Management Accounting and Financial Issues

The document discusses the various financial issues faced by Zylla company, including profitability problems, cost efficiency issues, performance and control problems. It also highlights measures such as KPI, financial governance, benchmarking, and others that can be used by the company to improve its performance and sustainability.

MANAGEMENT
ACCOUNTING

Table of Contents
FROM: MANAGEMENT ACCOUNTANTS................................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
ZYLLA COMAPNY ......................................................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM .....................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1:...............................................................................................................................................1
P2:...............................................................................................................................................2
M1:..............................................................................................................................................4
TASK 2............................................................................................................................................5
P3:...............................................................................................................................................5
M2:..............................................................................................................................................7
D2:...............................................................................................................................................7
TASK 3............................................................................................................................................7
P4:...............................................................................................................................................7
M3:............................................................................................................................................10
D3..............................................................................................................................................10
P5:.............................................................................................................................................10
M4.............................................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

FROM: MANAGEMENT ACCOUNTANTS
TO,
GENERAL MANAGER
ZYLLA COMAPNY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting is a crucial aspect which is applied by each firm for making the
business sustainable for the long run. This report is made on the Zylla Company for improving
their performance in an effective manner. However, there are certain tools which are covered in
management accounting system. The management accountant uses these tools for enhancing
performance of the Zylla Company (Hoque, 2002). On the basis of these management
accounting tools, reports are made so that the company could make effective decisions for the
firm. In this report, net profit is maximised by using absorption costing and marginal costing, and
various planning tool are used for controlling budgets. Apart form this, company uses diverse
management accounting tools for reducing the financial problems in effective management as
well.
TASK 1
P1:
This is the process of recoding, summarising, assessing, interpreting and communicating
information in order to get the firm outcome in an effective manner. There is a need to make
effective management accounting report so that they could frame an effective strategy for the
firm. Management accounting reports are made by considering all the financial and non-financial
information of the firm. These management accounting reports are made on a daily, monthly or
quarterly basis. There is no regulatory requirement for making the management accounting
report, and this is the key advantage of this (Herzig and et.al. 2012). By Relying on the
management accounting reports, manager can make effective decision. There are diverse
management accounting tools which are used by the firm. Some of them are as under:
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Cost accounting system: Under this, cost of the product is analysed in an effective
manner. By using this tool, wastage costs is eliminated. This is the most effective tool that can be
used by the firm for lowering costs from the overall costs. By reducing per unit cost, company
could lower the cost of product and gain competitive advantage over their rivals.
Inventory management system: Under this system, inventory can be managed in an
optimum manner so that the Zylla could attain its pre-set objectives efficiently. With the help of
this, company's available resources can be used in an effective manner. There is strong need to
adopt this for gaining efficient outcomes in a firm. With the help of this, firm can track,
estimates, reorder inventory via whole supply chain (Horngren and et.al. 2002).
Job costing system: This is the system under which whole process that are related to
accumulation about the costs, linked with particular production or service job (Hansen, Mowen
and Guan, 2007). This kind of information is used by the firm for making an effective tool that
can be used by the firm for effective strategy of the firm.
Price optimization system: Under this system, price is optimised in an effective manner
so that the company fixes the price in an effective manner. Price is fixed under this, so that the
company could makes its price in a rate that can be used by the company in an effective manner.
As per the fixed price, consumer is willing to buy the product in an effective manner.
Batch costing system: This is the kind of job costing system. Under this, this is a form of
particular order costing. Under this, each batch have a number of identical units but independent
batch would be different. Each batch is an independent cost unit that renders a batch number in
the similar way under which each job is rendered a job number.
By applying these above-mentioned tools, firm can use effective strategy that would
assist the firm for gaining sustainable development (Horngren and et.al. 2005). This can be said
that the Zylla Company can use these tools for improving the performance of the firm.
P2:
The management accounting reporting is made by the analysing the financial and non-
financial information that could be used by the firm for effective decisions. There are so many
methods which are sued by the firm for making reports. These reports help Zylla company and
managers to control firm's performance as well as made frequently via accounting periods as the
requirement The main objective of reporting system is to increase profitability with the use of
necessary information from various financial statements. Such as profit and loss account, balance
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sheet and cash flow statements (Ezzamel and et.al. 2003). On the basis of these statements
investors and other stakeholder take critical decision regarding future investment planning. With
this chances of profitability can be increased. It has been noticed that reporting system is
primarily related with financial, operating as well as investing activities which is performed by
Zylla company during the period. It can also effective in increasing goodwill of the company in
accordance with other competitors. It is essentials for the managers to make well organised
reporting that can present a good image of financial performances of the company. There are
certain significance of using reporting system:
 Reporting is effective in managing control system: In specific term, an objectives can
be set by Zylla company. Under the report, various measure of controlling system and
decision related with project are mentioned. It can provide reliable information about
exact completion of project and required number of people needed to do so.
