Management Accounting Report: Financial Analysis of Tech (UK) Limited

This report delves into the critical aspects of management accounting, focusing on its application within Tech (UK) Limited. It examines the importance of management accounting in decision-making, contrasting it with financial accounting, and highlights key tools like cost accounting, inventory management, and job costing systems. The report analyzes various financial reporting methods, including performance reports, accounts receivable reports, and inventory management reports, emphasizing the significance of data in formulating these reports. It explores different costing methods, such as absorption costing and marginal costing, used to determine a company's net profit. Furthermore, the report covers various types of budgets, analyzes them as planning tools, and critically assesses financial issues. Finally, it discusses the balance scorecard approach to address financial issues and concludes with a comprehensive analysis of the financial landscape of Tech (UK) Limited.

Management Accounting

TABLE OF CONTENTS
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: (I): Management accounting and their essential requirements........................................1
P2: (B): Financial statements analysis....................................................................................3
(I): Different types of reporting methods...............................................................................3
(II) Significance of data that are use in formulating report....................................................4
M1: Advantage of using management accounting system.....................................................4
D1: Critical analysis of accounting reporting methods..........................................................4
TASK 2............................................................................................................................................5
P3: Different types of costing methods used to determine net profit for the company..........5
M2: Various types of management accounting techniques..................................................10
D2: Interpretation of income statements..............................................................................10
TASK 3..........................................................................................................................................10
P4: Various types of budgets................................................................................................10
M3: Analysis of planning tool..............................................................................................11
D3: Critical analysis of financial issues...............................................................................12
TASK 4..........................................................................................................................................12
P5: Balance scorecard approach used for solving financial issues.......................................12
M4: Analysis of financial issue............................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
Books and Journals:..............................................................................................................14

INTRODUCTION
This project module is all about discussing various importance aspects which are related
with management accounting system. Every organisation wants to get more reliable outcomes by
recording their business transaction into various accounting books. This will be helpful in the
way of preparing financial statements in more effective and efficient manner. The main objective
of this particular module is to analyse various accounting systems and reporting methods that are
use by Tech (UK) limited. Apart from this, use of different costing method in calculating net
incomes generated by the company within an accounting period of time can be analyse
effectively (Parker, 2012). Merits and demerit of several types of budget are also being discussed
to control additional losses that are arises in an organisation. However, all those financial issues
that are related with the company can be resolve by using management accounting systems are
illustrated under this report.
TASK 1
P1: (I): Management accounting and their essential requirements
In current era, it has been seen that plenty of organisation are getting more reliable growth
and stability by using their reliable resources. At the same time, managers of Tech UK want to
use best accounting systems which will be effective enough for them to get future aims and
objectives in more effective manner (Renz and Herman, 2016). for this purpose, they have
decided to analyse their financial performance through appointing a well experiences accountant
that would be capable enough to delivery more reliable outcomes in coming period of time.
Management accounting is one of the primary tools which will assist an organisation to
record, summaries, communicate and evaluate various financial transactions that are done within
an accounting period. While management used to provide all sorts of functions such as planning,
organising, controlling and directing the managers to make use of resources in effective manner
to get more reliable outcomes in near future.
Management accounting Financial accounting
It is held responsible for providing necessary
rules and guidance to an accountant to
prepared various financial statements of an
organisation.
All the laws and policies that are made by
upper level of the departments are needed to be
followed in effective manner so that better
results can be drawn in effective manner.
Management would not need to take any of While, financial managers need to take prior
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permission to from other to make any specific
decision.
permission of top level management to make
any kind of decision related with the reporting.
Importance of management accounting in decision making:
It has been found that any kinds of decision which are essential for the sake of an
organisation are needed to be made without any doubt. By management must have all kind of
information regarding their benefits and limitations. Some of them are:
 Increase productivity: It is considers that every decision made by the company is
always reliable for maximising productivity of the company. It can only be possible in
case they are able to use best resources in coming period of time.
 Help in future forecasting: The primary motive of a Tech UK company is to make
decision in that ways in which they are able to estimate their cost and expenses for
attaining maximum return in coming period of time. All investments are made by looking
all financial position and reports of performance that are incur by the company in last
couple of year.
