Management Accounting: A Review

This assignment delves into the field of management accounting. It examines fundamental concepts and practices, highlighting their importance in supporting organizational decision-making processes and enhancing overall performance. The review encompasses various aspects of management accounting, drawing upon relevant academic literature and real-world examples to illustrate its significance in contemporary business environments.

MANAGEMENT
ACCOUNTING

Table of Contents
FROM: MANAGEMENT ACCOUNTING OFFICER..................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
ZYLLA COMPANY.......................................................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM......................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting tools and its various essential and its different types:...............1
P2. Various methods used by the management accounting officer for management accounting
reporting:................................................................................................................................3
M1: Merits of implementing accounting:...............................................................................4
P3 Net profits as per absorption costing and marginal costing:.............................................5
M2:.........................................................................................................................................6
D2:..........................................................................................................................................6
TASK 3............................................................................................................................................7
P4. Use of planning tools in the budgetary controls:..............................................................7
M3:.........................................................................................................................................8
D3:..........................................................................................................................................9
TASK 4............................................................................................................................................9
P5 Management accounting systems to respond financial problems.....................................1
M4:.........................................................................................................................................2
CONCLUSION................................................................................................................................2
REFERENCES................................................................................................................................3

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
ZYLLA COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting is the tool which is used by each firm in order to make
sustainable development. There are certain management accounting tools such as traditional
accounting, lean accounting, cost accounting, job costing, inventory management system, and
much more. With the help of these tools, any organisations can get the competitive advantage
over the others. Although, This report is made on the Zylla company which operated in the retail
trade. It is of small & medium size entity. By using management tools , firm can gain the
competitive advantage over the other rivals. However, this is observed that the company is using
these tools in order to improve the performance of the firm (Casini, Marone and Scozzafava,
2014). Various reports are made on the basis of these management tools so that they could take
effective strategy which is beneficial for the firm. Under this report, absorption and marginal
costing tools are used by the firm for maximising the firm's profits. In addition to this, various
planning tools, their advantages and disadvantages are used by the firm so that the business can
make effective decisions for the firm. However, this is the most effective tools which can be used
by each and every firms for gaining their pre-set targets. Various management accounting tools
such as, KPI, Financial governance, Benchmarking, Balance score care and so on, are used for
responding financial problems (Takeda and Boyns, 2014).
TASK 1
P1 Management accounting tools and its various essential and its different types:
The management accounting is the process of making management reports which
ultimately aim to render exact and timely financial and statistical information needed by the
managers to for making daily and routine decisions. This is the brad term which covers all the
financial and non-financial information that ultimately provides deep information about the firm.
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However, this is the most effective tool in any business form making effective decisions. There
is no legal requirement to serve this reports to the manager. This is totally depends on the
managers or top level authorities whether to serve the management accounting reports by the
management accounting officer or not. But on the other hand, financial accounting report is
required to be made as this is essential as per the law. Management accounting produces daily,
weekly or monthly reports for firm internal audiences. However, this report, typically reflects the
amount of cash available to the firm, sales revenue produced, amount of orders in hand, state of
debtors and credits, outstanding loans, raw material and stock and this might likewise covers
trend charts, variance analysis and other statistics, which will ultimately helps the firm to make
effective decisions for the firm (Malmmose, 2015). This is the tool which is used by the firm in
order to make cert
Management accounting includes accounting, finance and management along with the business
skills and tools which add real value to the firm. MA are qualified to work throughout the
business, not just in finance, assisting managers on the financial implications of huge decisions,
making business strategy and also controlling risks.
Management accountants implement management accounting reports for leading and
inform business strategy and drive sustainable success. The accounting officer of the Zylla
company use use management accounting information in such a manner so that the performance
of the cited firm can improve.
Cost accounting system: This is the accounting system which is used by the firm for
making production of good in an effective manner (Kotas, 2014). However, this is the most
effective tool for knowing the per unit cost. By using this tool, firm could bifurcate the per unit
cost and eliminate the wastage costs from the production costs. This is most useful for the firms
which are operating in the manufacturing sector. As, they would get to know about the costs of
various factors so that they can effectively add value to the firm. And make the product in an
appropriate value.
Inventory Management system: This is the management accounting tool which is used
in the firm for effectively using the available resource in an effective manner, however, this is
the most effective tool for optimising the value of the firm by managing the inventory in an
effective manner. Under this, the management effective manage the inventory so that no extra
costs can incur on the stock.
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Job cost system: This is the management accounting tool that are used by the firm for
recording the costs of producing job, instead of process (Fullerton, Kennedy and Widener, 2014).
