Management Accounting for Zylla Company

This assignment delves into the application of management accounting principles to address financial challenges faced by Zylla Company and 4Com plc. It analyzes various financial issues, including cost accounting problems and performance discrepancies, proposing solutions through KPIs, benchmarking, financial governance, and SMART tools. The document emphasizes the importance of systematic monitoring, effective decision-making, and continuous improvement in achieving profitability and operational efficiency.

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 and essential requirements of its different accounting system.....1
P2: Method of management account reporting...........................................................................3
M1: Merits of using management accounting system.................................................................5
D1: Critical evaluation of reporting system ...............................................................................5
TASK 2............................................................................................................................................5
P3: Various costing method using in management accounting..................................................6
M2: Evaluation of accounting tools............................................................................................7
D2: Critical evaluation of income statements.............................................................................8
TASK 3............................................................................................................................................8
P4. Advantages and Disadvantage of different type of planning tools used in budgetary
control.........................................................................................................................................8
M3: Evaluation of planning techniques....................................................................................10
D3: Critical analysis of financial problem................................................................................11
TASK4...........................................................................................................................................11
P5: Comparison with various company regarding its financial problem..................................11
M4: Analysis of financial problem...........................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
ZYLLA COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting plays an important role in controlling and monitoring
accounting records and information which help managers in making an effective decision and
plans. Thus it is required in every organisation irrespective of the size whether small or large. As
every organisation need to identify their actual financial position through which they can
compete with their rivals. Therefore management accounting provides them relevant financial
records and statements which help them in forecasting the project activities in proper manner that
will bring positive result to company (Albelda, 2011).
The main purpose of this project reports is to provide the roles and importance of
management accounting in achieving desired goals and objectives. The project covers different
costing methods which help company in analysing the actual profitability of company.
Budgetary control techniques are also explained under this project which help in resolving
financial issues of company and achieve profitability. It also covers management accounting
system and reports which help in identifying the actual financial position of company. Company
named “ Zylla” is chosen for the purpose of preparing this report.
TASK 1
P1. Management accounting and essential requirements of its different accounting system
Management Accounting Practices Committee (MAPC) defines Management
accounting as “ the process of identifying, measuring, analysis, interpreting and communicating
financial information which is used by manager to formulate an effective business decision.
Institute of Management Accountants (IMA) defines MA as “ It is a profession that
involves partnering in management decision making, control and monitoring the financial
records and information in order to formulate an effective plans and strategies.
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Management accounting: It refers to managing and monitoring the accounting and
financial recorded which help in making an effective decisions in order to achieve desired goals
and objectives of company. Through management accounting, Zylla can able to operate its
business operation in an effective way that will help them in increasing their financial position.
The accounting manager is held responsible to implement suitable management
accounting techniques which help them in dealing with uncertainty condition which directly
helps in improving their profitability situation (Advanced Management Accounting, 2017). The
manager need to guide and direct its employees to perform in such a way that will help in
meeting the desired result. In order to achieve growth ans success the manager of Zylla should
always keep their eyes on implementing new and advanced technology which helps in bringing
efficiency in their work and performance. If due to certain circumstances such as lack of
financial resources, lack of skilled employees etc. The company fails to implement changes in
existing technology then it will bring negative impact on their sustainability and profitability
(Arroyo, 2012).
Therefore the manager of Zylla need to implement various accounting systems through
which they can operate business functions and activities. Such accounting systems are as
follows:
Cost accounting system: This system is useful in determining the actual cost which will
be incurred in the production process. The main objective of adopting this system is to allocation
of cost on the basis of outcomes they received in near future. Thus the managers of Zylla should
focus on adopting such technique through which they can eliminate irrelevant cost and utilise
money in profitable manner. Through this they can ascertain net profitability, cost control and
other various factors which influences production and operational activities. For example the
product manager may use various cost such as normal, actual and standard price in order to
analyse expenses incurred in manufacturing process (Bennett, Schaltegger and Zvezdov, 2013).