Cost accounting system: This seems to be one of the main accounting systems that can aid an
organisation to manage and regulate their cost and expenses that are making impacts on overall
productivity of Tech UK within an accounting period. Some effective aspects those are related
with cost accounting are required to be taken into consideration. Such as
 Normal costing: under this cost, Tech UK need to paid for those products which are
produces by paying normal cost to direct material, labour and overheads.
 Actual costing: It is consider more accurate cost which is actually a company is going
too incurred for the production of products and services during the time.
 Standard costing: It happens to be more reliable costing method which is based on set
standards those are being set by the company during the time of production process.
Inventory management system: It refers to be one of the crucial accounting techniques
which is held responsible for Tech UK company to control their ongoing stocks from the
businesses (Soin and Collier, 2013). They need to make use of various tools to analyse their
inventory position on a regular basis so that chances of mistakes can be reduced.
 FIFO: In this rules, a company need not to follow any kind of rules and norms on
effective management of FIFO while reporting of financial information of the company.
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 LIFO: This seems to be that stock which is kept for very long period of time with the
company can be release first so that extra costs cannot be applicable for the company.
 AVCO: It relies one overall average cost of inventory charged by the company during the
time of manufacturing process. It is calculated by considering AVCO period in which it
is divided by cost of production kept within the warehouse of the company.
Job costing system: According to this costs which is associated with the production of every
individual product or services that are produced during the period of time. It is consider more
effective in case all products produces are relatively different from each other. Some crucial
costs associated with these cost are mentioned underneath:
 Batch costing: It happens to be that specific costs which are taken into account as cluster
during the time goods are produced in huge quantity. It is easier to determine each batch
of products because of their number and date.
 Process costing: It one of the most reliable techniques which are associated with
allocation of cost units during production of one products by the company.
P2: (B): Financial statements analysis
(I): Different types of reporting methods
It has been found that Tech UK limited is having various rules and regulations that are
playing vital role in making effective reports for an organisation through collecting necessary
information from various departments. For Tech UK company, types of reports are primary
based of decision making for various investors and outside parties. It will lead to making future
decisions to make resources in more reliable and accurate manner. It has been analyse that there
are several types of accounting reporting methods which are responsible enough in providing
crucial information about current position of the company (Christ and Burritt, 2013). some of
them are mentioned below:
Performance report: It is known as one of the main report which is taken into account for
evaluation of project coordination departments. It includes specific collection and
communication of operating projects and proper utilization of resources in order to increase best
performance in coming period of time. It is consider for examine actual and standard outcomes
that are done in last period.
Account receivable report: This seems to be more valuable reports those are helpful for an
organisation to determine lists of unpaid customer detail and their credit memo balances. This
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will be closely analysed by stakeholders before making any crucial decision of capital
investments. By using this particular report, company would be able to get more effective
outcomes those are effective responsible to attain accurate time period for recovery of their
actual outstanding amount.
Inventory management report: According to this particular report, managers of Tech UK
would easily determine their overall stock positions on the basis of opening and closing detail
records. There are various techniques which are needed to be implemented to overcome misuse
of stocks. It will also assist managers to determine their level of stock position and total ability of
warehouse to store inventory (Wickramasinghe and Alawattage, 2012).
Job cost report: This seems to be more concern about account reporting which will be consider
to tack and control additional costs which are invested for the production of one unit. By this
managers will be able to determine total revenue they are able to earn from each job during the
time. It is more simple and reliable report for investors for making their future investments.
(II) Significance of data that are use in formulating report
In respect to get more accurate solution to a given resources company used to make
appropriate planning. This happens to be more reliable reporting techniques which will be
beneficial for longer period of time. It has been articulated that all data that are collected from
the users of report are held for attaining future aims and objectives those are being set by the
company. Every resource must be utilising in proper manner so the better outcomes can be attain
in near future time. After making necessary analysis, these reports are transfer to upper level of
investors to make future decision regarding increase productivity and growth of the company.
M1: Advantage of using management accounting system
There are various positive benefits of using the accounting system for an organisation. All
the above discussed systems are equally responsible for attaining future aims and objectives.
