Financial Issues and Remedies in Zylla Company

This project report examines the importance of management accounting in business organisations, using Zylla company as a case study. It highlights the need for effective tools such as KPIs and benchmarking to solve financial problems and maintain economic scale. The report also compares Zylla with Unicorn Grocery and discusses various costing methods and planning tools.

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1. Different types of management accounting and its essential need..........................................3
2. Different methods of reporting system used in Zylla company..............................................4
M1: Advantages of using Management system..........................................................................5
D1: Critically analyse reporting system......................................................................................6
TASK 2............................................................................................................................................6
3. Costing methods used for profit analysis................................................................................6
M2: Management accounting techniques use ............................................................................7
D2: Evaluation of income statements.........................................................................................8
TASK 3............................................................................................................................................8
4: Planning tools advantages and disadvantage in budgetary control.........................................8
M3: Planning tools analysis......................................................................................................10
D3: Different tools used to resolve financial problems............................................................10
TASK 4..........................................................................................................................................10
5. Use of Management accounting in solving financial issues.................................................10
M4: Assessment of financial problems.....................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is an important aspect of an organisation. It is used to
summarise, record and evaluated various financial transaction that are done by company during
their day to day operations. The purpose of management accounting is to utilise company
resources in order to attain its long term objectives. This project report consists of information
about Zylla company which is large organisation (Ahmad and Kamilah, 2013). It covers various
accounting system and reporting that are used by company in order to manage and control their
business performance. Certain costing methods are used which can help in determining profit for
the company. It also present analyses of planning tool that can be helpful for budgetary control
process. At, the end comparison with other other company is done to identify effective measure
to solve financial issues. Overall, project explain usefulness of using management accounting for
the further expansion of business.
TASK 1
1. Different types of management accounting and its essential need
Management accounting is a term that consists of various information associated with the
financial data of any organisation. As, a management accountant of Zylla company for more than
10 years. They have appointed to revamp company financial system so that effective results can
be achieved. Zylla Ltd is undergone to a various series of changes with their old accounting
system. MA play an effective role in providing right direction to the company so that more
positive outcomes can be attain. Critical decision can be made on the basis revelation of
performance report. It can be noticed that nature and size of accounting system is to be of high
quality which will help them to reach at their set goals.
It consists of various accounting information that is related with financial reporting such
as costing, analyses of inventory and so on. The results can be more accurate and reliable if they
are using correct system in right manner (Bodie, 2013). Every inappropriate data can affect
profitability and growth of the company that need to be control by using necessary steps. There
are various accounting system which can help in controlling financial records and transaction.
Some of them are:
Cost accounting system: It is framework used by Zylla company in accordance to
determine total cost which are incur during production of product and services. The main

purpose of using thus system is to analyse profit volume ratio, cost control and other cost related
activities. At the time of manufacturing, manager's are use certain costing such as Normal,
standard and actual costing.
Price optimisation: It is an effective tool used in statistical planning. It is related with
crucial information regarding price that changes at each units produce. Price optimisation is
based on pricing that explain correct price for a product (Caglio and Ditillo, 2012). It is used by
company to set best price, identify the profitability outcomes and increase chances of getting
goal in quick time.
Inventory management system: It is known as an effective aspects of Zylla company
because inventory controlling is one of the biggest challenge for manager. They are using
various method such as ABC costing and EOQ to manage their stocks. It is mostly associate with
manufacturing process as large amount of orders are received and delivered at one time.
Job costing system: It is that accounting system which is used to determine each lot size
of a product produce during the year. It consists of product date, identification number of lot and
many more. It is related as that point where products develop by company's are relatively
different from one another.
2. Different methods of reporting system used in Zylla company
As, this company changes its business operation for the purpose of increasing
profitability and growth. They require a well organise reporting system which can record its each
an every transaction done by company during that time. It is prepared by taking support guidance
from various statements such as profit and loss statements or balance sheet. It can also help them
to use their resources in effective manner so that minimum wastage can be done. The
management can take future decision on the basis of report prepared by the accountant. The
performance and appraisal evaluation can be done through collecting necessary data provided in
reports. The data collected for the purpose of preparing reports are gathered from financial as
well as non-financial sources (DRURY, 2013). After collecting information they are firstly
analyse by using appropriate tools and techniques prior posting it to the books of accounts. It is
important to do so because chance of mistake and fraud can be controlled. Data should be
collected from various department that are working for the common objectives. In accordance to
get more accurate results managers required to prepare various financial report by taking
information from every departments. The future investment is based on these reporting on which

