Management Accounting Report: Costing Methods and Financial Problems

This report provides a comprehensive overview of management accounting principles and their application within an organization, specifically using Zylla Company as a case study. It delves into the essential needs of management accounting, exploring various reporting systems, including performance, accounts receivable, inventory, and job cost reports. The report analyzes different costing methods like absorption costing and their role in calculating net profit. Furthermore, it evaluates the merits and demerits of planning tools used in budgetary control, along with an analysis of accounting tools and techniques. The report also examines financial problems, offering insights into overcoming financial challenges and evaluating financial issues. The content covers topics such as cost accounting systems, inventory management, price optimization, and job costing systems. Overall, the report aims to provide a critical analysis of accounting reporting systems and financial problems, offering valuable insights for effective decision-making and financial management.

Management Accounting

CONTENTS
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Explanation of management accounting and their essential needs in an organisation....1
P2: Different types of management accounting reporting system..........................................3
M1: Benefits of management accounting system...................................................................4
D1: Critical evaluation of accounting reporting system.........................................................5
TASK 2............................................................................................................................................5
P3: Various costing methods used to calculate net profit for the company...........................5
M2: Analysis of accounting tools and techniques..................................................................7
D2: Analysis of income statements.......................................................................................7
TASK 3............................................................................................................................................7
P4: Merits and demerits of various planning tools used in budgetary control.......................7
M3: Analysis of planning tools and their application............................................................9
TASK 4............................................................................................................................................9
P5: Different measure to overcome financial problems.........................................................9
M4: Evaluation of financial issues.......................................................................................10
D3: Critical analysis of various financial problems.............................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
This project is all about discussing crucial information about management accounting which
is more valuable concern for every organisation. It has been seen that managers of Zylla
company is always in search of crucial aspects that are effective enough for the company to
attain their aims and objectives those are being set for the future. It would guide them to take
necessary actions regarding right options which will responsible for generating maximum profit
for the company. This project is discussing vital matters those are related with types of
management accounting and reporting system. Apart from this, to analyse total net profit for the
company various costing methods is being taken into consideration. By the help of merits and
demerits of using planning tools are equally responsible for attain future goals for an
organisation. Although, comparison by using management accounting systems in respect to other
industries to determine financial issues those are affecting the performance during the period of
time. All information are analyse to reach a certain targets those are set of an organisation are
discussed under this report (Figge and Hahn, 2013).
TASK 1
P1: Explanation of management accounting and their essential needs in an organisation
Nowadays, it has been seen that most of the companies are trying to make use of
appropriate accounting systems those are responsible for recording valuable transaction those are
incurred during a financial period. It is the primary responsibility of project managers to always
search for all those aspects those is helpful or beneficial for an organisation to attain their aims
and objectives in more effective manner. This can only be possible in case Zylla Company can
make proper allocation of resources in right ways. Through this, they are related with achieving
maximum earning with maximum selling of products and services (Thompson, Gilbert and
Hernandez, 2012).
Definition: As per the institute of IMA (Institute of management accountants:
Management accounting is said to be an effective profession that consists of partnering in
administration decision making, devising strategies and providing expertise financial reporting.
This will be considering more reliable for an organisation to attain future aims and objectives
those are set by Zylla company management team. This would aims of formulating management
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reports and statements that provide reliable and timely statistical data those are needed by
managers to make every day as well as short term objectives.
There are various types of significance of using management accounting systems:
Effective decision making: It is said to be utmost important aspects for an organisation
to attain future aims and objectives in case Zylla Company can make appropriate decision for
future. All data will be essential enough to attain upcoming growth and sustainability through
using resources in proper manner.
Enhance productivity: Another important point is to be taken into account is related
with production capability. It will be useful in increasing overall productivity of an organisation.
There are different types of accounting systems which will be helpful for Zylla Company
is mentioned underneath:
Cost accounting system: It is said to be an effective framework that is being used by an
organisation to predict the cost for their goods for the purpose of attaining profitability analysis.
Estimation regarding reliable and accurate costs of products is effectively profitable in operations
department of an organisation (Shah, Malik and Malik, 2011). There are various types of costs
which are needed to be taken into consideration during the use of production process. It is
consists of actual, standard and normal costing those are equally utilise in manufacturing of
products.
Inventory management system: It refers as utmost important accounting system which
is useful to measure, track and analyse stock position of the company. All essential aspects those
are associated with inventory maintaining and controlling of different stock those are being kept
by an organisation during end of accounting period. There are various stock techniques that are
related with them are FIFO and LIFO.
Price optimisation system: It is essential tools which is used as numerical evaluation by
an organisation in order to determine customers thinking and perception that what they will
respond to various prices for all those products and services that are being offered by the
company. This will be effectively reliable to examine prices that the company used to analyse
will be more reliable to attain their objectives which is to increase operating profit for Zylla
Company (Chang, 2013).
Job costing system: It is known as effective system which is effectively associated with
assigning production costs to an individual goods or group of products. Basically, job order
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costing is reliable in only that particular situation in which products produced are sufficiently
different from one another. It has been seen that in case there are more than one job currently in
progress, there is positive chances that costs will not assign in right manner. There are various
