Tech (UK) Ltd: Evaluating Management Accounting Systems & Applications

This report provides a comprehensive analysis of management accounting principles and their application to Tech (UK) Limited. It distinguishes between management and financial accounting, emphasizing the role of management accounting in decision-making for department managers. The report explores cost management systems, job cost systems, and inventory management systems, along with the presentation of financial information. It includes calculations using cost analysis techniques to prepare income statements under marginal and absorption costing methods. Furthermore, it discusses different types of budgets, the budget preparation process, and the importance of budgeting for planning and control. The report also examines the balance scorecard approach and evaluates how management accounting can lead organizations to sustainable success by addressing financial problems. This document is available on Desklib, a platform offering study tools and solved assignments for students.

Management Accounting report for Tech (UK) Limited
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Contents
Introduction:................................................................................................................................................4
Task 1 Report:.............................................................................................................................................5
A) Explanation of management accounting and the essential requirements of management accounting
system which entails:...............................................................................................................................5
1. Distinguishing Management Accounting from Financial Accounting:................................................5
2. The importance of management accounting information as a decision-making tool for department
managers..................................................................................................................................................6
3. Cost management systems:..................................................................................................................7
4. Job cost systems:.................................................................................................................................7
5. Inventory management systems:..........................................................................................................7
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:.............................................................................................................................16
D2 Produce financial reports that accurately apply and interpret data for a range of business activities:
...............................................................................................................................................................17
Task 3........................................................................................................................................................18
a) Different kinds of budgets and their advantages and disadvantages..................................................18
b) The budget preparation process including determination of pricing and different costing systems
that can be used.....................................................................................................................................21
c) The importance of budget as a tool for planning and control purposes..............................................22
M3: Analyze the use of different planning tools and their application for preparing and forecasting
budgets..................................................................................................................................................23
Task 4........................................................................................................................................................24
a) Balance scorecard approach...............................................................................................................24
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M4 Analyze how, in responding to financial problems, management accounting can lead organizations
to sustainable success............................................................................................................................26
D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to
lead organizations to sustainable success...............................................................................................27
Conclusion:................................................................................................................................................28
References:................................................................................................................................................29
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Introduction:
The major aim of preparing this report is to analyze usage and significance of management
accounting and tools for making accurate and successful decisions. This reading will be going to
explain various methodologies and types of management accounting systems, importance of
management accounting reporting in the context of Tech UK limited. This report will explain the
features of cost techniques and analysis in order to measure transparency and reliability to
manage the business and they're objective to get long-term achievements. This report will
provide knowledge about balance scorecard as decision making management tools which will
help the reader to assess the capability of the company to decisions and attain effective meaning
outcomes through this; it will also include a description of budget and their significance of
budgets in the company.
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Task 1 Report:
A) Explanation of management accounting and the essential requirements of management
accounting system which entails:
Management accounting is a profession which helps in managing, observing and inter-
relating all the things related to business activities. It is a study of collecting managerial,
financial and operational data, evaluating the systems and make standards related to that in
order to make effective decisions within the management. Management accounting is
essential to be adopted by the company to maintain working environment and decision
capability stable.
1. Distinguishing Management Accounting from Financial Accounting:
Basis Financial Accounting Management accounting
Nature Financial accounting is the
tool which is utilized by the
company to manage financial
activities.
It is flexible in nature which is
used in the company to manage
decision making possibilities.
Objective The major objective of
adopting financial
accounting is to define
accuracy and transparency in
financial accounting and
records (Legaspi, 2014).
But management accounting is
adopted in the company to make
various kinds of decision more
flexible and accessible.
Scope Financial accounting has a Management accounting is not
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wide scope in the
organization because it is
mandatory to be utilized
while producing financial
and annual reports.
compulsory for the company and
management to be adopted due to
its limited scope in the company
(Lunkes, et. al., 2013).
Accounting
compliance
Financial accounting is based
on the regulatory process of
accounting principle and
norms which is necessary to
comply with accounting
standards, regulations and
laws while making financial
statements.
In Management accounting,
accounting norms and regulations
are not compulsorily adopted, it is
just related to the operational
reports.
Interest It is basically used for
internal plus external both
users who have interest in
company’s financial status.
Management accounting is
generally adopted when its
compiled with only internal users
of consumption.
2. The importance of management accounting information as a decision-making tool for
department managers.
1. Pricing decision: management accounting is adopted by the company to determine
their product prices as per market trends and competition demand. Management
accounting allows the company to have competitive analysis and evaluate the market
condition. It is important for the company to monitor market changes and set prices to
increase sales volume.
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2. Investment decision: Investment decision can be taken by management accounting.
Finance department and managers adopt management accounting tools to measure
cost-effectiveness and accuracy of the financial terms of the company to meet its
long-term obligation. It allows the finance department to observe funds requirement
and make an investment decision.
3. Inventory decision: management accounting allows the company to review and
measure accuracy and the actual level of the inventory. It allows the company to
manage inventory and avoid risk part of under and overvaluation o
3. Cost accounting systems:
Cost management systems are used in the company to assess the product and their cost ability. It
is also known as product assessment system which measures cost-effectiveness and accuracy of
the product as per market review and demands. Cost management systems are basically adopted
to evaluate and monitor value and cost of the product in order to cut additional cost and
maximize profit.
 It monitors and evaluates cost assessment factors of those products which can be directly
assessed related to their cost.
 It controls cost and makes even sure that wastages of non-value products could not be
increased.
 It analyses the cost and revenue related to reaching the conclusion of maximizing profit
and benefits.
4. Job cost systems:
Job cost systems are usually utilized in the company to operate and manage each job and tasks
related to the product effectively. Job cost systems are known as process or job management
systems which is also adopted to understand reliability and effectiveness of cost for each job
process.
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 It allows the company to trace and monitor their every activity from production to sales
to measure cost and control risk factors.
 It indicates to measure funds requirements regarding resolving the funding problems
related to sales and budget through cost-based analysis in Tech UK Ltd.
5. Inventory management systems:
Inventory management systems are those systems which are used to measure and control
inventory and increase the storage capacity of the company. Managers of the Tech UK can easily
determine the price of the product and maintain production level by this inventory management
systems because this system allows the company to trace each activity related to the inventory
and company’s requirements.
 ERP systems and tools are utilized in the company to measure storage and level of
inventory in the company.
 JIT systems are used as inventory management system that allows the company to keep
records related to inventory inflow and outflow.
 These systems allow the company to control under and overvaluation of the inventory
and make a quick decision related to the production.

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b) Presenting financial information:
Various types and importance of accounting reports:
1. Sales report:
Sales report is managed and produced by the company related to sales activities and its
measurement. Sales report defines all activities related to profit and sales relationship in the
particular year. Sales report helps the company to evaluate market risks, trends, demands an
supply of the product through sales report. It helps them to not reporting past mistake so that
sales volume and profit could be increased (Legaspi, 2014).
2. Inventory report:
The inventory report is that report which includes all information related to stock inflows and
outflows in management. These reports are prepared at the time of production. Through this
report, the company can easily understand the production level and capacity to produce
additional units within the organization. Reports help them to revalue stock level and control
over and undervaluation condition of the inventories.
3. Performance Appraisal report:
Performance appraisal reports are made to define and measure the performance of the company
related to financial, operational and managerial tasks. Tech UK can easily measure the changes
in the performance of the company relative to the information included in the performance
appraisal report (De Jong, et. al., 2012).
4. Investment report:
Investment report is usually made in the company through finance department to indicate and
measure funds report and capacity of the company to meet long-term obligations, investment
report includes policies and possibilities for the management from investment could be made
easily and effectively. It allows the organization to prepare investment policies as per company’s
investment capabilities to invest in new projects.
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M1 Evaluate the benefits of management accounting systems and their application within
an organizational context.
Benefits of management accounting systems:
Management accounting systems are those systems that are used in the company to make
decisions as per company demands and requirements. It can implicate in management and in an
organization for taking sales forecasting, pricing determination, funds and other decisions in
order to maximize and manage productivity and profitability in the company. Management
accounting tools and systems are utilized by the company to manage all records and
documentation reports related to the financial, operational and budgetary activity (Lunkes, et. al.,
2013). It allows the company to evaluate their management and operation needs to rectify and
understand the situation. It provides a platform for the management to reduce the cost of their
products and make profitable decisions as per requirement and needs. Management accounting
reports and accounting systems are used which provides an accurate and perfect knowledge of
market trends so that company could reach the management effectiveness and profits.
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D1 critically evaluates how management accounting systems and management accounting
reporting is integrated within organizational processes.
Management accounting systems are taken as those accounting systems which are utilized in
measuring accounting accuracy of all records and documents to make transparent decisions in
this matter. It provides accurate, transparent and reliable information based on managerial and
financial activities of the company. Tech UK can figure out all changes in managerial and
financial performance in order to set organizational targets and achieve long-term benefits. The
company will be able to recognize future needs and threats so that risk can be measured to get
reduced and long-term productivity will be managed. Tech UK is the company which wants to
measure adaptability of management accounting systems to consider financial possibilities to
increase benefits and target opportunities for the management.
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