Management Accounting: A Comprehensive Guide for Zylla Company

This report delves into the intricacies of management accounting, providing a comprehensive guide for Zylla Company. It explores various management accounting systems, techniques, and tools, including marginal and absorption costing, budgetary control, and planning tools. The report also analyzes how management accounting can address financial problems and lead to sustainable success for the organization. By examining the application of these concepts within Zylla Company, this report offers valuable insights for improving financial performance and achieving organizational goals.

Management Accounting
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Contents
Executive summary:...................................................................................................................3
Introduction:...............................................................................................................................5
LO1:...........................................................................................................................................6
P1 Explain management accounting and give the essential requirements of different types
of management accounting....................................................................................................6
P2 Explain different methods used for management accounting reporting...........................6
M1 Evaluate the benefits of management accounting systems and their application within
an organisational context........................................................................................................7
D1 Critical evaluation of how management accounting systems and management
accounting reporting are integrated within organisational processes....................................8
LO2:...........................................................................................................................................9
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing..................................................................9
M2 Apply a range of management accounting techniques and produce appropriate
financial reporting documents..............................................................................................12
D2 Produce financial reports that accurately apply and interpret data for a range of
business activities.................................................................................................................14
LO3:.........................................................................................................................................15
P4 Explain the advantages and disadvantages of different types of planning tools used in
budgetary control.................................................................................................................15
M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets...............................................................................................................16
LO4:.........................................................................................................................................18
P5 Compare how organisations are adapting management accounting systems to respond to
financial problems................................................................................................................18
M4 Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success.....................................................................................19
D3 Critically evaluate how planning tools for accounting respond appropriately to solving
financial problems to lead organisations to sustainable success..........................................19
Conclusion:..............................................................................................................................21
References:...............................................................................................................................22
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Executive summary:
As the management accountant of the Zylla Company, there are many changes occurred over
some time so it is important to manage the accounting system of the company. The reports
include the explanation of the management accounting systems. It is also explained how to
determine the marginal and absorption cost using the management accounting technique.
With the help of management accounting financial problems of the company is also resolved.
The report also recommend about the accounting management planning tools and the
methods of management accounting report. Report also include about the solving the
financial problem of the company which leads to the sustainable success of the organisation.
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Introduction:
Zylla Company is the large multinational organisational company. It is changing over some
time which results in the expansion of the business into new markets, structuring, acquisition
and location. Being the management accountant of the company to review and research the
management accounting methods, tools, techniques for the efficient working of the
organisation. It helps in the decision making of the company and improving the performance
of the organisation. Management accounting also helps in making management reports and
accounting which gives the proper financial information required by the Zylla Company.
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LO1:
P1 Explain management accounting and give the essential requirements of different
types of management accounting.
Management accounting helps in managing the business organisation. The manager manages
the business and takes the decisions for the better goals for the organisation. By managing the
reports of the company, we can accurately maintain the information of the company. It also
helps in taking the financial decisions of the company. It manages analyses, and predicting
the future. It helps in making the conclusion and predicting flows of cash. It makes the
performance of the company better and helps in achieving the goals of the organisation. It
helps in evaluating how sales of the company should be increase. For evaluation an
accounting manager can analyse the difference between advertising alternatives of each
product (McNeil, 2015).
P2 Explain different methods used for management accounting reporting.
There are different methods of management accounting such as:
1. Financial information: It helps in evaluating the ratios, comparative statement, graphs,
diagrams, trend, fun flows, and cash flows and also analyse the return on capital employed.
2. Cost accounting: It includes the information such as marginal costing, standard costing,
variances of cost, direct costing, etc. It also helps in analysing the profit, cost of the company
Zylla (McNeil, 2015).
3. Mathematical Approach: It helps in analysing the numerical as well as the operational
functioning of the organisation. It helps in programming the statistical data and also
achieving the objectives of the company (Bedford, 2015).
4. Budget: Budget is the forecast of the future planning; it helps in analysing the budget
variance and the revenue variance. Budgeting controls also manages the cash requirements of
the company. There are also the appraisal projects and the evaluation of the organisation
which leads to attain the performance of the company.
5 Financial statements and planning: The Company’s main objective is to attain a
maximum profit. It can only be attain by a proper financial planning, so it is the essential tool
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for the management accounting. With the help of financial statement, the manager can easily
analyse the profit and loss as well as the balance sheet of the company. This also helps in
giving the information about the growth of the organisation and its financial position
(Bedford, 2015).
6 Standard costing: It is a predetermined cost of the company. It measures the actual
performance and gives a yardstick to the company. If there is any deviations then standard
costing find a reason behind it.
7 Marginal costing: It is also known as costing of variable. It is based on the variable, fixed
and contribution. This technique is used to set the selling price of the company. This also
helps in taking the decision and accepting or rejecting the orders of foreign.
8 Budgetary controls: This technique is used to control the financial position of the
company and the performance of the organisation. It is the estimation of the future which is
arranged according to a basis of order.
M1 Evaluate the benefits of management accounting systems and their application
within an organisational context.
Management accounting helps in better understanding of the company Zylla. Management
accounting helps in taking a right decision at a right time. It also shows the financial position
of the business that analysis the profit, cash flows of the company Zylla. By maintaining the
management tools, it helps in achieving the goals and the adjective of the organisation. It
utilises the financial resources properly and also saved the working capital of the company. It
gives us the information related to the expenses, revenues of the organisation. It increases the
goodwill and represents the good reputation in the project. It also gives a clear picture to
bankers and investors. Management accounting helps in planning and controlling the
operations of the business. With the help of management accounting, manager can also
provide better services to its customers. Management accounting reduces any types of
wastages in production activities and increases the efficiency and effectiveness of business
organisation. It not only leads to the maximisation of the profit but also reliable for the
management accounting tools (Kerzner, 2017).
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D1 Critical evaluation of how management accounting systems and management
accounting reporting are integrated within organisational processes.
There is a relationship between management accounting system and their processes which are
integrated with the business organisation. It helps in the effective working of the
organisation. Business strategies help in achieving the goals of the organisation. It also
controls and manages the accounting system of the company Zylla. With the help of
management accounting the organisation can easily run its processes. Management
accounting reports gives the picture of financial position of the company which also leads to
the sustainable success of the organisation. Management accounting also gives the statistical
database information which is very essential for the company. Management accounting helps
in taking the internal decision of the company and also leads to the effective control of the
organisation. Management accounting identifies all the activities of the company and solves
all the problems of the organisation. If management accounting works properly then only the
organisation can achieve the business goals and objectives. So it is necessary for every
organisation to adopt the accounting systems and accounting reports which helps in achieving
the organisational goals. Management accounting does planning of the company and
organising the activities and manages the overall performances of the organisation (Gitman,
2015).
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LO2:
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing.
Working Notes :
Cost of Sales = Sales Unit x Total Production Cost
per unit
March = 1500 x 20 = 30000
April = 3000 x20 = 60000
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Under/Over Allocation
March
Overheads Allocated (2000 x 5) = 10000
Overheads Incurred = 15000
-5000
April
Overheads Allocated (3200 x 5) = 16000
Overheads Incurred = 15000
1000
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Working Notes :
Cost of Sale = Sales Unit x Variable Production
Cost per unit
March = 1500 x 15 = 22500
April = 3000 x 15 = 45000
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M2 Apply a range of management accounting techniques and produce appropriate
financial reporting documents.
Marginal and Absorption Costing:
Marginal Costing:
Marginal Cost as understood in economics is the incremental cost of production which rises
due to one unit increase in the production quantity. As, Variable cost have direct relationship
with volume of output and fixed cost remains constant irrespective of the volume of
production. Hence, a marginal cost is measured by the total variable cost which is attributable
to one unit.
Marginal cost is the sum of prime cost and variable overhead. Marginal Cost is a costing
system where products or services and inventories are valued at variable cost only. It does not
take consideration of fixed cost. This system of costing is also known as Direct Costing as
only direct cost forms the part of product and inventory cost (Singh, 2013). As per Question,
the total cost of producing 2000 units and 3200 units of a product is 22500 and 45000
respectively. The marginal cost for 3200th unit is 22500.
Advantages:
1. Simple price policy
2. Proper recovery of overheads
3. Shows realistic profit
4. How much to produce
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5. More control over expenditure
6. Helps in Decision making
7. Short term profit planning
Limitations:
1. Difficulty to differentiate between fixed cost and variable cost
2. Dependence on key factors
3. Scope of low Profitability
4. Faulty Valuation
5. Unpredictable nature of Cost
6. Marginal Coasting ignores time factor and investment
7. Understanding of WIP
Absorption Costing
In Absorption costing expenses are classified on functional basis whereas the marginal
costing is based on the expenses made by the organisation. Absorption costing is the pre-
determined cost of the company in which fixed cost is distributed over some products. In
absorption fixed cost is constant and the variable cost varies as per the data changes.
Difference in Profit under Marginal and Absorption Costing:
1. No opening and Closing Stock
2. When opening stock is equal to closing stock
3. When closing stock is more than opening stock
4. When opening stock is more than closing stock
D2 Produce financial reports that accurately apply and interpret data for a range of
business activities
With the help of financial statement and reports we can easily find out the financial position
of the company. The financial report includes the cash flow, income statement and balance
sheet of the company. Financial reports also state some data and give the details of the ratio.
Financial report is basically the collection of data as input which is processed to the
information. Inflows and outflows of money are the key essential points of an accounting
system. Financial reports are used as a medium of tracking the current financial status of a
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company. All the major decisions regarding the budgets and investments are prepare on the
basis the past financial record. Financial reports are like the final result or output of planned
data. What plan is directly associated with the outcomes of our reports. There is always a
room for improvement, firstly prepare expected expenditure and plan our financial budget for
better sectoral development. After performing all the function we planned, the final output is
prepared for analysing and summarizing the data. This data will leads us for either getting
better or to find out the actual reason behind mismatch is our financial budget planning. This
makes the process easy and fast for better and accurate working (Cook, 2016).
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LO3:
P4 Explain the advantages and disadvantages of different types of planning tools used in
budgetary control.
Planning Tools are the ways through which an organization takes its step related to the
implementation of initiative of programs and activities. It gives a detailed description about
how the plan should be implemented. Planning is the first step. A good planning tool will
always achieve the targets of the organization. Planning gives a mechanism to the
management accounting so it is very essential for any company. Planning tools gives the
guidelines to the company related to the financial position (Kerzner, 2017). It is an important
tool which is used by the organisation to control the cost and to increase the profit of the
company (Rubin, 2016)
Advantages:
1. Budgetary control helps in defining the goals, plans, objectives, and policies of the
organization.
2. It is an essential method for controlling the activities of a business process of different
departments in the company.
3. It also coordinates the different activities of the department and secures the interest in
the organization.
4. It is helpful in decreasing the cost of production by eliminating the expenditures
which are wasteful.
5. Budgetary control also helps in increasing the efficiency and also promotes the cost
among the employees of the company and serve to the economy of the company.
6. It helps in solving the problems and also tells the management to achieve the goals of
the organization on time.
7. It also helps in effective running and smoother functioning of the organization.
8. Along with decentralized activities it also provides centralized control.
Disadvantages:
1. Budgets are merely estimation; hence there are high chances of error.
2. Budgets take high efforts and time which lead to delay in decision making process.
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M3 Analyse the use of different planning tools and their application for preparing and
forecasting budgets.
Planning tools helps in increasing the profit of the company and also fulfilling the desires and
requirements of the organization. Planning tools also prepares the budget for the future which
helps in controlling the functioning of the organization. It also helps in financial planning and
the effective management of the company Zylla. Planning tools also helps in taking the
decisions of the company and also helps in managing the accounting of the company. It gives
the information regarding the revenues, incomes, expenses, profit and loss, and other
important information which is essential for the organization. Creating a budget plan helps
the business in managing the cash flows of the organization. As the business environment is
dynamic so to forecast the budget with the help of different planning tools helps in meeting
the needs and requirements of the business environment (Cook, 2016).
Budget also helps in comparing the actual performance with the current performance. It also
analyses the current years and previous years problems and it try to dissolve it. Planning tools
also helps in finding out the opportunities in the organization and identifies the resources and
also makes the budget. Planning tools helps in and manages to control the finance and the
funds to meet the goals of the organization. A company should always plan what it wants to
achieve then only it will lead to the success (Rubin, 2016).
LO4:
P5 Compare how organisations are adapting management accounting systems to
respond to financial problems.
There are number of financial problems which an organisation faces. There are number of
management accounting systems which consists of different types of accounting tools such as
benchmarking, KPI’s, standard deviation, financial ratios etc. In previous decades, companies
used to apply certain accounting tools such as financial ratios, standard benchmarked and
budgeting (Gitman, 2015). Financial ratios includes certain ratios such as profitability ratios,
liquidity ratios etc. These ratios are formulated with a view to analyse the financial
performance of the company (Gitman, 2015). Standard benchmarking includes setting up of
benchmark figures for industries which provides standard for every company.
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But with the passage of time, there are invention of other comparative tools such as Financial
ratios with balanced score card, KPI’s, activity based costing etc. Balanced score card is a
technique whereby both financial and non-financial parameters are considered for analysing
financial performance of the organisation. There is also technique like activity based costing.
This technique segregates cost on the basis of activities. Hence, it is analysed that there are
large development of techniques which provides solutions for financial problems.
M4 Analyse how, in responding to financial problems, management accounting can lead
organisations to sustainable success.
Sustainable development is meeting the needs of human by keeping in mind the needs of
future generations that is preserving the needs of future generation also. We cannot say any
country to be developed until it has sustainability implies without sustainability development
is not possible this author elaborates: sustainability has never been so effectively managed
than it is today and this is clear by the way governments and organizations are responding to
financial crises. He argues that sustainability educates people and advices them to live life
manageably. Sustainability is about present generation and time and also about the future
generation’s security and preservance.”
D3 Critically evaluate how planning tools for accounting respond appropriately to
solving financial problems to lead organisations to sustainable success.
For the success of the organisation, planning tools for the accounting is very essential. For
solving the financial problem, firstly we have to analyse the problem that cause the difficulty
in business organisation. Being the manager of the company, it is essential to manage the
cash of the company. Creating a budget also helps in solving the financial problem of the
company. Budget is the estimation of the future, which gives a picture of the financial
outflow. Set your goals, and take small steps to achieve them. To reduce the financial
problem, try to decrease the expenses of the company. By increasing the income and profit of
the company we can easily meet the needs of the organisation. Analyse financial or business
challenges of the future which helps in overcoming the financial problem of the business. For
the sustainable success of the organisation, it is important to work in a proper and in an
efficient manner. To follow the policies and procedures and to comply with the government
policies is also very important to overcome any financial problem. By improving the
performance of the company and implementing the plan we can easily take the decisions
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regarding the financial situations and also helps in achieving the goals of the organisation
(McDonald, 2016).
Conclusion:
In this report it is explained that management accounting is very essential for the company.
Management accounting helps in increasing the profit of the company and it also helps in
achieving the goals of the organisation. In this report we have explained different types of
management accounting which helps in analysing the financial position of the company. In
this report the manager has also explained about the marginal and absorption costing which is
the essential tool for the organisation. The manager has also explained about the advantages
and disadvantages of the budgetary control. Different planning tools help in forecasting and
preparing a budget. Different management accounting helps in solving the financial problem
which leads to the sustainable success. As the management accountant of the Zylla Company,
different accounting tools have been used in the company to determine the cost. Management
accounting helps in increasing the overall performance and the growth of the company.
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