 Advantages in increasing profitability: By the using reporting system operational
activities can be handled in well effective manner. It will help business organisation to
increase there profitability by applying necessary techniques and measures. It is
considered by company's in order to determine total cost and sales incur by company
during an accounting period.
Some of them are mentioned as under:
Budget report: This report assist the firm to assess their firm's performance and if the
company is more enough, managers assess their division's performance and manage costs.
Forecasted budget for the period is normally based on the actual expenses from previous years. If
Zylla uses this tools which could be used by the firm in an effective manner. Zylla could also
implement budget reports to render incentives to employees.
Accounts Receivable report: Under this accounts receivable aging report is a most
critical aspect for handling cash flow for the firms which extend credit to their customers. Such
report break down the customer balances by how long they have been owed. Major aging reports
covers separate columns for invoices which are 30 days late, 60 days late or more. A manager
could implement this report to identify problems or issues with the firm's collection process. If
any of the significant number of customer does not pay their balances along-with their balances,
firm could emerge to strengthen its credit policies. Periodically, evaluating this department helps
the collections division from surviving old debts.
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Job cost reports: This is the report which reflects expenses for a particular project. They
are normally connected with forecasting of revenue so that firm could assess the job's
profitability. This assists determine greater earning areas of the firm which could concentrates its
efforts there rather than wasting of time and money on jobs with lower profits margins. This
report also applied to assess expenses while project is in process henceforth, managers could
determine areas of waste before the cost increases.
Inventory report: Zylla company uses management accounting report for making
manufacturing processes in an efficient manner. These reports normally covers items like
inventory waste, hourly (Kotas, 2014). These reports normally covers items like- inventory
waste, hourly labour costs. Manager could compare diverse assembly lines under the firm to
oversee where one could enhance or to offer bonuses to the effective performing division in the
firm (DRURY, 2013).
Performance reporting system: According to this particular reporting, necessary
information about companies current and past year performances is measured. It is an important
activity which is used in a project by communicating it with every members as well as
departments. It consists of collection and dissemination of project details such as its progress,
allocation of resources and total estimated time taken in order to complete it.
On the basis of these informations, Zylla company could get effective outcomes that
could be used by the firm for developing sustainable growth and development.
M1:
This is concluded that the MA system is an effective system which are implemented by
organisation's to manage and measure its financial transactions. These systems helps the firm to
get an efficient results with the accessible resources. For gaining maximum advantages,
managers provides to consider several accounting system which will be efficient for the firm.
The efficiency for implementing these system is to improve profitability for the firm. The
Zylla company become more dependable for gaining the sustainability.
TASK 2
P3:
Cost is an amount of total cash sacrificed to attain some assets and make it ready for use.
Costing techniques consists of assembling and recording of various component of cost incurred
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in order to attain certain goals. Costing consists of variable costs those are varies with the
production of extra units. The scope of costing is much smaller as compare to accounting. In this
, the major target of company's is based on reducing their expenses so that maximum profit can
be incurred. In case of manufacturing, there are various costing methods can be used such as
normal, standard and actual costs which are associated with the products. It has been observed
that in recent times Zylla company is using plenty of techniques such as ABC costing according
to make improvisation in costing accuracy.
With the help of management accounting tools, company could optimise their profits in
an effective manner. However, this is the main tool that can be used by the management
accountant in the firm for finalising their business objectives. Here, there are two costing
methods are discussed here. Which are as follows:
Absorption costing: This is the costing tool under which all the costs which are related
to the manufacturing of goods covered, irrespective of the nature of fixed or variable costs. There
is a certain needs which are used by the firm for making these tools which are important for the
firm success. By applying this costing method, firm could enhance price in an effective manner
(Chapman and et.al. 2006).
Marginal costing: This is the costing tool by which the all the variable costs are
considered for calculating contribution per unit and after that all the fixed costs are considered
for knowing the net profits. There are so many tools which are used by the firm for making
business objectives in an effective manner. There is a strong need to make certain tools that can
be made effectively.
Comparison among costing method:
Absorption costing Marginal costing
Under this costing method, costing of data is
shown through using conventional sources.
In this, costing information is represented
through contribution per units that are collected
during production process.
If Zylla company is using this particular
costing method, they required to considered
variable as well as fixed cost at the same point
of time.
Under this specific method, company need to
select only variable cost during valuation of
inventories of the company.
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Every product and services taken as on
economical share of total fixed costs by which
profitability can be enhanced.
With the use of this costing period cost can be
taken into consideration. In this PV ratios is
calculated for the purpose of examine
efficiency and growth for Zylla company
(Bromwich and Bhimani, 2005).
For the purpose of taking decision absorption
costing is not that much suitable.
It is more reliable in terms of decision-making.
With the difference in opening and closing
stock can not affect the cost per units at the
time of production (Otley, D and Emmanuel,
K. M. C., 2013).
If there is any differences arises in beginning
and ending of stock valuation it can affect the
units cost of manufacturing.
Computation through Absorption costing
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Calculation by using marginal costing
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
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Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
M2:
This is said that there are diverse contenders that affects the profitability of Zylla firm.
This is connected with internal and external factors of the firm. Several accounting system are
used under the firm for get over the financial related issues (Bodie, 2013.). With the help of these
tools, managers of the firm can overcome the financial problems. Although, there are various
other tools such as- ABC costing and so many finally link up to the manufacturing of firm
product or services.
D2:
On the basis of above-mentioned calculation, it is concluded that the company measure net
profits on the basis of the Absorption costing and marginal costing methods. Although, firm's net
profits for absorption costing is calculated 7800. this is higher than the profits measured
according to the marginal costing. The marginal costing net profits is 7500. the difference of 300
is to analyse which is assessed via fixed costs.
TASK 3
P4:
Budget: This is the most important phase which is required to undertake by an
organisation for reducing and balancing cost of expenses. This is detailed and planned
information for a specific time period in regard of operations of business (Albelda, 2011). This is
termed for comprehensive operations designs and planning of accounting for a particular gap.
Usually, this is designed for more than a year but it can complied is result are in the company
favour.
Budgetary Control: his can be stated as most fundamental tools use for budgeting which
influence administration to carry planning, evaluation and coordination operations. This process
can be associated with various business parts that is eliminated into several different sections
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called centre of budgets. This render manager an idea about various available resources for
making proper cost effective use.
Budgetary Control Process Consult with Manager concern: This is significant for manager to make accurate
evaluation through undertaking necessary information weather company need any
expenditure and cost budgets. This will avail them in effective communicating data in
context of betterment of Zylla company. Make Effective Anticipation: In order to defend the further losses, after analysing
response the manager have to build an assumption. The main purpose of this process is to
control and manage cost of activities. Determined data of company for Budget to Accomplish Objectives: Zylla company
performance can be measured through utilising the comparison of data between budgeted
and actual one. This will avail company in development.
 Review Evaluation: The manager review entire process in final phase to overview
mentioned steps and operations and control outcome.
Planning tools are the most effective tools that are implemented for budgetary controls. This is
an important tool for achieving the sustainability for the company. There are so many planning
techniques that are mentioned hereunder:
Forecasting tools: This is the planning tool which assists for controlling budgets. This is
used by the management of the firm for attempting to cope up with the dependence of the future,
which are based on the data from the past and existing analysis of trends (Arroyo, 2012). This
starts with specific hypothesis which depends upon experience, knowledge, and judgement.
These forecasting are planned for the upcoming months, years. Because, any kind of problems or
issues under hypothesis will emerge under the same or crucial issues in forecasting, the tools of
sensitivity assessment is used which allocate a diverse range of values the uncertain issues. This
is the technique which is implemented by Zylla company for budgetary controls.
Advantages:
This is the key technique which is implemented by the organisation for achieving its pre-
set objectives. Although, forecasting tools assists company to estimate the amounts of the
incomes and expenses henceforth, the budgets in the firm can be controlled.
Disadvantages
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Forecasting is an estimation of the value which not only renders Zylla company's income
and expenses for its pre-set objectives (Macintosh and Quattrone, 2010). If cited company
would implement this tool, then the firm would make wrong budgets that would influence the
objectives for firm in a adverse manner. By implementing this tool, firm long term objectives can
not gained due to its wrongful estimation.
Scenario tools: Under this planning tool, which renders standard tool for managers for
assessing alternative opinion of what can happen in future as this is the most effective tool
which helps for making plans in strategic, functional and financial planning. By using this
method, the cited company responds three questions. These are: what would occurred?, what are
the effects on the strategies?, plans and budgets?, and how this can be responded by the
company? By using this tools, a firm can respond these kinds of problems.