With job costing system, a project manager or the management accounting officer could track
costs of the each job. Handling data that is more concerned to the operations of the business.
This is same as the batch costing system.
Batch costing system: Under this system, the batch costing is a kind of special order
costing. This is same as the job costing. Under the batch, each batch are a number of similar
units but each batch would be diverse. Each batch is addressing independent identifiable costs
unit. This is the cluster of the costs which are covered when a group of products or services are
made, and that could be identified to particular products or services within the group.
These are the management accounting tools that are used by the firm in order to attain
firm's pre-set objectives. However, this is the most essential part which are required to know by
the firm for making effective decisions.
P2. Various methods used by the management accounting officer for management accounting
reporting:
Management or Cost accounting concentrates internally on the information received via
financial accounting. Managerial accounting is implemented for planning, controlling and
decisions making. Management accountants depends upon the normal financial statements
covering the income statements, balance sheet and cash flow statements, but likewise
implement other kinds of management reports for assessing firm's information. These includes
product cost reports, budgets and performance reports.
Cost reports: Management accountants measures costs of products manufactured. This
is completed by considering all raw product costs, overheads, labour and any other extra costs
into consideration (Otley, and Emmanuel, 2013). The totals are divided by the amounts of goods
manufactured. Entire information related to this is briefly summarised under the cost report.
Such report enables managers the oversee the cost prices of products versus selling prices. This
enables the manager of the cited firm to plan and manage profits margin.
Budget reports: This is one of the most component of management accounting. Budgets
are mostly formed by implementing prior years' budgets and adjusting to future projections. A
firm's budget lists entire sources of revenues and expenses. A firm tries to complete its pre-set
targets and objectives at the time of staying within budgets amounts. Managers of the cited firm
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oversee into advanced vendors to implement as suppliers of raw materials to protect money.
They likewise find the ways to enhance sales while reducing expenses.
Performance Report: This is the report which reflects the performance of the firm.
Management accounting officer apply budgets to compare the actual expenses and incomes to
the budgeted amount. The variance is assessed at the time of identifying new budgets and and
whole information related to these amounts is listed on a performance report. Performance
reports are measured on an yearly basis. Although, few firms form them monthly or quarterly.
Such reports assists the managers plan for future demand in manufacturing and increasing costs.
Other reports: There are so many reports which are formed by managerial accountants.
Order information reports are used to compare orders placed to orders achieved. These reports
reflects backlog information and if the orders are placed were sufficiently required. These kind
of reports likewise summarize if huge number of orders were placed were specific were ordered,
henceforth, forcing the firm to sit on unused goods not required during the time. Business
situation reports likewise incorporated, that assists the managers to form decisions relating to
current and future firm conditions.
Job cost reports: Under this report, job cost report is the introductory place for much of
the data covered in other reports. Such report lists each job under which working on and lists the
total costs covered on the job in the previous period (Macintosh and Quattrone, 2010). The job
costs are costs broken down into the mentioned categories: Labour costs, Material costs,
Subcontractor costs, Field Overheads, Liquidated Damages. On the basis of this report, the Zylla
company can use this in effective manner. Although this is the most effective manner.
These reports are the essential parts by which firm can gain the sustainable development
for the firm.
M1: Merits of implementing accounting:
This is observed that the management accounting system is an efficient system that are
used by the firm's to control and safeguards its financial transactions. This kind of systems could
assist them to get positive outcomes with the available resources. For attaining optimum
advantages, managers needs to adopt diverse accounting system that could be effective for the
firm. The most imperative for implementing these system is to enhance profitability and
efficiency for the firm. The Zylla company become more reliable for assisting sustainability.
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P3 Net profits as per absorption costing and marginal costing:
Costing is the most crucial part for assessing the per unit cost for the firm. This might
covers the assignment of variable costs, that are those costs which can vary with few forms of
activity. Such kind of costing is called as the direct costing. For instance. The cost of material
changes with the number of unit manufactured, and hence is a variable cost. Costing does not
only covers variable costs but also fixed costs, that are those costs which stay the same, instead
of the level of activity. Such kind of costing is known as the absorption costing. This is the
costing is implemented for two purposes:
Internal reporting: Management implements costing to learn about the cost of operations,
henceforth, this could improve operations for enhancing profitability (Kotas, 2014). This kinds
of information can likewise implement as the basis for emerging product prices.
External reporting: Diverse accounting systems needs that costs be apportioned to the stock
recorded in a firm's balance sheet at the end of the year. This is likewise known as the use of a
cost allocation system, consistently applied.
Under this research report, this is concluded that the cited company uses absorption
costing and marginal costing method for knowing the net profits for the firm. These are
mentioned hereunder:
Absorption Costing: This is the costing tool under which all the manufacturing costs including
fixed and variable costs, are considered while calculating net profits. However, this is one of the
most effective tool which is used by the firm for lowering the costs and optimise the profits of
the firm.
Marginal costing: Under this costing methods all the variable costs are considered while
calculating the contribution. And all the fixed costs are separately treated under this. Thee are
certain tools that can be used by the firm for effective calculating the net profits.
Computation through Absorption costing
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
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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
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 observed that there are so many components which influence the profitability of the Zylla
company. This is linked with the with the internal and external factors of a firm. Diverse
accounting systems are implemented in the firm for overcome the financial distress. Via using
these kinds of tools, managers could effectively address their problems. However, there certain
other tools like- ABC costing and other which ultimately connects to the production of goods
and services.
D2:
From the above calculation, this is observed that the firm can calculate the profits on the
basis of the Absorption costing and Marginal costing tool. However, the company's absorption
costing for measuring the net profits and the net profits as per thee absorption costing is
calculated as 7800 which is more than the profits calculated as per the marginal costing. The
marginal costing net profits is 7500. The margin of 300 is to assessed which is observed due to
the fixed costs.
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TASK 3
P4. Use of planning tools in the budgetary controls:
Planning tools are the most crucial tools which are used for budgetary controls. These are
the most effective tool for gaining the sustainability for the firm. There are certain tools which
are used by the firm effective operations (Bodie, 2013). There are few of the planning tools
which are mentioned hereunder:
Forecasting tools: This is the planning tool which assists the firm's management in its
attempts to co-relate with the contingencies of the future, based on the data from the previous
and current analysis of trends. This begins with the particular hypothesis that are relied on the
management's experience, knowledge, and judgement. Such forecasting are projected into the
forthcoming months, years implementing one or higher tools like- Box-Jenkins models, Delphi
method, regression analysis and trend projection. As, any error or problems in the hypothesis
would outcomes in a same or important problems in estimating, the tools of sensitivity analysis is
implemented that allocates a range of values the uncertain components. This is the tool which is
used by the cited firm for budgetary controls.
Advantages:
Forecasting is the main tool which is used by the firm that could be used by the firm for
meeting the pre-set targets. However, the forecasting tools helps the firm to predicts the amounts
of the revenues and expenses so that the firm could use them for budgetary control.
Disadvantages:
Forecasting does not always renders the accurate prediction of the firm's revenues and
expenses for the pre-set targets and objectives (DRURY, 2013). If the company will use this tool,
then the company will make wrong budgets which will ultimately affects the objectives for the
firm in a negative manner. By applying this tool, firm pre-set objectives can not be achieved due
to its wrongful projection.
Scenario tools: This is planning tool which renders a stranded tool for managers for
evaluating alternative views of what might occurred in the future as this assist to strategic,
functional, and financial planning. This planning tool concentrates highly on responding three
questions: what could happened?, what will be affect on our strategies, plans and budgets?, how
must the company respond? On the basis of these tools, firm is able to respond these problems.
Advantages:
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With the help of scenario planning, firm managers get the investigates about the choices,
opportunities and execution which uncertainty presents. This introduce improved quality strategy
plans, budgets and estimates, and it permits a clearer apprehension of the sensitivity of the main
drivers of the firm and possible impacts of the future outcomes.
Disadvantages:
This planning tool does not always renders an accurate forecasting values which can be
used by the firm. This is the time consuming process as this takes most of the time for
formulating planning tool.
Contingency planning tools: This is planning tool which is specially made for making a firm to
respond in an effective manner to an emergency and this possible impact (Herzig and et.al.
2012). Emerging a contingency plan covers forming decisions in advance about the management
of the human and financial resource, cope up and communications processes, and being aware of
a range of tools and logical references. These kind of planning is a management tool, covering
whole sectors, that could assist the firm to timely and efficient provision of humanitarian aid to
those highly in requirement at the time of disaster occurs.
Advantages:
The main advantage of the this planning tool is to minimise the costs so that the extra
cost can be eliminated. A contingency plan assists to lower the loss of production. A contingency
plan might covers of rerouting data, emergency producers for power, escape routine for
employees and management duties for contingency team members (Arroyo, 2012).
Disadvantages:
This is the most complicated plan as this takes highest time to calculate the planning tools.
While making this tool, company can make certain objectives in an effective manner. However,
this is the reactive approach instead of proactive approach.
M3:
In order to increase the efficiency and attain maximum advantage from the resources,
Zylla company is using various planning tools which can overcome the issues and make
necessary decision by using appropriate budgets. Some of the effective planning tools are
forecasting which can help the organisation to plan for the future sales and profits. Other are
contingency tools is based on situation, under this the company some reserve so that they can use
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it if any contingency occurs during year. All these tools help the company to increase their
market share and control extra cost which are incur during the year (Albelda, 2011).
D3:
In relation to manage Zylla company's performance finance department is entirely
responsible. They can take decision on the basis of current and previous year performance of the
company. It has been analyse that financial problems can affect the performance as well as
growth. It is utmost necessary for the managers to detect all those financial issues and make
necessary steps in attaining future sustainability for the company. Balance scorecard is an
essential system that can be used for the purpose of solving financial issues those are arises in an
organisation. Some issues are related with credit for living expenses on reduced income.
TASK 4
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P5 Management accounting systems to respond financial problems
There are different business situations which are evolved over past few years. It has
become important to have the required information available so that accordingly performance
can be measured and can be identified that weather the desired goals are achieved or not. There
are different techniques which are developed in order to measure the results which are financial
and non financial in nature (Ajibolade, Arowomole and Ojikutu, 2010). Budgetary control
system as discussed above is a suitable technique which helps in facilitating control in overall
operations of enterprise. Zyla by using this can keep effective control over the inflow and
outflow of cash which will help in attaining the desired profitability margins. Key performance
indicators are the measures through which the refereed organisation can reveal its growth in long
term objectives. Some of the major indicators are discussed in detail below:
Benchmarking – It is system through which management puts a standard result in front
of the operation team and ask them to reach at same level of output. This act as a common
objective for the whole organisation and everyone gives their collective efforts towards
achieving it. All the required resources are provided so that no problem is faced by the operation
members. Sufficient time is given to the production department so that standards of given
benchmark can be achieved. It is taken from the own unit or from the market which is considered
to be best in its field. Once the final product is prepared it is compared with benchmark and
deviations are observed. Thereafter, the reason behind the difference is identified so that
accordingly corrections are made and next time the work is done with higher efficiency. This is
an important technique which helps in raising the overall quality and effectiveness of the
business and further leads to employee expertise.
Financial governance – In order to operate in an effective manner it is important that all
the activities are carried out in a manner they are governed in. financial governance is an
appropriate technique through which the refereed organisation can be directed and can mange its
various financial transactions (Takeda and Boyns, 2014). Through this process the needs of an
individual are balanced with that of organisation and together the goals are accomplished. The
result of every employee is compared with the desired standards so that areas of improvement
are identified and than accordingly planning is done. Finance under this technique assures a fair
return to the leaders which motivates use of this approach at wider organisation context.

Key performance indicators – It consists of different too through which the quality of
results are determined. Different ratios like current, quick working capital are calculated which
shows that how effectively the organizations resources are being utilized. It can be determined
through these ratios that how effective the refereed organization is to meet its debts. There are
profitability ratios which are also taken in use in this concept like gross margin profit, selling
cost percentage etc. which are effective setting benchmarks and goals for different departments.
It helps in removing the gap from the actual and set outcome which is of great importance so that
long term benefits can be earned. It is required that right key performance indicator is selected
against a particular situation as only than it will be of use for the management. Each division of
refereed institution will use distinct KPI to calculate the level of its performance.
M4:
It has been noticed that there are various financial issues present in an organisation that
can affect the profitability and growth of the business. The goals cannot be attain in the set
allotted time because of those issues (Juras, 2014). In order to manage all these issues company
need to have well organised system that can control the effects of those issues. Some of them are
KPI which is perfect indicators of solving financial performance of an organisation as well as
individual. Financial governance is another tool which consists of various policy made by the
government in relation to manage companies operations.
CONCLUSION
From the above mentioned report, this is observed that the zylla company uses various
management accounting tools for improving the firm performance so that the cited firm could
make decisions effectively. However, there are certain tools that can be used by the firm’s
management accounting manager for making management accounting reports. Under this report,
net profits as per the absorption costing and marginal costing are used by the firm effective
utilising of firms resources. However the company uses various planning tools for budgetary
controls for getting the outcome as per the results. Under this diverse management tools are sued
by the firm for making overcome the financial distress. By using KPI, Benchmarking, financial
governance and others are the tools which are used by the firm for achieving the financial gains.
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REFERENCES
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Online
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<http://www.bristol.ac.uk/efm/courses/undergraduate/units/level3units/
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