Management Accounting and Planning Tools

This assignment delves into the world of management accounting, focusing on various methods and their applications. It examines different planning tools used in budgetary control, highlighting both their advantages and disadvantages. The assignment aims to provide a comprehensive understanding of how management accounting contributes to effective goal setting and organizational growth.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1. Management accounting concepts and its needs..............................................................1
P2 Different methods applied for management accounting reporting...................................3
LO2..................................................................................................................................................5
P3 Cost analysis to prepare an income statement using absorption cost and marginal cost.. 5
LO3..................................................................................................................................................7
P4 Define advantages and disadvantages of differed kinds of planning tools which used in
budgetary control and activity based costing.........................................................................7
LO4..................................................................................................................................................8
P5 How Organizations are adapting management accounting systems to respond to financial
problems.................................................................................................................................8
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Management Accounting is used by managers for better information of organization and
id is a type of provision made for systematic decision making to assist management and
performance business. Internal activities of firm requires perfection and accuracy in each and
every task.. Zylla also adopts various techniques and methods of management accounting to
reach its financial objectives. It uses these tools to decide costs and resolve financial problems in
smart way. Management accounting is used in devising planning, decision making, and proving
expertise to in various reports. There illustration of risk plan, strategic management and
performance in this report. Its techniques help in operational ability and cost mechanism. Present
report will represent various budgetary techniques, costing system, reporting methods and
techniques of appraisal in internal administration (Kotas, 2014). It emphasizes on tasks,
operations, detailed information and other divisions. It also includes partnering in various
management systems to assist formulation and implementations of strategic techniques. It varies
from financial accounting in various ways. Creditors, shareholders use financial accounting
publicly while management accounting is used within organization itself. It is computed towards
the needs of managers by using management information system. There is variance analysis,
activity based costing, transfer pricing and much more.
LO1
P1. Management accounting concepts and its needs
Management accounting is a needed for evaluation of data for basic needs of
organizational goals. It can be considered as a mathematical tool which fix data in assertive form
of decision that business making and planning for managerial professionals to predict budgets in
different functional departments. These techniques are targeted in a prominent way in an
organization with complete effectiveness to attain managerial objectives. It is a combination of
financial and non-financial statements to provide data so that outstanding decisions are taken in
organization.
Various phases of management are seen techniques of accounting are as follows:
Job Costing: Transaction activity determines costs incurred in each and every activity of
business. Costs are required in every department to demonstrate its requirement (Ceulemans,
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Molderez and Van Liedekerke, 2015). Thus, all mandatory records are made in accounting
systems like direct labor, direct material and other related costs.
Inventory management: It helps in maintenance of export-import of business. It depends on
managing the steadiness of inventories. It should be kept in mind by the production department
that business profitability and consumer demand are major goals of any firm and so organization
should be cautious for it.
Price optimization: Firm earns profit by putting the best and profitable price. Various prices are
fixed up on products and services by rising profit in business. Thus, depending on each and every
product such type of variations are made at various locations. Zylla earns profit if such
techniques are operated carefully.
Cost Accounting: Cost incurred at part of business is illustrated by Zylla. Therefore, for the
production of goods and services huge amount of fund is required (Collier, 2015). So there is
balancing of fund required and investment of fund in production costing technique so that fruitful
results are availed. This technique is mainly useful to know actual cost incurred on every product
to bring results. Like, this perfect management of firm can be confirmed and its practices are
optimized that are based on cost efficiency and capability. Zylla uses this technique in a very
deliberate and technical way.
Auditing: Preparation of audits helps in upbringing of work culture of organization in all possible
ways. All managerial professionals are bound so that meaningful decisions are taken internal
information are known by the accountants relevant to operating expenditures, profit, costs and
other information. Zylla has perfect functional and operational steadiness which has been made
by regular improvements in internal practices of administration. Assets, liabilities and profits are
major accounting parts of accounting systems. Auditing aids in determining these parts in a
suitable time period. It can be considered as the best form of examining and providing surety of
compliance to requirements of firm. There is main use of internal audit. It is done by first party
of organisation which doesn't possess any absolute interest in its outcomes. Compliance,
performance, corrective actions and risks are major tasks of audits. Mainly four phases of audit
exist i.e audit preparation, performance, reporting, follow up and reporting. Auditor, clients and
various other paties perform the first phase (Dekker, 2016.). Second phase is known for
fieldwork which is performed for gathering of information and that includes practices like on-site
audit, meeting with auditee, understanding the whole process and finally controlling the entire
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system. Then, third phase involves communication of results that are investigated. Report
prepared should be clear and transparent.
P2 Different methods applied for management accounting reporting
A report consists of detailed information as per date and time. It includes information
regarding cash inflows that comes from different organizational practices and costs incurred in
various activities of firms. Zylla prepares report in same manner. These records help in effective
decision making and determination of profitability by managerial professional which in turn
reduces costs. Different reporting techniques of Zylla are:
Inventory management report : Inventory management is a report which needs quantity, quality
and cost of products which are initially manufactured and then delivery is done in competitive
and tough market. Fine analysis can be made only from information that aids in evaluation of
demands of products as well as capability of reordering the goods. It is an imperative method as
it bridges the efficiency and development of the firm (Ceulemans, Molderez and Van
Liedekerke, 2015). Usually, organizations compete to make inventories at best level. To fulfill
the demands and avoid hike in prices of goods an issue of having satisfactory products is always
there so that there is no overstocking problems in department. Usually small scale companies
face these types of problems with sophisticated tools at their disposal. Inventory reports are
accessed at accurate time and are moved to stock movement. It is then started with activities like
creating custom reports, underselling, avoiding overselling and cost of goods involved. Various
features are involved in inventory management report that includes inventory stock on hand
report, customizing report with proper attributes, detailed report of inventory, inventory location
report, stock recorder report, incoming of stock report and lastly historic inventory report. First
step goes with simple identification of goods and services. Then a detailed overview of inventory
is reported which involves a list of variants and products. After this, listed amount of stock and
bound up sales is on hand. Then proper comparison is done at different locations. Finally,
management of report and reorder report are done for filtration of purchase. Finally, average cost
is determined for every variant and then desired stock is exported.
Debtors aging report: It is a mandatory report which have controls over extensions on credits of a
firm. It is helpful in preparation of account receivable report (Arkorful and Abaidoo, 2015.).
Therefore, powerful ideas are made for the completion of company's procedure. Records of
debtors who are liable to make payments of goods and services are involved in the record. On the
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contrary, bad and doubtful debts are also included in it. Invoices that are more in length and are
due are under receivables and useful. An estimation is made out of accumulation of products
from uncollected receivables that comes under doubtful accounts. It is mainly useful if any
company faces problem in collecting information or mere customers grow up their business
through cash only basis.
Budgetary Reports: New and innovative ideas are generated through. Thus, prediction of
required costs of each department is each done in order to control expenses. It is meaningful in
allocation of resources. Zylla use this technique to make use of budgetary report so that more
profit can be achieved and accurate business can be done. Management system becomes more
attainable and systematic. Actual performance is compared with budgeted projections in fixed
period. It actually shows the closeness of actual budget with budgeted performance (Collier,
2015). For example, financial managers can correct difficulties in reports by making
performance more inline. Then their accuracy and realistic articulation is measured in real form.
There is possibility of adjustments if assumptions are closer during period.
Cost accounting Reports: It computes with manufacturing costs and delivery costs of goods.
Zylla uses this technique to make reports of all type of cost incurred in different activities of its
business and therefore outstanding controlling is done on the costs of products. It assures costs of
production, labor costs, overheads which are covered under inventory. Thus, managers create
new views and plan alternative ideas for further use. These proposed ideas consequently reduce
manufacturing costs. Revenues and expenses information is provided which are based on credits
and debits of cost centers. It also helps in knowing current cost of business. Cost accounting
includes important element known as overheads that includes administration overhead, factory
staff, sales staff, cost of money, distribution overhead, repair and maintenance, supplies etc. are
categorised into indirect and direct costs. These are controllable and uncontrollable costs.