Advantages:
By using scenario planning, Zylla company's managers and top level authorities can
investigate about the alternatives, opportunities and performance of the firm. And then enhance
improved quality strategy plans, budgets and this enables the appropriate understanding of the
sensitivity of the key drivers of the company and effective impacts of future outcomes.
Disadvantages:
Scenario planning tool does not provides an reliable outcome for the firm, and this is the time
consuming process because this makes entire time for making the planning tool for the firm.
Contingency planning tools: Under this planning tool, firm's manager can incorporate
effective tools during contingency or emergency situation of the firm. For developing the
contingency plan, various decisions are made relating to the handling of human and financial
resources, communicating process, and others so that company could come out at the time of
contingency. This is a management tool which incudes entire sectors which helps the cited
company could make strong provision of humanitarian helps to those more in the requirement
during the time of disaster happen.
Advantages:
Contingency plan is the best way to lower the costs of the product so that while forming
budgets, company could make an effective strategy. A contingency plan includes of important
data, important process for power, save routine for the employees an management
responsibilities for the members who deals in the contingency team.
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Disadvantages:
This is a complex plan because, this takes more time for incorporating this plan. During forming
of this tools, firm can gain an effective tool for making the pre-set objectives.
M3:
For enhancing the efficiency of the firm from the available resources, company could
uses several plans that can lower the problems and also form essential decisions by implementing
an adequate budgets. Few efficient planning tools are estimated which assist the firm so that the
they can forecast the sales and profits data. There are contingency tools which is based no the
situation and on the basis of this, company can execute their plans effectively.
D3.
For managing the financial problems, Zylla company's finance department is wholly
accountable. They could form decisions on the basis of existing and last year performance. This
is observed that the financial distress in the company will affects the performance and growth the
firm. This is must that manager can make entire financial issues and form essential steps for
gaining long term sustainability for the firm (Ajibolade, Arowomole and Ojikutu, 2010). There
are diverse management accounting tools which are used by the firm for resolving the finance
related problems. These are: KPI, Financial Governance, Benchmarking and others. By using
these technique, a firm can make an effective tool for overcome the financial problems of the
firm.
P5:
There are many financial problems faced by Zylla company. This will affects the ability
management to perform their function effectively. Finance is the important source on which the
operations of company are demand and such financial problems affects the ability of manager to
effectively distribute funds to different departments of company. To solve such problems the
management of company adopts many management accounting systems. These system provides
various informations regarding different aspects. This will be used by the management to make
better strategies and policies to reduce financial problems. Some financial problems which are
faced by management of Zyalla company are define below:
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 Probability: The financial issues which is faced by Zylla company is with their
profitability. This will arise because of their high operational cost. This will affects the
ability of company to perform their functions and achieve their targets.
 Cost efficiency: Another problem which is faced by company is not able to control the
cost of different operations. This problem is arise because they don't have proper system
regarding cost accounting.
 Performance and control: This problem arise because management of company not
follows performance reporting system. This can arise mismanagement in operations of
company.
Measures to overcome from such financial issues
 KPI: By use of this technique performance of employees can make better and solve the
problems which are faced by them at workplace. To evaluate the performance of their
employees they have to compare the data of current year and previous year.
 Financial governance: This includes about preparation of rules and regulation by the
management of company to smoothly perform their different functions to achieve their
desired results. This provides the chance to go beyond the limits which are set by them.
 Benchmarking: This technique is used by the management of company to compare the
performance of company with another company. This helps the company improves their
performance.
Comparison
Zylla company Unicorn Grocery
This company provides their services at
medium level so lots of misconduct are
happening at workplace. To improve their
performance they have to use the KPI
technique.
It is the large company and have wide rage of
activities. This company is requires to adopt
proper system of management of performance.
SMART objectives are used by the
management of company
There are many policies and procedures are
used by management of company in decision
making
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M4
This is observed that there are so many financial problems exists in a company which
could influence the profitability and development of the firm. The pre-set targets can not gain
within the allotted time due to the financial distress in the firm (Otley and Emmanuel, 2013).
However, this can be said that the issues can be managed by making effective systems which can
control effects of these issues. Few of them are as mentioned hereunder
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CONCLUSION
From above-mentioned report, this is observed that the Zylla company uses various
management accounting tools by which diverse strategies are made. However, under this report,
various management tools are discussed and their uses in the firm are elaborated. By using these
tools, management accounting reports is made which is further useful for making strategic
decisions for gaining diverse strategy. Net profits is optimised by using absorption and marginal
costing tool. Various planning tools are discussed under this report, so that the company can
control their budgets in an effective manner. There are so many tools used such as key
performance indicators, financial governance, benchmarking and others that can be used by the
Zylla company for making the business sustainability.
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