Comprehensive Analysis: Management Accounting Report for Zylla Company

This report, prepared for Zylla Company, delves into the core principles of management accounting, emphasizing its critical role in organizational decision-making. It begins by defining management accounting and its essential requirements, exploring various accounting systems like cost accounting, inventory management, and price optimization. The report then examines different management accounting reporting techniques, highlighting their importance for internal stakeholders and external financial reporting. It further analyzes the merits of using management accounting, including its impact on profitability and resource optimization. The report covers different costing methods and their application, along with an analysis of income statements. Furthermore, it explores planning techniques, their benefits and limitations, and the critical evaluation of financial issues, offering recommendations for resolving financial problems. The report concludes with a comprehensive overview of financial analysis and decision-making processes, providing valuable insights for the company's sustainable growth and financial stability. The report references various academic sources to support the analysis and recommendations.

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
TASK1.............................................................................................................................................1
P1. Management accounting and essential requirements of its different accounting system 1
P2: Various techniques for management accounting reporting..............................................3
M1: Merits of using management accounting........................................................................5
D1: Critical evaluation of reporting system ..........................................................................5
TASK 2............................................................................................................................................6
P3: Different costing methods................................................................................................6
M2: Use of management accounting techniques....................................................................7
D2: Critical analysis of income statements............................................................................8
TASK 3............................................................................................................................................8
P4: Benefits and limitation of using planning techniques......................................................8
M3: Analysis of planning techniques...................................................................................10
D3: Critical evaluation of financial issues............................................................................10
TASK 4..........................................................................................................................................10
P5: Different measures to resolve financial issues...............................................................10
M4: Analysis of financial problem.......................................................................................11
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................13

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
ZYLLA COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management accounting plays a crucial and vital role in managing accounting activities
and records of an organisation. Therefore it is essentially required for every business
organisation whether small or large in size. Every organisation need to record their financial
transactions during the year which helps them in getting accurate financial position of an
enterprise. This projects includes various activities based on different accounting system and
reporting. It also covers various costing methods which help company to analyse their
profitability (Suomala and Lyly-Yrjänäinen, 2012). In order to monitor financial issues the
company need to use different planning tools and techniques in budgetary control. Thus, the
overall project covers all aspect related with management accounting system which helps in
formulating effective decisions for future growth. Company named 'Zylla' is selected for the
purpose of preparation this report.
TASK1
P1. Management accounting and essential requirements of its different accounting system
Management accounting: Management accounting refers to managing the accounting
information and reports in such a manner that will help in taking effective decisions for the
operation of an organisation. Through management accounting company able to operate the
business in more effective and efficient way which also help them in improving financial
stability (Arjaliès and Mundy, 2013). Manager is the one who perform and contribute his efforts
in analysing and monitoring all relevant accounting information which supports in knowing the
accurate financial position of business. This will also help in minimising the risk of uncertainty
and increases chances of generating profit. Therefore management accounting plays an important
role in the success of an organisation for longer period of time. In order to formulate decision
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regarding minimise cost and overhead expenses the Zylla needs to analyse its financial
performance in an efficient manner. The manager need to prepare financial report include
accurate and true accounting information which help them in directing to achieve desired goals
and objectives. Manager should also need to focus on improving existing technology and
introduce the latest and updated technology in order to get better outcomes. If company fails to
adopt updated technology due to its cost then it will make negative impact on the performance of
company. This will help company in gaining competitive advantage as well as maximising
profitability as well.
Objectives of Management accounting:
Main objective of management accounting is to provide relevant and accurate financial
information which help manager to take effective decision for the success of an organisation.
Some objectives are mentioned as below:
 Helps in assisting plans and formulation of effective polices.
 Helps in interpreting the financial data in order to use them in an effective and efficient
manner.
 Helps in providing solution of strategies problems.
 Helps in motivating employees and coordinating business operations.
Therefore the manager needS to use various types of accounting system which help in
monitoring business operations. Such accounting system are as follows:
Cost accounting system: This system is related to analysing the cost which is incurred in
the production process. Its main motive is to ascertain profitability, cost control and other various
aspects which incurred in production and operational activities (Cost Accounting Systems, 2013).
Therefore manager need to use cost accounting system which allow them to eliminate irrelevant
cost and utilize money in important areas of department. For example product manager uses
various cost such as normal, actual and standard price in order to evaluate expenses incurred in
production process.
Inventory management system: This system has main objective is to minimising the total
cost of inventories in order to generate high return. The manager has to decide that when to order
inventory and how much to order through which it reduces the inventory storage cost and any
spoilage or wastage of inventory. Therefore the manager of Zylla needs to manage company's
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inventory on daily basis and should be focused on identifying the accurate position of stock
through using ABC costing and Stock turnover ratios.
Price optimisation system: This system is considered as important tool which is used for
statistical planning. Therefore manager needs to first calculate that how whether the demand of
products changes at different price levels and after which they need to fix the prices of their
product which help in fulfilling the requirements of customers. It is also important for manager
to forecast the demand of product and accordingly developing prices and promotional strategies.
In short the manager has to carefully decide the price of their product which can be easily
afforded by large number of customers (Bebbington, Unerman and O'Dwyer, 2014). This will
helps company in generating huge profits as well as future sustainability.
Job costing system: The job costing system is used by company only when the products
they manufactured are different from each other. It is important for manager to create a job cost
record for each and every item and thereafter assign direct material and direct labour to each job
which help in improving efficiency level of each item.
P2: Various techniques for management accounting reporting
Accounting reporting is deal with systematic measurement of economic activities those
are affecting inflow and outflow of resources in order to develop vital information for decision
making. The financial accountant is related with reporting to external such as shareholder and
owner of the business, revenue and other regulatory agency (Kotas, 2014). The management
accountant reports accounting data is based on internal to the management and employees of
Zylla company. The main information sources is used by financial department is comes from
bookkeeping system. A report is complete detail of crucial accounting statements which is
recorded by Zylla company.
It is related with balance sheet and income statements. It is an effective communication
system which is used by plenty of investors and shareholder to take valuable decision for better
future. With the help of proper reporting system every detail information about financial position
of the company is identified. It is prepared after collecting necessary information from every
department such as finance, HR and operational etc. The transformation of data to higher level of
division to lower level is need to be more effective so that an ideas can be generated regarding
the need of reporting system. Certain procedure is required to record data into the books of
accounts of Zylla company.
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Reports are more essential components for the company as they are delivering more
effective outcomes in the form of profit during the year. There are basically, more effective
administrators those are responsible for up coming planning and analysis of results. It is said to
be continuous process that is done through out the year (Herzig and et. al., 2012). Thus, it is
important to have a well effective reporting system which can generate positive outcomes for the
company. The main purpose of using reporting system is take crucial decisions on the basis of
financial performances during the year. It is more effective techniques to collect data from
various activities such as operational, investing and financing. It is done to determine whether
daily operations of an organisations are operating in well organised manner or not. With this,
managers can plan to attain their organisational efficiency by allocating resources of Zylla
company in more effective manner.
Report are more accurate with it is prepared by taking reliable data of the company
without any mistakes into the books of accounts. This will help in safeguard of data to be stolen
by other parties. Reporting can help to determine exact cost a company is incurring during the
production of products and services. It has been found that organisation can only achieve their
aims, if they are utilising company resources in more economical manner. By this, the chances of
increasing there reputation in the market can be become more (DRURY, 2013). The sources of
data collecting can be of any mode such as internal and external, financial and non-financial.
It is important for the manages to keep in mind about the social aspects during
preparation of report so that it will be easy to take decision in the benefits of them. In order to
gain the market share and future growth for Zylla company is necessary to have proper data
regarding the current and previous year performances. Hence, they required to use reporting
system in their business to remove obstacles and other barriers that can be make huge impacts on
the performance of the company. Importance of reporting system are:
 Effective tools in recording system: With the help of this, managers can have complete
overlooks over employees to identify whether they are delivering the services in correct
manner in achieving aims of zylla company.
 Chances of increasing profitability: The primary objectives of every business is to
maximise productivity by allocating resources in more accurate manner. This will make
easy for managers to increase profitability for the company.
Types of reporting system:
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 Inventory management system: According to this system, managers can enter vital
information regarding inventories in the various statements of the company. It is one of
the effective system that can provide more quick results regarding stock position in the
storehouses. There are some effective techniques by which it can be done such as EOQ
and inventory turnover ratio.
 Account receivable report: This specific report is used to analyse complete information
about unpaid customer and bills those are allocated with a particular date. It is the more
effective tools which is helpful in examine exact time required to regain all the amounts.
 Performance reporting: As per this system, accounting information are determine
according to the information collected from current and past year performance of Zylla
company. The financial statements of companies are determine by using right tools so
that productivity can be enhanced.
 Job costing reporting: It consists of total cost Zylla company is incurring for the
production of every job size of a product during one financial year. It record information
about total labour, material and costs that used at that time.
 Operating budget report: This report is based on total income generated by the
company and for this exactly amount of expenses are been used. All these are analyse
under this report so that to gain positive outcomes for the company.
M1: Merits of using management accounting
Management accounting helps manager in managing and monitoring company's financial
transactions which help them in taking effective decision for the growth of an organisation. With
the help of this system the company can utilize its available resources in an optimum manner.
Price optimisations and job costing system are such accounting system which help company in
earning high profits. Thus it has been clearly noted that accounting system help in overall
performance and profitability of company. Zylla therefore needs to use such accounting system
in order to make sustainable future.
D1: Critical evaluation of reporting system
It has been noticed that every business organisation whether small and large must
required a system that can help them to record various financial transactions that are done done
by the company during its operations. Reporting can be an effective tools for Zylla company to
manage and record its transactions. It can be beneficial for increasing profitability as well as
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growth efficiency for the company. The goal of company should be attain in more quick time
with managing total costs and expenses that are incur at the time of production process.
TASK 2
P3: Different costing methods
In every segment of business, cost is the most crucial aspects that can be used up to
develop or produce something or deliver a services. In business, the cost may be one of acquiring
under which the amount of money expended to acquire is termed as cost. Whereas, costing is a
systematic process of recording, classifying, examine and summarising alternate courses of
actions for the control of costs (Cadez and Guilding, 2012). It can involve assessment of variable
costs which are those costs that are changes with extra production of activities.
This types of costs are said to be direct costs. Full costing can be other managerial
accounting techniques that describes when every fixed and variable costs that consists
production costs which is used to calculate cost per units. It can be said that total costs those are
varies with some alternative to operate a business through allocation of income and expenses at
various stages of manufacturing phases. It has been seen that scope of cost accounting is very
narrow as compare to accounting system. Under this, it is the primary responsibilities of
managers to set target and make an estimation about total costs and expenses that are going to be
incur by the company are recorded in it. There are certain techniques of costing that can be more
effective in making profitability for the company. Such as :
Absorption costing: These are said to be that cost which is incurred over every stages of
production. It means that both fixed and variable costs are considered during manufacturing of
products and services. Thus, such methods are used as long term basis.
Marginal costing: It is said to be that costs which is incur by the company during
production of one extra units of products (Merchant, 2012). It is divided into two parts such as
fixed and variables. But for the production purpose only variable costs are taken into
consideration.
Comparison:
Absorption costing Marginal costing
In this particular method, cost is used as
conventional basis.
By the use of such costing method, data is
shown through contribution per units.
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The main aspects of this is that both variable
and fixed costs are used.