Uncontrollable costs are not affected by action of management while opposite happens in
controllable costs.
Performance Reports: These reports are handled by managerial heads and professionals of the
business so that entity and workforce performance can be properly assessed properly. It is
fruitful in creating appropriate profits from the market and knowledge (Colmenar-Santos, et.al.,
2016 ). Therefore, operational practices have good effect and these reports fuel up managers for
effective analysis and helps in decision making process to bring work culture in action. Zylla use
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this report very properly and encourage employee's work with rewards, bonuses and various
other benefits.
LO2
P3 Cost analysis to prepare an income statement using absorption cost and marginal cost.
Marginal Costing Method :
Absorption Costing Method:
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Interpretation: This report interprets that absorption costing technique is more helpful and
reliable to th entity because all costs and expenses incurred are considered properly. These costs
included direct material, costs of labour, purchases, variable sales overhead, production
overheads and fixed expenses. This cost system affects all kinds of costs and is an effective
system. Therefore, as compared to marginal cost system this tool is more accurate and perfect. It
is full absorption method or full costing.
Zylla use absorption costing for net profit and accurate results. It is reflective type of method
because it represents fixed costs that are attributed to those items which comes within ending
inventory. Expenses calculated are unsold products so actual expenses are decreased. Finally, the
result is that net profit is higher than variable costing according to calculations. In this cost of
production are accumulated and then targeted to single costs (Cooper, Ezzamel and Qu, 2017).
Valuation is done through this inventory which is shown in balance sheet. Absorption costing
steps involves assigning particular cost to cost pools which is determined set of accounts that
cannot be transformed eventually. After this calculation of usage is done so that overhead cost
can be measured which includes direct labor or machine hours. Lastly, this usage is bifurcated
into total costs so that allocate rate of per unit activity can be traced. On the other hand marginal
costing system is used in values inventory and in decision making at total variable production
cost of a unit of product. It is division of fixed cost and variable cost. Here only variable costs
are operated as fixed costs are excluded from it. This is the reason why many companies prefer
absorption costing system. Zylla also prefer this system to properly calculate net profit and
includes all types of costs. On the basis of administration, selling and distribution classification
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of overheads are done. Engagement of fixed costs directly affects profitability of the firm. While
profit volume ratio determines marginal cost profitability (Lew, Pacana and Kulpa, 2017). Net
profit is attained per unit through cost per unit. While absorption costing system is different
method. In this, report data is shown in quite different and conventional way. That's why this
method is adopted by Zylla company. It is satisfied from this method. No further issues
regarding costs are created through this report. But in marginal costing method cost data outlines
entire contribution of each and every production of department. Here variances in opening and
closing stock affect cost per unit in report.
LO3
P4 advantages and disadvantages of differed kinds of planning tools
Activity Based Costing
This is a very meaningful essay technique with the help of that process of forecasting of
budget is needed to be taken. In addition to this, there are differed kinds of needs which directly
affects terms as are planning, distributing, marketing, production etc. In this term, there are
number of advantages and disadvantages of budgetary will be discussed as follows:
Advantages
It is one of the appropriate and accurate techniques of costing, with help of this there can be
accurate calculation and understanding of budget. Total cost is not considered for examination of
all cost incurred in the operational activities of firm (Lichfield, Kettle and Whitbread, 2016). In
this, only unit cost is needed to add in terms to calculation.
Disadvantages
Under this, there is a need of high sustainable resources and higher attention as it is helpful in
focusing over gathered information which is on high cost. In this term, present method of costing
focuses over profit margin and traditional concept of costing put consideration over efficiencies
of business.
Zero Based Costing
In this, it can be said that it is not inclusive of any kind of past data and performance of
enterprise so it can be dynamic and flexible. Under this, it can be said that budget-developing
plan has to put consideration over current as well as future needs.
Advantages
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Under this, there is a need to make changes as per requirements of firm and is helpful in order to
satisfy numbers of technique (Libby, 2017). In addition to this, all budget need to get start from
Zero balance and it will be inclusive of lower cost. It focuses over flexible budgets, focused
operations, lower cost, and disciplined execution. It is highly used for non-profit enterprises.
Disadvantages
one of the major shortcomings about this is that it is a time consuming process, the high paper
work is need to include at time of preparation of Zero based budgeting. The manager can work as
to develop fear and oppose new ideas at the time of changes taken place.
Incremental Budgeting
This term is based on assumption with some changes in the process of budgeting. It is prepared
with the use of previous period budget amounts and is added for a new period of budget. In this
term, it can be said that allocation of resources are totally based upon the allocation of above
period.
Advantages
 The one of primary advantage is that it is based on recent financial results.
 In this effect of changes can be seen easily.
 It is suitable for firm where requirement of funding are fixed and within the deviation.
Disadvantages
 This kind of approach will work as to makes manager spends more and budget can be
easily available and it may lead to irrelevant spending of funds which is not to be
warranted.
 It encourages higher budgeting. It may lead to reduction in cost and no incentives for
managers.
LO 4
P5 How Organizations are adapting management accounting systems to respond to financial
problems.
Management accounting is the overall process to manage the proper implementation
process and market oriented deals and effective management task oriented process in order to
make the most prominent and effective marketing tools and techniques. Overall, it brings new
method of performance and task oriented process. Besides, besides, it also helps to take over the
functioning level of task oriented process (Chiwamit, Modell and Scapens, 2017). Management
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accounting or managerial function are deployed to provide information that management can use
to make good decisions. This management accounting will help to use the system to help in
costing and managing the manufacturing process. This also helps to make the process
implementing and task oriented managing the manufacturing process. There are given some
accounting system that helps to respond to financial problems.
Balanced Score Card (BSC)- It is the strong balanced scorecard is a strategy
performance management tool. It also helps to convey the best performance level. That helps to
bring new opportunity and growth. It is the tool that helps company to get overcome from the
challenges. It is the strategy that helps to control the things that helps to take the powerful nature
of growth.
Generally is refers to a performance management team that has been used by company. It
also helps to take the best approachable process that helps to make the process clear and
advancing. Through company can easily overcome its challenges.
KPI (Key Performance Indicator)- Key Performance indicators is the measurable
values that helps to make the most compatible and growth oriented strategies that should be
adopted by the company while performing the work accordingly. Besides, it also helps to get
over from the challenges (Christ, and Burritt, 2017). This helps to identify the new ways through
company will achieve business objectives and take corrective action plan.
Benchmarking: Benchmarking is comparing ones business processes and performance
metrics to industry bests and best practices. This process or strategy is also beneficial for
selection, planning and delivery of products. Measuring dimensions are quality, time, and cost.
That will helps to promote best targeting goals.
Financial governance: It is the another, this tool is measurable by audits, to process
workflows, to financial controls, data tracking and security. This will help to make the essential
tools and techniques. It is the overall, financial governance will make the proper effectiveness
that helps to measure the lacking point of the business.
CONCLUSION
From the basis of above section it can be concluded that, management accounting is the
most essential and goal oriented process for the organization. Management accounting is the
most essential and goal oriented process through company can easily get the most effective
process that, helps to make the most essential target plan. Overall, it also helps to bring new
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target goal that helps to take the most essential. Present study has been based on management
accounting functions that helps Zylla Company for a number of years. Study has summarized the
essential requirement of different types of management accounting. This method has been used
for different marketing tools that provides the best effective goal making charge. Overall, this
brings new better opportunity and growth. In order to take the best approachable task oriented
process. It also explained the advantages and disadvantages of different types of planning tools
used in budgetary control.
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REFERENCES
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