing in the qualified areas (Ahid and
Augustine, 2012).
III. Cost Accounting Systems
The cost accounting system is the framework which will be used by Tech (UK) Limited so that
the estimation of the cost can be done for the purpose of profitability analysis. With the analysis
of the profits it will also help in controlling the cost and valuating the inventories of the
organization (Ahid and Augustine, 2012). The standard costing is the amount which is set by the
organization so that the actual cost can be compared and the variances can be evaluated while the
actual costing is the cost which is attained by the organization during a particular period. The
normal costing is the method through which the production cost is tracked based on the rough
calculation of prices (Ahid and Augustine, 2012).
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IV. Inventory Management Systems
These are the systems which are used in the Tech (UK) Limited so that the inventory can be
tracked and the cost of ordering the product can be determined. There are three ways for
managing the inventories these are LIFO, FIFO and AVCO (Kolios and Read, 2013). LIFO is
used to find the first cost of item. FIFO believes that the product purchased first should first
(White, 2015). AVCO shows the average cost of product.
V. Job Costing Systems
It is the costing method which will be used by the Tech (UK) Limited for assigning the cost to
the particular product or job. This is done so that the allocation of the resources can easily be
done and the profits can be maximized (White, 2015). A similar products industry uses this type
of costing systems (Richard Lavron, 2016).
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B) I. Different types of management accounting reports.
The various types of management accounting reports are as follows:
Image: Types of Reports
Source: By Author, 2018
Demand Reports: These are those reports which keep the records of items which are much
demanded by the individuals. Through this the managers of the Tech (UK) Limited will ensure
that there is no shortage of any item which is demanded by the customers (Modell, 2012).
Scheduled Reports: These reports helps in keeping all the data of the organization in the
systematic format so that the available information can easily be tracked when required. It helps
in implementing and executing the plans as all the reports are kept systematically.
Exception Reports: The Tech (UK) Limited will prepare these reports so as to ensure that what
items is missing in the list and what has been expired till date (Ahid and Augustine, 2012). These
reports are basically prepared by the production department so that the items in the stores can be
matched with that of all the available balances.
II. Why information should be presented in an understandable manner.
The information in the reports of the Tech (UK) Limited should be presented in the
understandable manner due to the following reasons:
 It shows the reliability of the information to the managers so that the evaluation can
easily be done and the performance can be evaluated (MONONEN, 2013).
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 The accurate reporting ensures that the data is up to date with that it also shows that the
available information is accurate.
 The reports should be presentable as it will be easily for the user to understand and
calculate the profitability of the organization (White, 2015).

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M1) Explain benefits of management accounting systems and their application.
The application of the management accounting systems will provide various benefits to the Tech
(UK) Limited such as:
Decision Making: Through the management accounting systems the managers of the
organization cam take the strategic decisions for the organization which will help them in
attaining the short as well as the long term goals and objectives (MONONEN, 2013).
Improved Cash Flow: The management accounting will help in improving the cash flow as it
evaluates the inflow and outflow of cash in the organization by keeping the proper track on cash
items so that the profitability can be increased (White, 2015).
Helps in investment decision: Through management accounting the financial position of the
company can be evaluated which in turn helps the shareholders to take the investment decisions
accordingly so that the better returns can be gained and the efficiency in the organization can be
increased (White, 2015).
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D1) How management accounting system and management accounting reporting are
integrated within organization.
Both management accounting reporting and management accounting systems are integrated
within the organization as the management accounting keeps the proper track on the
organizational items so that the revenue of the Tech (UK) Limited can be increased and the
management accounting reporting helps in evaluating the financial position of the organization
by analyzing the financial accounts (Dandago and Adah, 2013). They both aim to achieve the
same objective that is the organizational goals. They also help in evaluating the risky factors that
may impact the organization in near future (MONONEN, 2013).
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