Inventory management system: Through adopting this technique, the manager can able
to reduce the total cost of inventories with a motive of generating high return. Thus it is the
responsibility of manager of Zylla to carefully analyse the stock available and accordingly order
raw material which help them in avoiding the shortage situation. Ordering right quantity at right
time at right place will help company in meeting the demands of the targeted customers. It also
help in reduce the inventory storage cost through which they can able to provide product to
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customers at less prices. Therefore the manager of Zylla need to focus on managing and
monitoring inventory on regular basis so as to know the accurate position of stock through using
ABC costing and Stock turnover ratios.
Price optimisation system: This system play an important role in fixing the prices of
product that will satisfy the customer's expectations. Therefore the manager need to first properly
analyse the demand of their product and accordingly made changes in prices in order to get huge
profitability as well as attain loyal customers. After considering all expenses incurred in
production and other business functions, the manager should decide the price of their products
which help them in recovering their actual cost and also maximises the level of satisfaction of
customers towards the prices the charged.
Job costing system: This method can be used when the products the company
manufactures are relatively different from each other. It is essentially required for manager to
record job cost for each and every items and accordingly allocate direct material and direct
labour to each and every job which brings efficiency in each item.
P2: Method of management account reporting
In every business organisation, management accounting is entirely different form final
accounting in which managers use to formulate reports for Zylla company's internal
stakeholders. Reports are one of the crucial aspects for the company which is used for the
purpose of recording various financial transaction on regular basis. The data recorded in it is
gather from various sources such as operational, financial and investing activities. There are
different reports those are been prepared by account managers. Such as profit and loss statement
which is one of the most crucial managerial reports prepare during the year (Bodie, 2013).
This will be provide more specific and reliable information about companies to total
income and revenue they are getting in an accounting year. Accounts officers and managers
generally use to write and develop income reports so that valuable decisions can be made
properly. This will be considered in order to identify total gross profits generated by the
company during the month as well as in a year. This monthly reports are use by managers in
order to inform supervisors about current projects performance. By the help of this, management
would use to track accountability and keep ensure that proper results would be attain with proper
utilisation of resources.
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Reporting to management is a kind of systematic process of delivering data at various
level of the department in order to enable proper analysis of ongoing projects. If any things
required to be change then by using corrective tools this will be remove before completed the
task. Reporting is very complex, multiple stage activity that take place in accordance with other
business processes that provide crucial information about future profitability of an organisation.
The reports are more useful for Zylla company for future planning. This will be essentially
required to be implemented by managers in order to take corrective action for increasing
productivity of Zylla Ltd. In other way of reporting is operated at internal level (Boyns and
Edwards, 2013).
“Reporting in management is an organised techniques of delivering every manager with
all information only those data that is require crucial for future decision making”.
Objectives: A report is mainly an effective mode of upward communication. These are
more crucial for the purpose of making vital decision regarding formulation of any business
function. Some of the other aspects are related with the legal needs of the company. Managers
use to prepare annual reports which is to be effectively helpful during the time of audit.
Importance:
 Provide valuable information: Reports are essential for delivering corrective
information to every possible level. Such as trend of business, fund flow and total amount
of cash they are getting during an accounting year.
 Helps in selection process: There are plenty of information presented by the managers.
Out of which only relevant data in taken into consideration in an account.
Types of reporting system:
Performance report: This particular report is use to determine exact position of the
company. This can be analyse by using data from past and current year. It is necessary activity in
accounting. It consists of various collection of information such as utilisation of resources, future
progress and current status of company's stakeholders.
Account receivable aging report: This specific report is considered as complete list of
unpaid customers detail and unused credit memos through data ranges. This happens to be the
primary tools which is used for the purpose of collecting personnel to analyse which invoice is
overdue for commerce. There are certain causes in account receivable which is varies with
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increase and decrease in total cash owed by its clients. This will consists of balance sheet, bills
receivable etc.