goodwill of the company is totally relies. There are various reporting system that can be used by
managers of Zylla company. Some of them are discussed underneath:
Performance reporting system: According to this reporting, necessary information
about company past and current year performances are recorded. It can be identified by using
different statements (Herzig and et. al., 2012). It is an important report because future investment
decision are taken if performance of the company is well enough in past few years.
Operational reporting: Such kind of information is related with production process that
consists of costs and expenses that are incur over production process. It will help to determine
actual costs incur by company during that period of time. It is mainly associated with internal
reporting.
Job cost reporting: This reporting system consists of those costs which are charged over
material, labour and other production overhead. It is an effective techniques used to track actual
costs levied on an individual jobs and analyse them to critically, if costs can be control in later
job activity.
Inventory management reporting: It is known as an effective component of supply
chain that indicate flow of goods from producer to storehouse and that to point of sales. It is
related with tracking of goods, billing records, supplier information and delivering data.
Account receivable aging report: It consists of certain lists of non-paying customers
invoice and uncredited memos by date ranges. It is primary techniques used by use for collection
of due amount.
M1: Advantages of using Management system
It has already been discussed that MA is an effective tool for analysing company's
performance. It will help them to acquire positive results with the available resources. For this
purpose they are using various management accounting system that can help them to fulfil their
aims and objectives. It is considered as one of the important aspects to business because,
maximum profitability can only be achieve through effective system. Long term decisions can be
taken more easily. Apart fro this, efficiency of Zylla company can be increase for getting future
sustainability. Few other aspects are related with the performance and growth that can be
enhance through using management accounting system.

D1: Critically analyse reporting system
Positive results can only be attain by using proper financial information or transaction
that can help company to plan their future aims. For this purpose, reporting can be useful
techniques on which decisions of the company relies. Financial report are prepared by using
necessary information about current and previous year performance. It is used by investors for
taking capital investment plan in the up coming projects. The primary source of data collection is
taken from income statement and balance sheet. Job cost reporting and performance reporting is
considered as on first priority because maximum attention of company's are based upon these
two.
TASK 2
3. Costing methods used for profit analysis
Costing is the term use for the purpose of evaluating total amount of capital invested on
the production of goods and services. It is directly related with material, labour and overheads
that are used while production (Kotas, 2014). It is generally known as monitory value that
summarise with efforts and resources use by managers in order to deliver quality products to its
customers. It consists of variable costs that alter with each units produce. These are advised as
direct cost. In financial accounting there are various costing methods are used in order to incur
maximum profit and sustain a bright future for the company. Some of them are:
Absorption costing: Such kind of costing system that treats each costs of production as
product costs whether are related as variable or fixed. It allocates certain portion of fixed
production overhead cost to every units of product, along with variable costs. It is known as full
costing methods because all production costs are termed as product costs.
Marginal costing: It is related with that cost which is incur by company with the
production of additional units of products (Renz, 2016)). If prices charge by company for per
unit of products is higher than the marginal cost of producing one unit then its positive sign to
produce that unit. It does not considered fixed cost during production process.
Comparison of both costing method
Absorption costing Marginal costing
Fixed costs are incur for the cost of production. Analysis of fixed costs are measure through
period costs.

Cost data is shown by using conventional
pattern. Net profit is calculated after deducting
fixed costs from variable costs.
Under this method, contribution per units is
determined.
If there is any differences in opening and
closing of inventory it will affect the costs of
production.
If found any variations in beginning and
ending of stocks it cannot affect the units of
production.
Costing overheads are included during the
computation of absorption costs.
Expenses related with selling and distribution
are taken as vital part.
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
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
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
M2: Management accounting techniques use
There are various factors which are affecting the profitability of an organisation. They
can be related with internal as well as external factors. In order to overcome these, managers are
using various accounting techniques such as microeconomic techniques that are related with cost
volume profit, flexible budgeting and cost related variances. By applying these techniques in
business operation every issues can be resolved. Some other tools are activity based costing and
overhead cost techniques which are directly related with the production process. It is done to
make positive comparison between actual and standard cost that are use by company's. So that
wastage of resources can be controlled.
D2: Evaluation of income statements
In the above used financial information is taken as on assumption basis. It is done to
determine net profit for the company by using various costing methods. Zylla company is having
two important methods. Such as absorption and marginal costing. If they are using absorption
costing they getting profit of 7800 while, with marginal costing they are receiving profit of 7500.
The difference of 300 is analyse which is observed because of fixed cost. For the purpose of
future decision marginal costing is more effective. As, they are providing more reliable outcomes
as compare to absorption costing.
TASK 3
4: Planning tools advantages and disadvantage in budgetary control
Budgets: It refers as an investment planning for a definite period of time mainly for one
year. It consists of sales planning and revenue, quality of resources use, cost and expenses and
cash-flows.
Budgetary control: It is system by which actual earnings are compared with that
planned financial gain and spendings (Nixon and Burns, 2012). It will help business to see if
plans are being followed in right manner or whether required any changes. Procedures of
controlling budgets are as follows:
 Consult with manager: Any information related with profitability and growth purpose
are consult with managers so that appropriate solution can be made (Burritt, Schaltegger

