Financial Troubleshooting: Tools & Techniques

This assignment delves into the challenges faced by companies due to lack of financial resources and cash flow problems. It emphasizes the importance of accurate record-keeping and proper accounting information for maintaining stability. The report discusses two organizations, 4com plc and Zylla company, comparing their approaches to managing financial issues using tools like KPIs, financial governance, benchmarking, and budgetary control.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Various types of accounting system and its use .....................................................................1
2.Several methods of accounting reporting system ....................................................................2
M1: Merits of using management accounting.............................................................................3
D1: Critical analysis of reporting system....................................................................................3
TASK 2............................................................................................................................................4
3. Different costing methods used to analyse profitability.........................................................4
M2: Use of management accounting techniques........................................................................5
D2: Analysis of income statements.............................................................................................6
TASK 3............................................................................................................................................6
4. Use of planning tools in budgetary control ............................................................................6
M3: Evaluation of planning tools................................................................................................7
D3: Tools used for resolving financial issues.............................................................................7
TASK 4............................................................................................................................................8
5: Comparison with other company's in relation to solve financial issues.................................8
M4: Evaluation of financial issues..............................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Management accounting is one of the crucial aspects for any business concern whether
small or large. Every organisation require a well systematic system that can keep record of their
financial transaction which is done by the company during the year. Accounting is a systematic
recording, summarising and controlling of financial entries those are perform by Zylla company.
This project report consists of various task which is based on various accounting system and
reporting. It also includes different costing methods that is use for the purpose of analysing
profitability of the company (Albu and Albu, 2012). Use of planning tools in budgetary control
and effective use of techniques which can help in controlling financial issues. The overall project
is based on management accounting system that can help in taking effective decision regarding
future sustainability of Zylla company.
TASK 1
1. Various types of accounting system and its use
Management accounting is a term that covers all those aspects by which finance
department can assist the higher authorities and other departments in the formation of policy,
execution and hold of effectiveness. This point out that management is associated with primary
task of designing, execution and control of the operational activities of Zylla company. For
making an effective decision the need of accounting information is must because on that basis
position of company is decided. A perfect data is usually accurate and risk of fallible is
minimised.
Management accounting play a crucial role in delivering right direction to the company
so that chances of getting more healthy profit and growth can be enhance. By analysing
performance of Zylla company critical decision are made to minimise its costs and extra
expenses. It has been notified that nature and scope of accounting system is very wide because of
its accuracy and correctiveness (Burritt, Schaltegger and Zvezdov, 2011). The primary
objectives of managers is to make financial report more effective so that long term aim and
objectives can be attain. Company performance is affecting in that case, if the managers are
using outdated system to record financial transactions. There are various types of accounting
system that can be helpful in controlling business operation. Such as:
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Cost accounting system: It is design which is used for the purpose of analysing cost that
zylla company is incurring in their production process. The main objectives of using this system
is to determine profitability, cost control and other aspects of costs which are incurs over
different activities. At the point of production, project managers uses various costs such as
Normal, actual and standard cost.
Inventory management system: It is one of the effective system which can be use for
monitoring and controlling opening and closing stocks of a company. It is known as biggest
issue for managers to manage their inventory of their own without having proper system. In
order to identify exact position of stock they need to use ABC costing and Stock turnover ratios.
Price optimisation system: It is considered as a systematic tools effectively use for
statistical planning (Cooper, Ezzamel and Qu, 2017). It is associated with critical information
in respect of price that can varies according to every unit produce. Price optimisation is helpful
in deciding which prices is more affordable for customers for their products. Company uses this
to determine the profitable and generate maximum chances for getting more effective results in
real quick time.
Job costing system: It is considered as that accounting system that can use to identify every lot
size of a goods and service produce during the year. It includes product date, lot identification
number and so other features.
2.Several methods of accounting reporting system
Reporting is positing of financial transaction into the books of account so that final
statements of a company can be made. It will consists of various crucial information related with
Zylla company day to day operations. Every data must be relevant and accurate before
transferring into and statements. Because top management would make their critical decision
through analysing such records and entries at the time presenting it to their investors. It is known
as vital parts of corporate governance. The financial statements consists of income statements,
balance sheet and cash-flows statements. Accounting is the field of finance that is concern with
the summary, reporting of regular transaction pertaining to a business. The major purpose of
using such kind of report is to analyse and control wastage of a company which is done in the
form of costs and unnecessary expenses (Fullerton, Kennedy and Widener, 2014). The
management and investors can take future decision on the basis of reports that are prepared by
accounts departments. After making complete overlook of such report necessary decision and
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investments plans are made. It will be helpful for making performance analysis and appraisal for
company as well as team members. The sources of data collected is from financial or non-
financial. Data is gather from various departments those are working for the purpose of common
objectives. Some crucial reporting system that can be used by managers of Zylla company are as
follows:
Operating budget: These are associated with production activities that are related with
income and expenditure incur by company during the year. This prime objective this reporting is
to determine actual cost which is done by company over the production of products. It is mostly
consists as part of internal reporting.
Performance reporting: As per this report, valuable information regarding Zylla
company's past and present year performance is being taken into consideration. It will help the
managers to reach out a valid point where a perfect outcome can be provided about their
performances.
Job cost reporting: Such kind of report is related with those costs that alter with the
production of units produce such as material, labour and other overhead. It is use to track actual
cost which is levied on specific job and evaluate them critically in the manner to determine
whether few costs can be minimise (Hoque, 2011).
Account receivables aging report: It is associated with a lists of non-paying clients
invoice and uncredited bills by mention date. The purpose of such techniques is to analyse
recovery time of due amounts.
M1: Merits of using management accounting
As, it has been observed that management accounting system is an effective system
which is used by company's to manage and safeguard its financial transactions. Such kind of
system can help them to make bring out positive outcomes with the available resources. In order
to make maximum chances of getting profit they need to use various accounting system like
price optimisation and job costing system which can be effective for the company. The important
advantage of using these system is to increase profitability and efficiency for the company. The
Zylla company become more reliable for making sustainable future.
D1: Critical analysis of reporting system
Every organisation is working for getting positive results with their available resources. It
can help them to analyse financial transaction of company in order to gain maximum profit. The
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purpose of using reporting system is to evaluate performance and their stake in future growth and
sustainability (Tappura and et. al., 2015). Reports can be prepared by using critical information
about past and present year performance so that proper idea can be analyse about performance of
Zylla company. It is used for the purpose of taking investment plan in there coming projects.
Performance report and accounts receivable report are the two important techniques of reporting
by which financial position of company can be determine.
TASK 2
3. Different costing methods used to analyse profitability
Costing is the term which is use by company for the motive of evaluating total funds
invested on manufacturing of goods and services. It is directly or indirectly related with cost of
production such as material, labour and overheads. Basically, considered as that costs which is
measure in terms of monitory value that is known as summary of efforts and resources use by
managers in order to make proper transfer of products to its customers. Such costs are effective
in decision making as they provided more accurate and reliable information about exact costs
levied by the company (Hoque, 2011). There are various costing methods which can be more
suitable for Zylla company in order to make analysis of net profits.
Absorption costing: These are considered as that costs which are levied over all manufacturing
of products and services. It include variable or fixed costs at the same time. That's why these are
known as fixed production costs because maximum of costs are related with production.
Marginal costing: It is related with that costs which is incur by company during production of
one extra units. It does not considered fixed costs because of which contribution per units is
taken into consideration.
Comparison among these two methods
Absorption costing Marginal costing
Cost data is presented by using accepted
system. In order to get Net profit fixed costs
and variable costs are deducted from it.
Contribution per units is calculated by the
accounts managers to determine net profit for
the company.
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It there is a difference in beginning inventory
and ending it will directly affect the costs of
production.
In this case, if there is a variation in stock it
cannot get affect on unit produce.
In the computation of absorption costs
overhead expenses are taken into
consideration.
All those office expenses are taken into
account while using marginal costs.
For decision-making purpose it is not so
effective.
It more effective while making any crucial
decision.
Computation through Absorption costing
Particulars Amount
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
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
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Total Profit / Loss 7500
M2: Use of management accounting techniques
It has been found there are various factors those are affecting profitability of Zylla
company. It can be associated with internal as well as external environment of an organisation.
In order to reduce financial mistake and errors various accounting system can be used. Such as
microeconomic tools which is associated with cost volume profit and variances (Renz, 2016).
Through using these techniques managers can easily sort out their problems. Some other are
related with ABC costing and all those which are related with manufacturing of products and
services.
D2: Analysis of income statements
From the above information which is taken on assumption basis is used to analyse the
variations in Net profit through using two different costing methods. For Zylla company they
need to use these two methods for evaluating their actual net profit so the future investment plan
can be made. If they are using absorption costing they are getting profit of 7800 while, with
marginal cost they are receiving 7500. The margin of 300 is determine which is seen because of
fixed costs.
TASK 3
4. Use of planning tools in budgetary control
Budget: It is known as future investment strategies made by company for a definite
period of time. It includes sales and revenue planning, use of resources and income and
expenditure that a company is getting from their investment.
Budgetary control: It is considered as that system which is related with actual earning
and planning financial spendings. It is helpful in determining whether the policies followed in
proper manner as per the set rule and regulations. Process of budget controlling are :
 Discuss with managers: All those information which is associated with profitability and
growth of a company are firstly discussed with managers (Jansen, 2011). They also look
to see whether they require any changes or need of budgets.
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 Make proper assumption and declaration: It has been notified that budgets are always
made up with assumption. The income generated in future or costs which are incur by
company with the production of products are analyse in it.