Job cost report: This types of reports is mainly assigning to the costs which is incur for
a particular job in which owners and its business is associated with. This will be analyse by
recording, classifying and evaluating different alternatives aspects use for the purpose of
controlling costs.
Inventory management report: This is one of the main report that every business
managers uses to prepare. By the help of this, opening and closing stock details can be identified
during the time. There are various tools and techniques which is used from the purpose of
making proper of record of inventories such as EOQ, ABC costing and inventory turnover ratio.
The Zylla company can use this as primary tool to keep balance in their stock.
Operational budget report: The Zylla Business can implement various techniques in
order to estimate total income and expenses they are incurring during the production of each
units. This will summaries with sales, production and other curial budgets. In order to get more
effective results they need to prepare reports on a regular basis so the chances of getting more
effective results can be increased (DRURY, 2013).
M1: Merits of using management accounting system
Management accounting system has various benefits such as:
 It helps company in reducing operational expenses through using management
accounting information.
 It helps manager to make an effective business decision with the help of quantitative
analysis for various decision opportunities.
 It also help in increasing financial returns of company through forecasting the customer's
demand and sales of products.
D1: Critical evaluation of reporting system
In case of Zylla company, each staffs and department is operating its roles and
responsibility in an effective manner. The use of accounting reporting techniques is an essential
aspects that can helpful in incur better results for the company. Reports are helpful for the
purpose of making crucial decision-making for future planning.
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TASK 2
P3: Various costing method using in management accounting
Cost is an amount which has to be paid in order to acquire something. In any business,
cost is mainly related with monetary evaluation of total material, labour, resources and workers
involve in delivery of products or services. It is a value of money which has been used up to
manufacture or deliver some specific products and services. A costing is the amount of
estimation which is forecasted by the managers for producing a product. This happens to be the
systematic process of identifying total cost of producing one units (Herzig and et. al. 2012).
It will provide perfect relationship among profit and capacity of a product. There are
various costing method those are directly or indirectly affecting the profitability of an
organisation. They consists of direct labour, material and other overhead costs those are
associated during the time of production. Some of them are discuss underneath:
 Absorption costing: These are considers as all those costs which is related with the
production process. Those are absorbed by every units produced during the time. It
consists of both fixed or variable costs in order to get net profit during the year. It is
determine as full costing techniques.
 Marginal costing: It is known as one of the effective costing method which is incur by
Zylla company for the production of one extra units. It will considered only variable costs
and fixed costs are ignore under this method. Hence, marginal cost involves prime costs
plus total variable overheads. In this, stocks values are much higher than using marginal
costing.
Absorption costing Marginal costing
Under this fixed costs are incur to the total cost
of production.
This will considers fixed costs as period costs.
These are identified through using P/v ratio.
All the costs information are marked as
conventional pattern.
Here, cost data is shown through total
contribution incur from each products.
Difference is determine because of the impacts
made on opening and closing stock.
They does not get affected.
It is not considered suitable for the purpose of Most of the managers uses to make valuable
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decision making. decision for making vital decision of future
planning.
In order to get gross profit managers need to
deduct cost of good sold from total sales.
In accordance with analysing total contribution
managers require to deduct variable costs from
total sales.
In case of reporting of information this is used
for external purpose such as for income tax
calculation.
These are use to evaluate data for internal
reporting.
Computation of net profit by using marginal costing
Profit and loss 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
Calculation of Net profit by using absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
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Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
M2: Evaluation of accounting tools
In order to make investment planning they need to analyse crucial aspects of the
company. Zylla company is incurring more sufficient amount of gains during the time. They
need to use more effective tools and techniques in order to make proper stability in every level of
departments. For this, it is essential for keeping proper record of data as perfect planning tools by
evaluating crucial aspects in projects planning.