and Zvezdov, 2011). Requirement of budget is analyse by taking valuable information
from each departments.
 Make assumption and predication: Budget are always made with assumption of
income earned in future or cost that are incur over production of products. In this process,
they need to set an overall rough idea about costs and expenses.
 Set detailed budget to attain goals: In this stages, a detail list of budgets are prepared
by taking help to higher people working at each level. It can be operation, cash or
production budgets.
 Measurement of actual performance with budget: current year performance of zylla
company is measure so that it can fit according to the budget.
 Review phase: In the final stage, review and feedbacks are collected from various
departments whether this budget is effective or not (Quinn, 2014). After all analysis, it is
handed over to the top management to make necessary approvals.
Planning tools: These are used to measure the performance of company with the help of
various budget information (The Advantages and Disadvantages of Budgeting, 2017). Some of
them are:
Operating budget: It is mainly related with production process. As, total cost and
expenses which are invested by company during the time are recorded under this budget. It
consists of sales, and production budgets.
Advantages:
It is an estimated budget which need to be prepared in advance.. It can be weakly,
monthly or yearly.
Disadvantage:
It is too expensive to prepare because proper estimation can be not made. Because,
management is having limited information.
Cash budgets: It is an effective budget which is useful to determine total cash inflow and
out flows done by company during one accounting year. It is collected from various activities
such as operating, investing and financing.
Advantages:
A well organise information about total cash use by company during the year is
determine easily (van der Steen and Martijn, 2011).

Disadvantage:
The biggest limitation of this is that if recovery time of capital is completed the presented
cash-flows is ignored.
Static budget: It is prepared at the initial stage of budgeting period. It is valid only for
the purpose of designed level of activities. The other name of this is fixed budget. The actual
results are received after the fact. The digits are quite different from the actual outcomes.
Advantages:
Every information is taken on assumption basis that cannot be changed or varied.
Disadvantage:
There is limited source of application and it is not considered that much effective as
compare to all other budgets.
M3: Planning tools analysis
In relation to get more reliable outcomes, company's used to prepare budgets. For this
purpose various planning tools are considered such as operating, cash and master budgets. These
all are used to make effective evaluation of company's performance and to take necessary steps
for further improvements. With the help of this, long term debts can be paid in order to achieve
future aims. Operating budgets are used to make analysis of costs and expenses that are incur by
Zylla company during production. Whereas, cash budgets are used to determine total cash in and
out from business during the year.
D3: Different tools used to resolve financial problems
For the purpose of performance analysis, different issues are need to be analyse which are
affecting the performance of an organisation. It has been associated with management of day to
day business operations. It can be affected by financial and non-financial issues. It is the prime
responsibility of managers to analyse those financial problems so that it cannot get affected the
profitability of the company. In order to solve such issues company can use balance scorecard
system. Their are various issues like cash inability or extra debt burden. It can directly affect the
growth of business.

TASK 4
5. Use of Management accounting in solving financial issues
In an organisation, it has been found that profitability can be increase by using right tools
and techniques. The prime objectives of business operation is to attain short and long term aims
and objectives (Ward, 2012). It can be affected by financial issues. Like, lack of cash available
to meet out short term debts. The financial problems can be resolved in early time so that it will
not affect new business performances. It has been observed that such kind of issues are arises
because of misconducts and over utilisation of financial resources. This made huge impacts on
net earnings of Zylla company. Therefore, it is utmost responsibility of both managers as well
organisation to resolve these issues as soon as possible. There are various financial tools
available to the company which can help them to easy there task. Some of them are:
KPI: Key performance indicators is known as an effective techniques which is used to
analyse individual as well as organisation performance during the past couple of year (Merchant
and Kenneth, 2012). It can resolve and provide well necessary solution to the financial problem.
Benchmarking: It can be said that an effective tool used for the purpose of solving financial
issues. Under this, a point of scale is set in order as per other company's performances.
Comparison among Zylla company or Unicorn Grocery
Zylla company Unicorn Grocery
It is a large organisation which is dealing in
multi transaction. They require a perfect
system which can control their financial
transaction.
It is small company which is operation at
median level. They target those areas which is
lacking (Herzig and et. al., 2012).
The company is using KPI and financial
governance to manage their business
transactions.
Historical data is being used for the purpose of
decision making.
They are regular keep motoring of their
business transaction so that minimum wastage
can de occurs.
The actual and budgeted information is
required to be evaluated to determine its
current position.

M4: Assessment of financial problems
In the formulation of new business project, company need to use problem free
information. Because it will help them to attain its objectives without any extra efforts. It has
been found that there are various risk related with the projects. It is the responsibility of
researchers to use effective tools to overcome these issues. It will help them to set good image in
the market and also gain competitive advantages over other companies. Financial governance is a
key element to solve financial issues because they are made by government. Every organisation
need to obey their policies and standard so that economic of scale can be attain.
CONCLUSION
From the above project report, it has been concluded that management accounting is
utmost important aspects of any business organisation. It will help company's like Zylla to setup
their standard and maintain balance at every level of organisation. This project summarise
critical information about accounting system and reporting so that Zylla company can manage
there business transaction. It also explains various costing methods that are use for the purpose of
profit analysis. The usefulness of planning tools in budgetary control system are discussed. The
comparison with other company is done to determine financial issues and remedies to resolve
those issues. The overall project is providing positive results to increase growth and future
sustainability.
REFERENCES
Books and Journals: