Management Accounting and Reporting System

The assignment discusses various topics in management accounting, including the use of accounting and reporting systems to examine net profitability, different costing methods, and planning tools for budget control. It also touches on environmental management accounting, strategy, and performance analysis in a lean manufacturing environment. The document provides references from books, journals, and online sources.

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: Different types of management accounting and their essential use.................................1
P2: Different methods for management accounting reporting...............................................3
M1: Benefits of management accounting:..............................................................................5
D1: Critical analysis of reporting system ..............................................................................6
TASK 2............................................................................................................................................6
P3: Various costing methods .................................................................................................6
M2: Evaluation of accounting techniques..............................................................................8
D2: Critical evaluation of profit and loss statements............................................................8
TASK 3............................................................................................................................................8
P4: Advantages and disadvantage of using planning tools....................................................8
M3:Evaluation of planning tools..........................................................................................10
D3:Critical analysis of financial problem.............................................................................10
TASK 4..........................................................................................................................................11
P5: Various measures to resolve financial problems............................................................11
M4:Evaluation of financial issues........................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
ZYLLA COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management plays an important role in managing business operations of an organisation
in an effective and efficient manner so as to achieve desired goals and objectives. Management is
required in a business organisation whether the size of an organisation is small or large. There
are different tools and techniques through which manager perform various activities such as
planning, organising, motivating and controlling in order to formulate better decision. In this
project report, the firm 'Zylla' selected in order to examine various accounting systems applied
along with their essential use in organisation. Various costing methods and different aspects of
accounting reporting which is helpful in analysing profitability of business will also be discussed
in this report (Arroyo, 2012). The benefits and limitations of using planning tools that are linked
with budgetary control are also covered in this project report. The questions related to financial
problems along with corrective measures are also discussed here. The Overall project is based on
management accounting system which is helpful in achieving the future growth of Zylla.
TASK 1
P1: Different types of management accounting and their essential use
Meaning: As various activities are performed within business organisation and in order
to ensure whether such activities are done in an effective and efficient manner, management is
necessarily required which helps an organisation to achieve desired growth and profitability. To
manage the accounting data and information account manager is held responsible through which
he can organise and control accounting activities effectively.
Definition: Management accounting refers to preparation of financing reports and
accounts which include reliable, accurate and statistical data which is need to be required by the
manager to formulate effective decisions that directly help an organisation in achieving short as
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well as long term objectives. Therefore in order to attain good financial position and perform
business operations smoothly the manager of Zylla needs to evaluate accounting and financial
information as well as data relating to entries, ledgers and budgets (Boyns, and Edwards, 2013).
Also they are needed to implement corrective measures if any deviations occur. It is known as
the primary aspects of accounting system through which manager gets to know about company's
total sales volume, accounts receivable and payables etc. Effective management of financial
operations also helps in attracting investors to invest in an organisation to get maximum return.
Misrepresentation or misconduct also affect the profitability of business organisation
therefore by using effective accounting system the managers can easily find out deviations as
early as possible and accordingly take corrective measures to resolve all such related problems so
that it would not affect the productivity. As Zylla is large in scale therefore it becomes difficult
for the manager to manage financial records in an effective and efficient manner thus it is
required to first analyse the financial problems carefully and then need to implement corrective
measures. Company's performance is also affecting when the management uses outdated system
in order to record financial transactions due to which chances of errors in accounting data are too
high Therefore managers need to update themselves with the advanced technology in order to
achieve competitive advantages as well (Herzig and et. al. 2012). So Zylla needed to use updated
accounting systems which helps an organisation to record and analyse the transaction performed
on regular basis. The future growth and profitability of company depends on the results which
are collected from using accounting systems.
Importance of management accounting:
l It helps in achieving the team's objectives: Arranging factors of production, assembling
and organising the limited resources through using appropriate accounting system by
manager of Zylla in an effective and efficient manner helps in achieving the set group
goals.
l Optimum utilisation of resources: An organisation has limited resources in the form of
physical and human as well as it is important for the manager to utilise them in such an
appropriate manner which helps in bringing maximum output at minimum cost.
Types of accounting system:
Price optimisation system: It refers to maintaining the balance between profit and value
of product so as to achieve profitability as well as customer satisfaction. It is important for
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managers of Zylla to fix prices of their products according to the response of targeted customers
which will help them in achieving operating profits as well as in the future growth. It also helps
company in determining the initial pricing, promotional pricing and markdown pricing. The price
optimization system allows company to forecast demand of their products and developing
pricing as well as promotional strategies along with control inventory cost and customer
satisfaction.
Cost accounting system: An organisation can only sustain in the competitive
environment if they manage their business operation and cost of production effectively and
efficiency. Therefore accountant manager is held responsible to monitor such business operations
and control excessive cost incurred in production process (Otley and Emmanuel, 2013). He is
also liable to take effective decisions regarding storage cost which help them in evaluating the
cost of sales. This will help an organisation to reduce the wastage of resources incurred during
business operations.
Inventory management system: Proper managing and supervision of non-capitalized
assets and inventories helps Zylla to supply products to meet the demands of their products in
market. The manager also need to take suitable actions relating to maintaining storage products
in an effective and efficient manner. Manager of Zylla need to control all the activities that start
with production process and ends with sales to end consumers.
Job costing system: It is useful in tracking labour cost assigning or allocating
manufacturing costs to specific product or batches of product. This costing system is helpful only
when the products manufactured are different from each other.
P2: Different methods for management accounting reporting
A report is complete summary of every crucial financial accounting statements which are
prepared by Zylla company. It consists of profit and loss statement, balance sheet and cash flow
statements (Van der Stede, 2011). It is a systematic communication system by which plenty of
investors and stakeholder can used for the purpose of taking valuable decision-making. It is a
form of data analyse process by which performances of various level of departments are evaluate
and summarised. On the other hand, it is said to be transforming useful information to higher
level of department of Zylla company to determine there exact demand and position. It consists
of evaluation, suggestion and monitoring with proper evidence in form of final outcomes during
the year. These are mainly effective to the administrators for up coming planning and
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measurement. It is a ongoing activity which is done through out every year on a regular basis.
Hence, it is necessary to have a well organise reporting system system which can provide
effective results for an organisation. The primary objectives of using reporting system is make
the decision more effective and profitable. It is an important aspects that is helpful in data
collected with the business to discharge there operational activities such as planning,
summarising and controlling or managing their day-to-day operations. By this, it can help in
attaining operational efficiency of Zylla company through proper utilisation of resources.
Reports are more effective, if they are prepared by taking accurate data of the company
without any wrong entries into the books of accounts ( Tucker and Lowe, 2014). It will help in
order to protect information about individuals those are belongs to various departments in an
organisation. It has been notified that organisation can only attain their objectives, if they are
using reliable sources of tools that can help them to increase goodwill in the market. There are
various sources through which information can be brought such as financial as well as non-
financial. The social company's benefits would be taken into consideration while making any
critical decision with the help of those reports.
In order to increase market share and future sustainability which is an essential parts for
accounts managers. Thus, they required to have an effective reporting system that can provide
necessary information about their overall performance of company during the year. With the use
of reporting system company's financial records, entries and amounts are analysed in proper
manner. These are more effective in taking necessary decision for the growth and success of
business. Such data is collected from HR, finance, sales and operational departments. The detail
of information is posted into various accounts statements. The investors of Zylla company uses
these statements for the purpose of making crucial decision whether to invest under this company
making them healthy return in future or not (Vaivio and Sirén, 2010). The further investment
planning is based on these statements. For reporting it is necessary to target their growth and
opportunities which are beneficial for coming sustainability.
Significance of reporting system:
 Useful tool in controlling system: By the help of this, managers can take complete
observation over employees to determine whether they are working in right manner in
attaining goals of Zylla company.
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 Effective in profit generation: The main objectives of an organisation is to increase
profitability with utilising resources of company in more efficient manner.
Types of reporting system:
 Performance reporting system: According to this system, accounting information are
analysed in such a way as that it should present recent financial performance of Zylla
company. It helpful in determining both individual as well as organisation performance
during the year.
 Inventory management system: Under this reporting system, managers can record
various crucial information about stock position (Quinn, 2014). It is an effective tools
used for the purpose of managing and controlling inventories. There are certain tools
which are helpful in doing so such as EOQ, ABC costing and inventory turnover ratio.
 Account receivable report: As per this particular report, managers uses to analyse total
detail of unpaid clients and bills according to allotted data. It is one of the crucial
techniques which is used for to examine total time required to recovery all these amounts.
 Job costing report: It includes total cost which is related with production of goods and
services during the year. It consists of detail information about various aspects such as
material, labour and expenses which are incur by Zylla company during that time.
 Operating budget report: This report is prepared in order to analyse total expenses and
income done during production process. The actual costs is determine which are incur
with the production of one additional units. They are usually related with a entire
business or an individual project. By combining all operating budgets into a report called
as income statements it will be analysed total earning of the company.
M1: Benefits of management accounting:
In order to attain financial stability and efficiency in performance of Zylla, the
management accounting system is necessarily required with the help of which they can record
regular transactions in an appropriate manner. Through performing this, the chance of getting
profitable results will be more. Therefore recording and analysing accounting information
through using accounting system tools, them manager of Zylla has in strong position to take
effective decision in order to better profitable result.
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D1: Critical analysis of reporting system
It has been seen that every organization whether small or large required to control their
accounting data in well manner so that chances of mistake and fraud can be controlled. Reporting
system can be the effective tools which can help the company's to manager their daily
transaction. The manages have to make use of these system so that profitability and growth can
be enhanced. By this aims of Zylla company would be achieved in more quick time. The primary
objectives of using reporting system is manage their costs and expenses as well as estimation of
future productivity.
TASK 2
P3: Various costing methods
Cost refers to be an estimation of total amount Zylla company is using during production
of products and services. Basically, it will expressed in financial and non-financial manner. It
consists of valuation of resources, utility consumed and total risk related with that specific
product (Morales and Lambert, 2013). Whereas, costing is the systematic process of company's
projected cost of manufacturing something. It consists of variable costs those are varies with
some changes in activities. On the other hands, it is the system of calculating total amount
require to run a business through allocation of expenses at different stages of production. Costing
is a technique to assists Zylla company in establishing various budgets, standard.
The scope of cost accounting is narrow as compare to management accounting system. In
this, manages targets is related to minimise costs so that maximum profits can be done. In case of
manufacturing, research and accounting cost can be considered as total amount which has been
utilised in formulation of something or delivery of goods. It has been seen in recent past that
companies are moving towards use of ABC costing which is helpful in generating cost effective
outcomes for Zylla company. There are some costing methods which can be useful in improving
performance as well as productivity. Those are discussed underneath:
Marginal costing: It is said to be that cost which is incur by company during production
of an additional units with the same resources. It is segregated into two parts fixed and variables
by this help of these division company can take valuable decision.
Absorption costing: According to this costing, cost of manufacturing is determined after
evaluating total costs. It carries both fixed and variables costs. Thus, this method is followed
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from long time. Variable costs are changes with product while fixed costs are apportioned over
other aspects of products.
Comparison
Absorption costing Marginal costing
Under this method, cost is termed as on
conventional basis.
With the use of this method, cost data is
represented by contribution per units.
Both fixed and variable cost are taken into
consideration.
In this method, variable costs are used for
stock valuation.
It is associated with companies long term
strategic development.
It if for short-term planning (Luft and Shields,
2010).
It is not considered to more effective methods
in terms of decision-making.
Managers uses these costing method for taking
future decisions.
Calculation through marginal costing using
Income statements
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 of Net profit by using absorption costing
Income statements
Particulars Amount
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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: Evaluation of accounting techniques
It has been observed that every organisation need to have perfect planning about their
coming future. It can provide them an estimation of total costs and expenses which are going to
invested by the company. It is more effective tools in order to increase profitability and growth
of Zylla company. For this purpose, managers are always uses perfect tools that can provide
them more reliable outcomes. In accordance to manager risk as well as extra costs those are
arises in an organisation can be controlled by using conservatism techniques. Materiality is
another tool which is effective in managing resources of company.
D2: Critical evaluation of profit and loss statements
According to take valuable decision, Zylla company is using two of the useful costing
methods such as marginal and absorption costing. Both of these are effective in generating net
profit for the company. With the use of marginal cost they are getting profit of 7500 while, if
they are considering absorption costing they are incur 7800. The difference of 300 is arises
because of fixed cost. For the purpose of future decision-making they need to go with marginal
costs as it is more effective as compare to absorption.
TASK 3
P4: Advantages and disadvantage of using planning tools
Budget: It is one of the effective techniques by which managers can estimated its total
costs and expenses which are going to incur by company. It is well planned and systematic
collection of records for a specific period of time. It is a complete framework of operation and
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planning for a particular targets (Fullerton, Kennedy and Widener, 2013). Basically, it is
prepared for maximum of five years. It can also be followed if results are not in appreciable.
Budgetary control: It refers to be an effective techniques which is used in operational
activities such as planning, organising and controlling performances of an organisation. In this
actual income and overall spending are analysed with planned income. It is required to be
followed with certain process in order to maintain proper balance.
Process of budgetary control
 Research with concern managers: It is an important step for managers to make proper
evaluation about budget requirements in an organisation. Budget are made after
consulting it with every departments.
 Determination of effective assumption: After gathering information from all
departments such as finance, HR and operations. An assumption is made about strategies
for future forecast.
 Set organisational data for budget to achieve goals: In this process, a well organise list
of detail information is prepared by assembling of data which are collected from
department (Cadez and Guilding, 2012V). A target is set by keeping future outcomes in
the minds.
 Measurement of information with actual: The position of Zylla company is measured
through using actual information in accordance with the standard one. By this exact
results of performance can be determined.
 Review analysis: It is the last phase under budgetary control. Managers can looks that
above explain steps need to be analyse before making it into action.
Planning tools: In every organisation, planning refers to be administration tools which is
associated with vision of the company upcoming path. There are some specific types of tools
which are used to control budgets. Such as:
Forecasting tools: It is based on assumption which is based on internal control
management that consists of effective skills, knowledge and decision-making. It is relies on
historical data for the objectives of estimating future targets. To make research about the
different industrial regulations that provides information regarding different important aspects.
Such forecast helps the management of company to understand about industry trends and the
potential happenings which are occur in the market like demands, prices and labour (What is
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Budgetary control, 2017). Under this forecast, they have to look another important factors like
consumer behaviour, advance technologies, strategies adopt by retailers and manufacturers,
legislation and state of economy. This helps in identification of future factors which have long
term impact on business operations. According to research, manager has ability to make plans
and budgets and guide their functions towards achievement of organisational objectives.
Advantages: It is crucial for industries in order to examine pre set targets. With this,
managers can estimate total cost and sales volume they are incurred in company future.
Disadvantage: Sometimes, it is not taken as essential tool as forecasting is entirely based
on assumption. It is difficult to estimate total expenses or costs Zylla company is going to get.
Scenario analysis tools: By the use of this tools, managers can react their response as pre
the current trend in market. It assists to planning, operational and investing administration of
Zylla company. It changes of according to variations in demand in the market (asile and Man,
2012).
Advantages: with the help of scenario tool, managers of the company can generate
proper idea regarding there selection and up-coming opportunities those are always uncertain for
them.
Disadvantage: It has been found that sometimes, it is also not so effective as with the
changes in policies it can not able to generate appropriate outcomes.
Contingency planning tools: It is said to be that planning tools which is formed for
identification of a firm's decision-making at critical situations. Implementing a contingency plan
can always effective in incurring sufficient amount of results.
Advantages: It is crucial for minimising cost so that extra burden can be managed.
Disadvantage: It is more uncertain and complex while predicating for future.
M3:Evaluation of planning tools
In order to increase goodwill and market share for Zylla company planning tools are
more effectively helpful. The resources are fully utilised by using corrective techniques. Some of
them are forecasting tools which is used for estimating future profitability and sales revenue.
Likewise, scenario tools are related to overcome current time issues those are present in the
company.
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D3:Critical analysis of financial problem
It has been observed that in an organisation there are various issues which can affect the
profitability and sustainability. These are issue are related with finance such as Cost efficiency,
performance and control. Such problems are need to solve in more quick time so that
productivity can enhances.
TASK 4
P5: Various measures to resolve financial problems
It has been found that every organisation is working for some motive. But they are not
able to reached to there goals because of financial issues attached with it. There are so many
issues which are presented in an organisation. It is associated with operational, investing and
financial aspects. These problems are develop through use of outdated technologies. Some of
them are:
 Profitability: There are some issues which are present with profit those are
related with Zylla company. It can increase extra cost and burden on them to
reach at there destination.
 Cost inefficiency: Few problems are exist with production process of products
and services (Parker, 2012). It is arises because of inappropriate use of cost
accounting system.
 Performance control and management: It is related with financial position of
company during the time. With the not evaluating performance of company in
correct manner it will create mismanagement of operations.
In order to overcome the above financial issues managers can us following techniques
those are discussed underneath:
KPI: Key performance indicators is said to be one of the crucial tools which is used for
the purpose of solving financial issues by comparing data of company. It should be of past and
present year basis. With this, performance of each and every one working in an organisation can
be evaluated.
Benchmarking: It is the process of assessing the performance of a firm's goods and
Services or processes against another firm assumes to be the best in the industry. This tool is
used by the management of the firm in order determines the inner opportunities for the
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improvement of firm performance. However, this can be said that there are mainly two common
types of improvement opportunities which are: regular and dramatic. The regular improvement is
incremental, covering only small arrangements to reap sizeable advances. While, dramatic
improvement is only emerged via re-engineering the entire internal work process.
Difference between two companies
Zylla company Unicorn Grocery
Under this, as company is operating at a small
level so they need to control there operational
activities in well organise manner.
According to this, as they are working at wide
scale so they need perfect monitoring system
so that issues can managed effectively.
SMART tools are required to be utilised in
more effective in more crucial situations.
KPI and benchmarking can be the perfect
option for this company.
M4:Evaluation of financial issues
According to the analysis of various financial issues in the above, it has been evaluate
that Zylla company need to adopt more effective techniques so rectify these problems. In relation
to this, KPI which is a perfect tool to determine performance of company during the year.
Another vital tools are financial governance and benchmarking can be the best option for them.
CONCLUSION
From the above project report, it has been concluded that management accounting is an
essential aspects for Zylla company in order to manager there daily operations. The project bring
a complete highlight of companies performances through using accounting and reporting system.
For the purpose of examine net profitability certain costing methods can be utilised. Some
planning tools are discussed under this project in order to control budgets. The understanding of
financial issues and necessary measure to solve those are explained clearly.
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REFERENCES
Books and Journals:
Arroyo, P., 2012. Management accounting change and sustainability: an institutional approach.
Journal of Accounting & Organizational Change. 8(3). pp.286-309.
Boyns, T. and Edwards, J.R., 2013. A history of management accounting: The British
experience(Vol. 12). Routledge.
Herzig and et. al. 2012. Environmental management accounting: case studies of South-East
Asian Companies. Routledge.
Otley, D and Emmanuel, K. M. C., 2013. Readings in accounting for management control.
Springer.
Parker, L.D., 2012. Qualitative management accounting research: Assessing deliverables and
relevance. Critical perspectives on accounting. 23(1). pp.54-70.
Vasile, E. and Man, M., 2012. Current dimension of environmental management accounting.
Procedia-Social and Behavioral Sciences. 62. pp.566-570.
Cadez, S and Guilding, C., 2012. Strategy, strategic management accounting and performance: a
configurational analysis. Industrial Management & Data Systems. 112(3). pp.484-501.
Fullerton, R.R., Kennedy, F.A and Widener, S.K., 2013. Management accounting and control
practices in a lean manufacturing environment. Accounting, Organizations and Society.
38(1). pp.50-71.
Luft, J and Shields, M.D., 2010. Psychology models of management accounting. Foundations
and Trends® in Accounting. 4(3–4). pp.199-345.
Morales, J and Lambert, C., 2013. Dirty work and the construction of identity. An ethnographic
study of management accounting practices. Accounting, Organizations and Society.
38(3). pp.228-244.
Quinn, M., 2014. Stability and change in management accounting over time—A century or so of
evidence from Guinness. Management Accounting Research. 25(1). pp.76-92.
Vaivio, J and Sirén, A., 2010. Insights into method triangulation and “paradigms” in interpretive
management accounting research. Management Accounting Research. 21.(2). pp.130-
141.
P. Tucker, B and D. Lowe, A., 2014. Practitioners are from Mars; academics are from Venus?
An investigation of the research-practice gap in management accounting. Accounting,
Auditing & Accountability Journal. 27(3). pp.394-425.
Van der Stede, W.A., 2011. Management accounting research in the wake of the crisis: some
reflections. European Accounting Review. 20(4). pp.605-623.
Online
What is Budgetary control? 2017.[Online] Available
through:<https://accountlearning.com/budgetary-control-objectives-advantages-
disadvantages/>.
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