D2: Critical evaluation of income statements
After making proper analysis of profit and loss statements. It has been seen that both
absorption and marginal costing is delivering different profits. If managers are going with absop
cost then they are getting profit of 7800. likewise, with the help of marginal cost they are
incurring a gain of 7500. The difference amount of 300 is develop during the time because of
fixed costs expenses. The best decision making is done by using marginal costs.
TASK 3
P4. Advantages and Disadvantage of different type of planning tools used in budgetary control
There are different budgetary control techniques which need to be adopted in order to
make an effective plans and strategies related to forecasting projects. As in organisation there are
various sections, departments and divisions which are performed to achieve their own target in
order to contribute in achieving organisational goals. Thus, to successful operate their business
activities budget must be prepared after forecasting the finance requirements. The main motive
of preparing budget is to manage and control cost in order to avoid problems of shortage. The
managers set an standards on the basis of which the employees should perform. It helps in
evaluating the performance by comparing actual with standard (Kotas, 2014).
The main purpose of budgetary control is to help managers of different departments to
control cost and management system through setting standards and achieve them in order to
attain huge profitability. There are three types of budgetary control techniques used in
managerial accounting which need to be discussed in brief:
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1. Finance budget: Cash is an important and crucial sources which is used in daily operational
activities. Thus it is responsibility of manager to prepare an estimated requirements of cash in
near future. This will help company in executing business activities in an effective manner with
the help of utilizing available resources at an optimum manner (Lukka and Vinnari, 2014).
Cash Budget: It is prepared to analyse the cash requirements used in operating business
functions and departmental activities of an organisation. There are various sources which help in
making an effective cash budget and plans such as cash receipts, fund flow and cash flow
requirements. These cash budget shall be prepared on the basis of weekly, monthly and quarterly
basis. It helps in ensuring proper utilisation financial resources in an optimum manner that will
help in getting profitable result.
Capital expenditure budget: This budget is prepared with a motive of analysing the
capital requirements which are needed in order to operate their business activities in an effective
manner. Capital expenditure refers to expenditure incurred in acquiring assets such as new plant
and machinery, land and building etc. This budget is helpful as capital assets are essentially
required in operating every business activities.
Balance sheet budget: This budget is prepared with a motive of identifying overall
expenditures incurred and incomes generated during all business activities and accordingly
formulate a budget in order to find out the actual financial position of company in competitive
world.
2. Operating budgets:
Sales and revenue budget: These type of budget is helpful in analysing the estimated sales and
revenue generated in near future from their business activates.
Expense budget: This budget is prepared with a motive of controlling unnecessary cost
incurred while executing business operations. This budget directed the manager to allocate funds
in such areas of department where they get positive outcomes. Profit and loss accounts and
income statements are such sources which represents expenditures incurred in business
operations (Macintosh and Quattrone, 2010).
Project Budget: This budget is prepared with a motive of analysing the difference
between the sales and revenue and expensed incurred in whole project activities. If the profit is
generated more than expected then it extra can be used to recover the extra expenses incurred in
project activities.
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3. Non-monetary budgets:
This type of budget is used to analyse and evaluate the non-monetary incomes and
expenditures, sales and revenues.
4. Fixed and variable budget:
These are the budgets which is prepared after analysing fixed, variable and semi-variable
cost incurred in business activities in near future (Ward, 2012). These budget help in analysing
the cots per product and accordingly set prices of product and services. Preparing fixed and
variable budget is prepared with a motive of minimizing the manufacturing and production cost.
Variable cost are those cost which varies with production and manufacturing process are
considered in variable budgets whereas fixed cots remain fixed in all business activities and
cannot be affected with any factors.
Fixed cost: These are the cost which remain fixed and unchanged while preparing
budgets and plans. For example a rental cost of warehouse in £20000 will be remain constant for
all months and cannot be changed during any circumstances.
Variable cost: It is a cost which may changed on the basis of changes in expenses with
respect to changes in production by one unit. This budget help in identifying the influencing
factor through which cost may vary (Otley and Emmanuel, 2013).
Semi-variable cost: This is the cost which is constants at certain level and then vary on
the basis of change in production. For example 0-100 package container has cost of £50 and 100-
200 it will rises to £60. This budget help in ascertaining the amount of semi-variable cost.
Advantages Disadvantages
With the help of budgetary control techniques
the manager can make an effective budgetary
policy.
It consumes more time and cost which may
affected the profitability of company.
It helps in identifying the events and incidents
occurred in near future so that the company
can prepare plans in advance in order to cope
up with them.
There are various complex factors which are
not identified due to which company may faces
problem or challenges in decision making
process.
It helps in maintaining records which help
them in making an effective decisions and
Due to uncertainty, the projected plans and
policies may not bring expected results to
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strategies. company.
It is a natural and compulsory process which
always brings positive outcomes to company
Innovations and new experiments are not
considered while formulating budgets.
M3: Evaluation of planning techniques
The managers can increase organisation productivity or efficiency by proper utilisation of
resources. In this manner, planning tools are more effectively help them to attain their set targets
without making any extra efforts. There are plenty of planning tools that are helpful in this
regards such as forecasting tools which is used for the purpose of making an estimation about up
coming costs and profitability. Some others are related with the scenario and contingencies
techniques those are effectively beneficial for delivering better outcomes for the company.
D3: Critical analysis of financial problem
It has been observed that plenty of financial issues are occur in business during the time
of production and recording of business transactions. It is essential for the managers to analyse
those issues in more systematic manner so that future risks can be mitigated. This will make
huge impacts on goodwill of the company. The techniques which is more suitable in this specific
condition is balance scorecard system.
TASK4
P5: Comparison with various company regarding its financial problem.
In every business organisation, it has been observed that plenty of financial issues are
affecting the profitability of the business (Parker, 2012). These are originated because of not
implementing corrective and reliable techniques for the purpose of recording financial
transactions. Budgetary control methods are discuss in more systematic manner which is helpful
in order to control operations of Zylla company.
Some of financial issues are:
Cost accounting: If the costs of production materials are not used in more effective
manner then these can make huge impacts on the business growth.
Performance problems: If information is not mention or recorded in systematic manner
the possibility of financial issues can get more during the time (Van der Stede, 2011).
To resolve them managers needs to use below mention techniques:
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KPI: By the help of this, companies performance can be measure in more effective
manner so that chances of getting better results can be enhanced.
Benchmarking: This is an essential tools which will generate more specific outcomes
by setting proper standard and every one needs to perform their task according to the set
standards.
Zylla company 4Com plc
As, this company is operating at a small stages
so the chances of mistakes can be more. They
need to use regular monitoring process system
to remove any other issues. KPI is best
techniques in this manner.
Under this company which is working in
telecom sector they require a system that can
manage there work in an effective manner.
Financial governance would be more
effectively used in this company.
Crucial decision get affected if right kind of
method is not be followed by the managers. Us
of SMART tools can be resolve these
particular issues.
In order to maintain proper balance among
every level they need to conduct a training or
seminar for resolving their queries.
M4: Analysis of financial problem
After making proper identification about various financial issues. They need to cover and
make appropriate plans to resolve those issues so that better results can be attain in more quick
time (Vasile and Man, 2012). This will make huge impacts in the productivity of Zylla so they
need to use KPI, Benchmarking, financial governance and SMART tools to resolve financial
problems.
CONCLUSION
It has been concluded from the above report that Management accounting plays an
important and vital role in managing and maintain accounting records and information which
help in making an effective and profitable decision for the company. There are various important
management accounting systems and budgetary control techniques which help company in
executing future business activities in an effective and efficient manner. It is the responsibility of
manager to first consider the benefits and disadvantages of budgetary control technique and
accordingly implement in order to get positive result.
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REFERENCES
Books and Journals:
Online
Advanced Management Accounting. 2017.[Online]. Available through:
<http://www.bristol.ac.uk/efm/courses/undergraduate/units/level3units/
efim30003.html>.
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