Role of Management Accounting in Business Growth

This assignment discusses the importance of management accounting in enhancing business growth and profitability. It highlights how financial governance, planning, and budgetary control tools assist managers in achieving targeted aims and making informed decisions. The report emphasizes the role of management accounting in improving internal financial health, which is crucial for businesses to operate efficiently and effectively.

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
P1 Concept of managements accounting and system of management accounting......................3
P2 Implication of managerial accounting reports into business operations.................................5
P3 preparation of income statement on the basis of marginal and absorption costing techniques
......................................................................................................................................................6
P4 Determining the budgetary control techniques as well as planning tools..............................7
P5 Ascertain the techniques for resolving the financial problems in business..........................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Managing internal activities of a firm which will require the accurate analysis and
determination of the facts which were to be resolved. Management accounting tools can be
assistive in terms of making improvement in the operational ability, financial health as well as
better cost mechanism. In the present report there will be discussion based on various budgetary
techniques, costing system, reporting methods as well as performance appraisal techniques that
will be helpful in internal administration. The report is also consists with the costing techniques
and planning tools that will be reflect increment in the operational level of Zylla Company.
P1 Concept of managements accounting and system of management accounting
Managements accounting:
This is the mathematical tools which help in analyzing the data set to ascertain the actual
requirements in the business. Moreover, such analyzed data set will be assistive to the
managerial professionals in terms of decision making and planning the forecasted budgets for the
operations (Cooper, Ezzamel and Qu, 2017). Similarly, implication of such technique will
improve managerial efficiency as targeted goals will be attain by organization in a very
prominent way.
Management accounting system:
There are various techniques which are needed to be implicated by the professionals of
Zylla Company in managing the business activities. These techniques will funnel the managers
as to have appropriate development of duties which are needed to be improved. Along with this
these techniques will help in improving firm’s operational efficiencies (Honggowati and et.al.,
2017). Thus, there are various accounting techniques which are as follows:

Job costing: To demonstrate the costs incurred in each operational tasks of the business
there has been determination of transaction activities. Therefore, this accounting system helps in
making the adequate record of all the costs such as direct material, labor and relevant costs.
Thus, costs will be beneficial to demonstrate the costs requirements in each department.
Inventory management: To keep the records of the imports and exports of inventory in
the business this will be based on managing the level of inventories. Therefore, the production
department needs to be conscious regarding consumer demand and the business profitability
(Miller and Rose, 2017). Therefore, the production of goods must be based on seasonal
requirements as well as analyzing the buyer’s demand. Zylla company will be helpful as if there
will be proper control over production and deliveries of goods to the consumers.
Price optimization: In relation with improving the operating profit of the business they
set different prices on their products and services. Thus, such variation made by professionals as
per delivering the products and services among consumers at different locations. They fetch their
behavior towards such prices (Turner and et.al., 2017). Moreover, the best or profitable prices will
be kept forward by them and which will be helpful in generating the appropriate amount of gains
to the firm. Zylla Company will have benefits as if they implicate such techniques into
operations.
Cost accounting: This technique will be helpful to Zylla Company as it demonstrate the
costs incurred in each business units. Therefore, to produce a product or services there will be
requirement of high amount of funds (Parker and Fleischman, 2017). Thus, to analyses the level of
funds invested in the business activity, the costing technique brings the most preferable analysis.
Auditing: Periodically making the internal audit will help the business in making the
adequate improvements in the work and work culture. It brings the internal information which
were relevant with the costs, gains, operating expenditures and relevant details that bounds the
managerial professionals to make effective decisions. Zylla Company will have appropriate
internal administration which in makes favorable improvements in the operational stability. It
helps in analyzing the profits, liabilities and assets during a period.

P2 Implication of managerial accounting reports into business operations
A report consist of all the records on which detailed information were listed as per their
date and time. There will be records of cash inflows in a particular activity as well as costs
incurred by such activities. Moreover, such records will help the managerial professional in
analyzing the profitability as well as making the effective decision that will reduce costs.
However, there have been various reporting techniques which are needed to be implicated by
Zylla Company such as:
Inventory management report: There will be records of all details relevant with the
quality,, quantity and costs of products were manufactured and delivered in the market. Thus,
such information will be helpful in making the effective analysis over the demands of products in
the market as well as efficiency of firm in making reorder capabilities (Kasravi, Ghasemi and
Zadeh, 2017). Moreover, this reporting system will be assertive as it improves the efficiency of
business and make appropriate development.
Debtors aging report: To have control over extending credits of firm, this is mandatory
to prepare an account receivable report. Thus, it ascertains company’s collection process which
in turn helps in making effective ideas to overcome with it (Modell, ed., 2017). Moreover, it
comprises with the records of all the debtors of business which were about to make payment of
the products and services obtained from the entity. It also included regarding bad debts and
doubtful debts.
Budgetary reports: This will be assistive in measuring the performance of business which
will be helpful in generating newer ideas. Thus, forecasting the required costs which bound the
firm in controlling the expenses as well as improve performance in each department. These
reports are fruitful in appropriate allocation of resources into job done by them. Zylla Company
will have appropriate gains as the budgetary system is more accurate and attainable to business
to reach the targeted goals.

Cost accounting reports: It comprises with computing the costs incurred in
manufacturing and delivering the goods to the need users. Zylla Company will have effective
improvements in the business activities as the costs incurred in each business operation will be
under control. It ascertains the costs such as inventory used in production, labor costs, overheads
etc. Thus, these are the record which bound managers in generating innovating ideas as well as
proposing the alternatives which will help in reducing the manufacturing costs.
Performance reports: These are the reports which are prepared by the managerial heads
and professionals of the business in order to assess the performance made by workforce and
entity. Therefore, it will be a helpful source in terms of generating adequate gains and knowledge
from the market. Thus, such reports will have positive impacts over developing the operational
practices (Szychta and Dobroszek, 2017). In addition, this report helps in funneling the managers to
make effective analysis and produce the fruitful decision to bring reforms in work culture.
Moreover, it will have positive impacts over motivating employees to make productive efforts.
Zylla Company will have fruitful gains as if the managerial professionals will make adequate
analysis employee performance as well as encourage them with rewards, bonuses and incentive
benefits.
P3 preparation of income statement on the basis of marginal and absorption costing techniques
Marginal costing method:
Marginal costing
Particulars details details amount
Sales revenue 25000
Less: cost of goods sold
Direct labor 200
Direct material 500
Machine hours 600 1300
Less: closing stock
Purchase 100
Opening stock 400
Closing stock 200 300 1000
Contribution margin 24000

Less: variable selling overheads 350
Less: fixed expenses 250
Production overheads 1800
Fixed selling and administrative costs 200 1400
Net profit 22600
Absorption costing method:
Absorption costing
Particulars details details amount
Sales revenue 25000
Less: cost of goods sold
Direct labor 200
Direct material 500
Machine hours 600 1300
Less: closing stock
Purchase 100
Opening stock 400
Closing stock 200 300 1000
Variable sales overheads 350
Cost of production 24350
Less: fixed expenses 250
Production overheads 1800
Fixed selling and administrative costs 200 2250
Net profit 22100
Interpretation: in relation with analyzing these costing systems it can be said that
absorption costing technique will be helpful to the entity as it considers all the costs and expense
incurred in the business. Moreover, it will be known as the all cost system which has influences
of all the costs. Therefore, the outcomes derived from such method are accurate and reliable than
compared to the marginal costing technique. Thus, it will be suggested to the professionals of
Zylla Company that they implicate absorption costing system in terms of analyzing the costs
incurred in the business during the period.
P4 Determining the budgetary control techniques as well as planning tools
Activity based costing:

This is the most helpful and adequate technique which in turn helps managers in
forecasting the budgets based on the level of activities performed in an organization (Kihn and
Näsi, 2017). Therefore, there are mainly influences of the requirements incurred in business
operations such as production, marketing, distributing etc. however; there have been various
advantages and disadvantages of this budgeting system such as:
Advantages:
 This is the most accurate and appropriate costing technique as there has been better
understanding for the overhead expenses.
 It considers the unit costs instead of total costs which in turn helpful in analyzing all the
costs incurred in the business operations (Budgetary control techniques, 2018).
 It encourages the performance chart and balance scorecards which will be beneficial to
the entity in terms of managing the supply chain as well as value stream.
Disadvantages:
 This requires higher attention as well as large numbers of sustainable resources because it
emphasis on collecting all the data which results in higher costs for such operations.
 The traditional costing systems focus on improving the business efficiencies while a
current technique determines the profit margin.
 It can be misinterpreted and publish the wrong outcomes.
Zero based budgeting:
These are the most flexible and dynamic budgets as it does not consider the past data set
and performance of business. It emphasis over development of plans which will ascertain present

and future needs. Similarly, due such facts these are the budgets which are mainly starts with
zero bases or nil balance (Lee and Herold, 2018). The costs will be added as per the requirements
of the industrial activities; Zylla Company will have appropriate budgets for the future as if they
implicate the use of such techniques.
Advantages:
 The most satisfying advantage of this budgeting technique is that it is very flexible and
time changes in accordance with business requirements.
 It comprises with lower costs as it dose not require focused operations as well as all the
budgets starts from the zero balance which is helpful in having comparatively lower
costs.
 It does not require too much time in decision making or planning for the activities.
Disadvantages:
 The flexible nature of the budgeting system dose not provides the accurate analysis over
the actual required costs in an activity.
 There will be manipulation of funds by the managers in terms with meeting their personal
needs.
Incremental budgeting:
These are the methods which were base on the assumptions that there have been slight
changes in the budgeting process. Thus, it emphasizes over the previous period budgets and the
actual expenditure incurred in the business on which they propose the additional budgeting costs.
Thus, it believes that the demand of products and services will be increase day to day so to meet
such requirements there will be need of accurate funds (Cooper, Ezzamel and Qu, 2017).

Moreover, before implicating this budgeting system in Zylla Company, there are various
advantages and disadvantages associated with this budgeting system such as:
Advantages:
 It is the easiest and simple method as the managerial professionals or accountant did not
need to make higher decision they can only surplus the amount of budgets by reviewing
for the actual needs.
 It brings the stability in funding terms which brings the fruitfulness to the entity in
retaining the favorable outcomes fro the many years.
 It helps in balancing the operational work practices in the entity which ensures that all the
departments must make stable and consistent efforts for the longer period.
Disadvantages:
 Due to incremental nature of this budgeting techniques which only emphases over
increasing the budgeting costs with considering minor changes.
 It does not make clear analysis over the business needs as well as demands in the market.
Therefore, this encourages the managerial team to overspend over non profitable
activities.
 Manager’s emphases over reducing the revenue growth while extending the higher
expanses due to which they would take higher variance advantages.
NPV:
This is the present value of future cash flow which ascertains the managerial
professionals in accurate planning for the proposed projects. Moreover, it helps in analyzing the

profitability of the plan which will be based on various years that will brings the accurate
outcomes to the professionals in analyzing and decision making (Honggowati and et.al., 2017).
Thus, it will suggest to the managers of Zylla Company in terms with implicating the use of such
techniques. Therefore, there are various advantages and disadvantages which are needed t be
consider by the industry such as:
Advantages:
 It determines that the future value of the projects is worth less than comparison with
today’s value.
 It considers the discounting of cash flows on the basis of periodical capital costs.
 It brings the most accurate outcomes to the professionals of the business which will be
helpful in attracting the investors to the proposed plan.
Disadvantages:
 The main disadvantages of this budgeting system are that it will require higher guess
work which in turn makes the unreliability over the gather information for the operations.
 It emphases over increasing the costs of capital which will bring good or higher returns to
the firm.
 It is time consuming process which will be in adequate and unfavorable to the business.
IRR:
The internal rate of return focuses over return generated by the business over the
proposed plan. Moreover, it can be said that it is a capital budgeting method which measured and
compared with cut off rates of a specific project plan. It brings the results to the professionals

that the initial investments by them in the project will giver the proportionate amount of return in
each period (Miller and Rose, 2017). However, there will be various advantages and disadvantages
of this planning tool such as:
Advantages:
 It comprises with the appropriate consideration of the time value of money which in turn
will be helpful in making the accurate decisions as well as improving the business health.
 There will be equal importance were given to all the cash flows with uniform ranking.
Disadvantages:
 It is very complex in understanding and which require the attention of accounting
professionals.
 The assumptions made in these plans are unrealistic as well as unreliable.
P5 Ascertain the techniques for resolving the financial problems in business.
To improve the financial health of the entities needed to have implication of various
techniques and performance appraisal techniques which will have positive impacts over the
productivity. Therefore, there are some tools and techniques which are needed to be applied by
Zylla Company for better operational management in the firm. There may be uncertainty of
losing the financial stability but proper administrating and execution will help the business in
efficient development (Turner and et.al., 2017). Moreover, there have been various performance
appraisals which will be fruitful to Zylla Company such as:
Key performance indicators:

This technique is implicated by various firms in relation with encouraging the staff to
make productive efforts. Therefore, there are various targets and objectives which were set by
managers of the organization in order to motivate the professionals in making the adequate
development of the performance (Kasravi, Ghasemi and Zadeh, 2017). Therefore, it is a
quantifiable technique which ascertains the growth in the performance capacity of employees as
well as organizations. Moreover, it evaluates the performance of organization especially on the
basis of activities on which it was engaged.
Variance analysis:
This the most effective technique to control the costs incurred in business activities.
Therefore, comprises as per the balance between budgeted costs as well as actual costs.
Moreover, the budgeted costs are comparatively higher than the actually incurred costs than the
surplus amount will be known as variance (Szychta and Dobroszek, 2017). In addition, Zylla
Company can implicate the use of variance analysis which will be helpful in appropriate
utilization of funds for each activity in the business.
Bench-marking:
This is he technique which implies with analyzing the own performance with the other
organization’s performance. Therefore, it might indicate the competitive nature in the work
culture but it is a true motivator. To reach and overtake the performance made by other
companies the firm plans newer ideas and implicate the innovative techniques which will be
indicative for the appropriate business gains. Similarly, this technique can be helpful to Zylla
Company in order to have appropriate revenue gains as well as reaching to the desired level.
Balance scorecard:
This is a strategic performance analyzing and executing tool which comprises with proper
administration and control over the work performed in the organization. Moreover, this
technique comprises with the executing the efforts made professionals as well as business in

proper manner of in the required state (Lee and Herold, 2018). Thus, such techniques will be
helpful and beneficial for the growth of the entity. Zylla Company needs to have appropriate
implication of such techniques in improving the performances.
Financial governance:
This is most effective and beneficial techniques which are need to be implicated by the
managerial professionals. Thus, it emphasis over executing the financial transactions held during
the period. Thus, these governance tactics will be applied and administered by the auditors,
accountant, owners and various managers in the business. These have importance in improving
the capital stability as well as build the proper operational efficiency to the firm. Zylla Company
needs to implicate the use of such techniques which in turn helps in making the adequate
increment in the growth and profitability of the firm. The financial governance will allow them
in appropriate planning and development practices.
CONCLUSION
On the basis of above report it can be said that management accounting play the vital role
in improving the efficiency and ability of business in meeting the targeted aims. Therefore, the
application of various planning and budgetary control tools will assist the managers of Zylla
Company for having accurate analyzing over projected plans. Moreover, the implication
reporting and costing technique will ascertain the internal financial health of business which
forces the professionals to think wisely and make effective decision.

REFERENCES
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