Such as by the help of cost accounting system, managers are able to control the extra cost that is
bear by Tech UK. While inventory management tools are associated with smooth conduct of
transactions that are made within an organisation. Job cost is also considered more effective for
future growth of the company.
D1: Critical analysis of accounting reporting methods
In respect to get more profit during the period of time for Tech UK company, it is vital for
investors and shareholders to analyse financial position of the company. The best ways position
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can be analysed is through using various reporting methods. Such as, performance report can
show a complete image of the company as compare to last year data. While, Account receivable
report would be use to determine total time duration to get receive outstanding amounts and so
one.
TASK 2
P3: Different types of costing methods used to determine net profit for the company
Cost is considered more important part for Tech UK limited company. It is directly or
indirectly related with the business while production of products and services. This seems to be
value of amount which is being given by managers to get something in return. These are
associated with direct material, labour and overhead costs incurred during production process.
There are various types of costs which are associated with computing net profit for the company.
Some of them are mentioned underneath:
Absorption costing: It refers to be all manufacturing costs which are applicable during the
time of producing product and services as per the demand of various customers. This used to
include both variable and fixed costs because of which it is known as full costing methods. But
the major limitation of this method is that, company would be not being taken into account as
more reliable tools for making future decisions (Schäffer, 2013).
Marginal costing: It is known as one of the effective costs which is being charged by the
company for production of one additional unit. It used to taken into account only variable costs
and fixed cost get apportioned during calculation of contribution per unit. It is known as period
costs because of this particular treatment. In-spite of this, entire manager consider this as more
accurate and reliable for future decision making.
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M2: Various types of management accounting techniques
In order to determine more reliable information about overall performance of an
organisation, it is necessary to make use of appropriate accounting techniques. Such as standard
costing is more reliable techniques which are used by an organisation to analyse actual cost for
the company. While marginal costing is consider more effective methods for analysing cost of
one additional units of production.
D2: Interpretation of income statements
All valuable methods which is effectively helpful for an organisation to analyse
performance of the company managers need to use two important methods such as marginal and
absorption costing.
Reconciliation statements Amount
Profit under absorption -375
Closing stock 500*5 2500
Profit under marginal 2125
From the above reconciliation statements, it has been found that company would be able
to generate sufficient amount of profit by using marginal costs. From this they are able to get
valuable amount of gains with 2125 of total profit. This differences are arises because of fixed
cost treatment.
TASK 3
P4: Various types of budgets
There are various types of budgets those are applicable in planning of operating for an
organisation in more effective manner. Some of them are:
Operating budget: It is said to be annual budget which will be based on all activity that
are incur by an organisation within an accounting period of time.
Advantage: It consist of all information those are related with cost of resources that are required
for evaluating performance of business on regular basis (Chan, Wang and Raffoni, 2014).
Disadvantage: It harder to record all records that from large amount of resources that are
incurred within an organisation.
Capital budget: It is one of the effective budgets which will be incurred within an
accounting period of time. All cash related aspects are taken into account for the formulation of
various statements.
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Advantage: It is used to determine cash flow those are generated during the time of production
process.
Disadvantage: These types of budget are only responsible for recording only cash items and
more time taking process.
Process of budget:
 The starting stage of this budget are use to develop well organise platform that aids the
administration of estimation of future profit.
 The management need to call meeting of various managers and other concern authority to
make valuable budget discussion (Al and McLellan, 2011).
 Hiring of skilled and experiences accountant to work with financial required during
development of predicated cost of capital.
 The finishing of budget preparation to top level of management in order to take further
approval of various financial departments.
 Collection of reviews and rectification that is vital in report format before posting it into
the market.
Pricing method:
Cost plus pricing method: It happens to be more reliable pricing approaches which is associated
with getting desire outcomes related with cost of production to determine accurate value for their
products.
Demand based pricing: According to this, a product can be selected as per the requirement of
customers so that they can satisfy with all their products those are offered by the company (Lavia
López and Hiebl, 2014).
Costing method:
There are various types of costing methods which will be effective enough to get more
reliable production outcomes within an accounting period of time. Some of them are fixed cost
which remains unchanged with the production of one unit. While variable cost are varies with
manufacturing units.
M3: Analysis of planning tool
There are various types of planning tools which are useful for Tech UK company to
control their budget (Scenario Planning, 2018). Some of them are forecasting tools that is used
to estimate their total cost and expense that a company is invested for increasing their goodwill.
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While contingency tools are more effective to determine risk those are associated with the
company during the period of time. Scenario tools are also so effective to deal with critical
situations those are arises in an organisation.
D3: Critical analysis of financial issues
This has been determine that there are different times of financial issues those are present in
an organisation. Some of them are related with product and services quality that are produce by a
department. It can be overcomes by using various financial tools such as balance scorecard
approaches.
TASK 4
P5: Balance scorecard approach used for solving financial issues
As per the mentioned case study, it has been determine that Tech UK is deal with certain
kind of losses within an accounting period of time. In accordance to deal with all problems they
are appointed a well experiences accountant. After making all evaluation, they have decided to
make use of balance scorecard (Hiebl and et. al., 2015). It is known as one of the primary method
which will be use for controlling all financial issues those are affecting the profitability position
of the company. There are certain perspectives which will be needed to be taken into account.
Some of them are:
 Financial perspective: It is more effectively use for analysing financial performance by
using resources those are incurred during production process.
 Customer and stakeholder: As per this, various customer aspects or key stakeholder are
taken into account to provide wealth for their investors.
 Internal business process: It is more efficient enough to determine product and services
aspects that are related with Tech UK.
 Organisation ability: Every capital investment, technology and ability are analyse by
examine performance of the company.
TECH UK Unicorn grocery
According to this particular company which is
related with production of electric product.
They need to make use of key performance
indictors to deal with financial issues.
As per this company that is engaged in
production of grocery items. They are using
financial governance and benchmarking tools
to overcome various problems related with
finance.
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M4: Analysis of financial issue
In order to get more accurate and reliable outcomes in coming period of time, managers
need to make use of various accounting tools. Some of them are key performance indicators that
are associated with analysing performance of the company. While financial governance is
helpful to work as per the decided norms set by government.
CONCLUSION
This project assignment is based on providing crucial information about management
accounting. It can assist various accounting and reporting system those are reliable for control
everyday operations that are done during the period of time. Various costing methods are also
being used to determine net profit for the company. All the analysis is done to increase goodwill
of the company in coming period.
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REFERENCES
Books and Journals:
Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting. 23(1). pp.54-70.
Renz, D.O. and Herman, R.D. eds., 2016. The Jossey-Bass handbook of nonprofit leadership and
management. John Wiley & Sons.
Soin, K. and Collier, P., 2013. Risk and risk management in management accounting and
control.
Christ, K.L. and Burritt, R.L., 2013. Environmental management accounting: the significance of
contingent variables for adoption. Journal of Cleaner Production. 41. pp.163-173.
Wickramasinghe, D. and Alawattage, C., 2012. Management accounting change: approaches
and perspectives. Routledge.
Schäffer, U., 2013. Management accounting research in Germany: From splendid isolation to
being part of the international community. Journal of Management Control. 23(4). pp.291-
309.
Chan, H.K., Wang, X. and Raffoni, A., 2014. An integrated approach for green design: Life-
cycle, fuzzy AHP and environmental management accounting. The British Accounting
Review. 46(4). pp.344-360.
Lavia López, O. and Hiebl, M.R., 2014. Management accounting in small and medium-sized
enterprises: current knowledge and avenues for further research. Journal of Management
Accounting Research, 27(1), pp.81-119.
Hiebl, M.R., and et. al., 2015. Family Influence and Management Accounting
Usage. Schmalenbach Business Review. 67(3). pp.368-404.
Al, S.F.A. and McLellan, J. D., 2011. Management Accounting Practices in Egypt--A
Transitional Economy Country. Journal of Accounting, Business & Management. 18(2).
Online
Scenario Planning. 2018.[Online] Avaliable through: <
https://sloanreview.mit.edu/article/scenario-planning-a-tool-for-strategic-thinking/>.
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