In this, only variable costs are taken into
consideration.
It is not so effective as decision-making tools. Management mostly choose this particular
method to analyse total costs of the company.
It forecasting for long term strategies
implementation.
According to this costing only short-term
planning can be done.
Computation 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:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
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
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Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
M2: Use of management accounting techniques
There are different factors which affect the financial position of Zylla . Such factors
include internal and external environment of an organisation. Therefore manager need to adopt
different management accounting techniques in order to eliminate financial errors and mistakes
which helps in taking effective decision for the growth of an organisation. ABC costing or micro
economic tool such as cost volume profit help company to reduce irrelevant cost and thus
generate profits which also help an organisation to survive for longer period of time.
D2: Critical analysis of income statements
As per the above computation of company's net profit. Zylla company is using both
absorption and marginal costing. It has been seen that both are more effective methods from
calculating profit for the company. If they are going with marginal costing, profit of 7500 is
generated. While, if using absorption methods they are getting profit of 7800. The difference of
300 is analyses which is occur because of fixed costs adjustments in marginal cost calculation. In
order to make crucial decision-making, marginal cost methods are more effective and reliable. It
can be further utilised in improving the future performances.
TASK 3
P4: Benefits and limitation of using planning techniques
Budget is said to be an effective techniques by which Zylla company and estimate their
future investments plans. It will help them to determine an assumption of total cost and expenses
those are going to be incur by them. It is termed as well planned mode of collection for a
particular period of time (Arroyo, 2012). It is known as more complete framework of operations
and strategies that are crucial for attain future targets. Generally, it is prepared for that time in
which they can advance there costs.
Budgetary-control: It is known as a techniques by which managers can determine total
utility of budgets to monitor and control total costs and operations during a financial time. On the
other hand, it is the process for managers to set financial and performances objectives with
budgets.
Process of budgetary-control:
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Consult with concern department managers: It is essential for them to make effective
analysis about budget needs in Zylla company. Because, it can only be prepared after taking
proper information about concern department.
Determine effective assumption: The next step would be collection of information from
department is implemented. These sources are gathered from finance, HR and other necessary
sectors. It is done so to make strategies for coming time.
Set data for budget to attain objectives: Under this process, a perfect list of
information is frame by assembling information those are collected from every persons.
Measurement of data with actual: The position of Zylla company is evaluated through
comprising the outcomes with actual budgets. With this a well effective solution can be gain in
order to make bright future.
Review stage: Under this final stage, complete overview of budgets are analyses with
necessary feedback if any rectification needed then it would be solved before transferring it to
higher level.
Planning tools: In an organisation, it is seen that proper planning can make there
business more profitable. It can operate there business growth chances in right manner according
to its vision and mission. Some of them are discussed underneath:
Forecasting tools: As from the name it is clearly stated that this tools is based on
assumption. It is for internal control management that includes effective ability, knowledge and
decision-making (Bodie, Kane and Marcus, 2014). It is typically relies on historical data for
estimating future aims. Such kind of tools are used according to the capability of organization
that can deliver positive outcomes for the company in future times.
Advantages:
It is an important aspects for industries in order to evaluate pre-determine objectives. By
this, managers can identify an estimation of total cost and revenue that are incurred by company
during the time.
Disadvantage:
In some situation, it is not considered as much effective. Because it is totally based on
assumption.
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Scenario analysis: It is more common as sensitivity analysis, but it takes into
consideration about the changes of several important variables at the same times. It can be more
effectively used by managers to make there decision according to the current market trends.
Advantages: By the help of this, managers can generate more effective ideas about future
opportunities that are beneficial for the company.
Disadvantage: It has been observed that few times, it is not that much effective because
of changes in policies. It is difficult to incur more effective outcomes with the available
resources.
Contingency tools: It is a management techniques which is used to evaluate impact of
potential problem and ensure that appropriate arrangements are made in prior to respond in
allotted time (Fourie and et. al., 2015). In order to implement this plan, proper experienced
managers are required.
Advantages: It is considered to be more effective tool to control extra cost for the
company.
Disadvantage: Such kind of tools are more uncertain and hard to manage because
appropriate skills are required to do so.
M3: Analysis of planning techniques
For every organisation, it is important to have a perfect market share in order to build
good image in the market in front of competitors. This resources are totally utilised by using
innovative techniques that can help in attain more effective outcomes for them. Some of them are
scenario analysis which is useful in control issues those are available in the production process.
However, forecasting tools are another tools which is used in order to estimate profitability and
total revenue for the company.
D3: Critical evaluation of financial issues
It has been seen that performance and growth of an organisation is getting impact because
of various issues such as financial and non-financial. The performance and control measures are
needed to be implemented in right manner to overcome financial problems. It can increase
profitability as well as chance of better goodwill in the market. Some issues can be solved by
using balance scorecard system which is made for such kind of situations.
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TASK 4
P5: Different measures to resolve financial issues
In company's like Zylla which having very small operations. But still having some
financial issues that cannot make them to attain their aims and objectives. As, it has been
observed that every business organization is working for some serious motive (Hülle, Kaspar
and Möller, 2011). In order to attain those target they required to eliminate all those financial
problems that are coming in there way. It can be associated with various activities that are done
in an organisation such as operational, investing and financial activities. Some of them are arises
because of outdated technologies. These are discussed underneath:
Profitability: Few financial issues is associated with company's profitability. Such issues
can hamper the performance and position of the company and extra cost can also be enhanced.
Cost efficiency: In management accounting, out of various issues cost can be the primary
aspects that is needed to be taken into consideration to make business more efficient.
Performance management: It is associated with Zylla company current time position
during the time. It is the key to every company as on this basis valuable decisions can be made.
In order to rectify the above issues such financial problems can be resolved by using few
techniques.
KPI: Key performance indicators is the main tool which is more effective for managers
to solve financial problems of Zylla company. It can be analyse by data collected from past and
present year basis.
Financial governance: This the policies which is made by legal bodies in order to solve
any financial issues that are originated in an organisation. It is more effective tools as compare to
other techniques.
Benchmarking: Under this process, management of the company determine the internal
opportunities for betterment of an organization performance (Quagli, 2011). A standard is been
set by the company in order to make better position as compare to other.
Comparison
Zylla company 4com plc
As this company is working as a small
business organisation. In order to manager
Under this company, they need to monitor their
every day transactions on continuous basis
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there operations they need to use KPI tools in
more effective manner.
because of large business size (Al and
McLellan, 2011).
SMART tools can be another beneficial tools
for remove financial issues that are affecting
the profitability of the company.
Benchmarking can be other option by which
crucial decision making would be done by
investors to remove obstacles.
M4: Analysis of financial problem
In order to determine various financial problems that are affecting the productivity and
growth of Zylla company essential tools can be used by the company. In accordance with the
upcoming performance and opportunities it is essential for them to use it in better manner. Some
financial issues those are arises in an organisation are related with profitability and cost
accounting of a department. These can be resolve through proper implementation of techniques
that can help in increasing good image for the company in front of others.
CONCLUSION
From the above project report, it has been concluded that management accounting is an
essential aspect that can be helpful for every organisation to manage there daily transactions.
This project report provided more effective information about accounting and reporting system
that can helpful in generating more profitable outcomes for them. In order to gain maximum
return costing methods is been used. Benefits and limitation of planning tools in budgetary
control are discussed in more effective manner. Some financial issues those are affecting the
business growth are explained clearly and measures to rectify those problems are evaluated
properly. The overall project is providing more reliable and accurate information about the use of
management accounting.
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REFERENCES
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Accounting Review. 24(3). pp.334-356.
Quagli, A., 2011. Goodwill accounting as a missing link between financial and management
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