 Set systematic information for budget to achieve objectives: Under this stages, a list
of various crucial information is prepared by using necessary detail from each team and
departments those are working in an organisation (Kotas, 2014).
 Measurement of actual with standard: Actual year performance of Zylla company is
need to be measure by using actual and predicated data of past few years.
 Review stages: It is final stages in budgetary control system which is based on review
analysis and taking corrective steps if any changes asked by management to do in it.
Planning tools: It is known as necessary techniques which is used by Zylla company in
order to manage there budget. Some of them are:
Operating budget: It is basically associated with manufacturing of product and services.
It is used to determine total costs and expenses which are going to be incur by company during
the coming year. It includes sales and production related budgets.
Advantages: It is totally based on estimation about sales and projected costs that is incur by
company in advance. It is prepared at regular point of time (The Advantages and Disadvantages
of Budgeting, 2017).
Disadvantages: It is too costly as overall information is based on estimation and less chances of
get more effective outcomes (Merchant, 2012).
Static budget: It is prepared at beginning of project budget period. It is essential for a
particular point of time. It can also be categories by other name as fixed budget. In this, the
numbers are completely different from actual.
Advantages: Under this budget information collected from budgets are made on assumption
which cannot be modified or changed.
Disadvantage: The sources of information is much concise and not effective as compare to other
budgets.
Cash budgets: It is more crucial budgets which is useful for identified cash inflows and
out flows made by Zylla company during the financial year. It is related with various activities
such as operating, investing and financing activities.
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Advantage: It will help to analyse total cash incurred by company from its various activities are
determine by using this budget.
Disadvantage: It ignore cash-flows if the recovery time of investment are completed.
M3: Evaluation of planning tools
In accordance to get more accurate information, Zylla company may uses various
budgets. Planning tools are more effective ways to detect exact information of company financial
position. Operating budgets are used to detect total costs and expenses which are incur during the
year. While, cash budgets are more reliable as total inflows and outflows from various activities
are easily analysed.
D3: Tools used for resolving financial issues
In order to determine performance of Zylla company, financial aspects are need to be
considered in more specific manner so that plenty of new opportunities and chances of getting
more accurate results can be more. It has been found that there are so many financial issues are
arises in an organisation that would make huge impact on profitability of the company. It is
primary responsibility of managers to find out financial issues and make steps in saving future
growth of the company. In order to solve those issues balance score card system is being. Some
critical issues are inability or extra liabilities burden.
TASK 4
5: Comparison with other company's in relation to solve financial issues.
In every organisation, it has been observed that financial issues can make direct impact
on the productive and growth of an organisation. The primary objective of an managers is to
make crucial plan in order to gain short or long term profitability. The profitability of an
organisation is affected because of financial issues. Some of them are lack financial resources,
cash inability and short term liabilities (Otley, 2016). The financial problems can be rectify in
earlier phase so that maximum chances of growth can be attain. It can be determine that various
kind of problems are develop because of errors in record keeping and misconducts in accounting
information. Some effective tools are:
KPI: Key performance indicators are one of the important tool used for the purpose of
resolving financial issues in an organisation. The purpose of using this is to analyse and evaluate
performance of team as well as organisation during the year.
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Financial governance: It is the government made rule and regulation which every
company need to be followed. It can help them to make to analyse durability and stability of
company in the future (Papaspyropoulos and et. al., 2012).
Comparison with other company's
4com plc Zylla company
This company is small scale business
organisation dealing in electronic gadgets. It is
operating at a middle level.
It is a large scale organisation which is
associated with multiple products. They need
to have effective accounting system that can
manage their daily expenses.
This company is using key performance
indicators to evaluate their business as well as
team performances.
In this, financial governance and
benchmarking tools are used to manage their
financial problems.
M4: Evaluation of financial issues
It has been found that most of the company is facing the problems of perfect accounting
system. It will make huge impact on the profitability of the company. To control and monitor all
these issues company uses various tools and techniques which can make their business more
profitable and safe from getting hamper. It has been seen that company can not attain positive
outcome if they are using outdated system (Parker, 2012). By using financial governance and
key performance indicators one can manage their daily business risks.
CONCLUSION
From the above project report, it has been concluded that management accounting is an
essential aspects of any business organisation in order to manage and control financial
transactions. This project provide necessary information about various accounting system and
reporting that are more useful for crucial decision. Certain costing methods are used to determine
net profit for Zylla company. It also summarise planning tools which is used in budgetary control
process and to information about tools which is used in resolving financial issues.
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REFERENCES
Books and journals:
Online
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The Advantages and Disadvantages of Budgeting. 2017.[Online]. Available
through:<http://www.bifa.org/library/freight-management/finance/budgeting/the-
advantages-and-disadvantages-of-budgeting> .[Accessed on 20th November 2017].
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