MC4F12 Management Accounting Assignment Level 4

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 all 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

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:

Marginal costing:

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

P4 Different 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:

• Incremental budgeting
• Zero base budgeting
• Activity based budgeting
• 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:

• Payback period
• Discounted payback period
• Net present value
• Accounting rate of return
• Internal rate of return
• 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= ∑C_t/(1+r)^t- C₀=0

Where r is the internal rate of return, C_t 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= ∑(CF_t*PVIIF_k,t)-CF₀

Where C is the cost of action, K is the appropriate discount rate , CF_t 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.

CONCLUSION

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.

REFERENCES

• Christ, K. L. and Burritt, R. L., 2017. Water management accounting: A framework for corporate practice.Journal of Cleaner Production.152. pp.379-386.
• Cooper, D.J., Ezzamel, M. and Qu, S. Q., 2017. Popularizing a management accounting idea: The case of the balanced scorecard.Contemporary Accounting Research.34(2). pp.991-1025.
• Eldenburg, L. G., Krishnan, H. A. and Krishnan, R., 2017. Management Accounting and Control in the Hospital Industry: A Review.Journal of Governmental & Nonprofit Accounting.6(1). pp.52-91.
• Eldenburg, L., Krishnan, H. A. and Krishnan, R., 2017. Management Accounting and Control in the Hospital Industry: A Review.Journal of Governmental & Nonprofit Accounting.
• Goddard, A. and Simm, A., 2017. Management accounting, performance measurement and strategy in English local authorities.Public Money & Management.37(4). pp.261-268.
• Jermias, J., 2017. Development of management accounting practices in Indonesia.The Routledge Handbook of Accounting in Asia, p.104.
• Latan, H. and et.al., 2018. Effects of environmental strategy, environmental uncertainty and top management's commitment on corporate environmental performance: The role of environmental management accounting.Journal of Cleaner Production.180. pp.297-306.

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