costing systems those are related with an organisation. Some of them are standard costing,
contract and process costing.
P2: Different types of management accounting reporting system
In accordance with making valuable outcomes from the available resources they need to
consider all essential aspects those are reliable for an organisation. Report is more valuable
assets for Zylla Company to analyse all financial account data that are being prepared by an
organization during an accounting period of time. Management reporting refers to effective
procedure that would provide crucial information to various levels of management so as to attain
or give judging the effectiveness of all responsibility centres those are crucial base for taking
valuable course of action in case it is necessary for an organisation. There are certain crucial
matters with certain advantages and offering specific growth and financial stability in near future
period of time (Groot and Selto, 2013). Submitting particular data for specific objective that
relies upon certain demand of investors.
This particular data would be more valuable form of report that consists of all essential
data of Zylla Companies financial information. It is framed to attain all vital information about
members of administration through providing accurate and timely results through use of
resources in sufficient manner. Reports used to communicate data that has been complied as
valuable outcomes of research and determine information and all necessary issues that are
present in financial statements of an organisation (Justesen and Mouritsen, 2011). It would
covers large range of matters, but mainly target on transmitting data with reliable objectives to
draw attention of various people so that they can make valuable contribution by purchasing
shares of the company. The nature and style of accounting report varies from large scale. There
are various types of accounting techniques those helpful to record all data into their respective
format. Some of them are mentioned underneath:
Performance report: It is taken into account more specific raw data which is produced
before any particular analysis. Once it has been determine that financial position of the company,
it will be essential to make estimation of present performance. It becomes work performance
data for consumption for some objectives such as to make appropriate decision making in near
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future. There are various tools which are more reliable to take into account past record so that
actual outcomes can be managed in effective manner.
Account receivable report: According to this particular report that is being prepared by
an organisation to in respect to determine all lists of customers unpaid invoices and credit
memos. By using this, company would be easily be able to determine the exact time period for
recovering total amount which remain overdue from debtors side. It is taken into account as one
of the most reliable and easiest method for analysing the position of the company’s total account
payable or receivable (Harris and Durden, 2012).
Inventory management report: As per this particular report accountant can easily be
able to determine all necessary techniques or list of stock that Zylla Company has kept with
them. This would provide the stock age which determine their receipts data. In case all the
receipts date information is lost, the inventory cannot be ascertain or classified in essential
manner. All operating and closing stock positions that are being necessary to examine total level
a stock can be last.
Job cost report: It is known as initial place for total data which consists in other reports of
an organisation. As per this report each job a company is operating on and lists the total costs
which are incurred on an individual job in last period are taken into account. It can also be
divided into various parts such as labour costs, material and overhead costs. There are specific
documents that are being used to record producing costs and prepared through company that are
related with job costing system during the calculation as well as allocation of costs to an
individual products and groups at the same period of time (Amoako, 2013).
M1: Benefits of management accounting system
In every business organisation, it has been seen that are managers used to search an
appropriate accounting systems that are reliable enough to attain future aims and objectives in
more effective manner. All the above discussed accounting systems are equally responsible
which would be helpful to manage the financial transactions those are being done in an
accounting period of time. Such as cost accounting is which is related with increase future
estimated cost and expenses those are incur by Zylla company. Whereas inventory management
system is use control and keep track of stock position within an organisation.
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D1: Critical evaluation of accounting reporting system
In respect to get more reliable solution to a given statements. The best ways is to make
proper evaluation of financial position. This will assist them to determine current performance
and easy for investors to make their crucial investment decision. The chain of activities consists
of creation, manufacture and distribution of firms a company used to produced during the period
of time. Some of them are performance report that are prepared to analyse performance of the
company on the basis of actual and standard data. While account receivable report can used to
determine total lists of unpaid customers those are still remain overdue.
TASK 2
P3: Various costing methods used to calculate net profit for the company
Cost is considering more essential aspects for an organisation. It is vital for Zylla
company to record every costs those are incurred in a business in the manner which can be used
to improve their management performances. Cost accounting is said to be systematic process of
recording, categorising and allocating various alternative action for the purpose of controlling
costs for an organisation. There primary motive is to advice the management on the most
appropriate course of aspects those are based on the cost efficiency and capability of an
organisation. It is directly or indirectly associated with the production of products and services
that are done by the company during an accounting period (Brewer, Sorensen and Stout, 2014).
There are various types of costing methods those are being taken into consideration in respect to
evaluated total net profit for the company. Some of them are discussed underneath:
Absorption costing: It is known as one of the best suitable methods which are related
with all production process. This seems to be full costing which take into account fixed and
variable cost with the production process and apportioning to an individual products (Absorption
costing, 2018). Hence, a product must be associated with wide range of costs that are done in a
manufacturing process. Costs that are operate in production of facilities that does not vary with
the extra production of products units. Some crucial examples are rent and insurances.
Marginal costing: It is an effective accounting systems which is used by Zylla company
in production of additional unit produced. This concept is used to determine the maximum
manufacture quantity for extra units. It consists of only variable cost and fixed costs are units and
fixed costs of period are written off in full against the total contribution during an accounting
period of time.
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Comparison:
Marginal costing Absorption costing
It used to consider only variable costs that are
taken into account for product and inventory
valuations.
In this, variable and fixed costs both are taken
into consideration of product and stock
valuation at the same point of time.
In this fixed costs are regarded as period costs.
The overall profitability of various product can
be determine by using P/V ratios.
Here, fixed costs are charged to the cost of
manufacturing. Each product bears a
reasonable share of fixed costs.
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
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: Analysis of accounting tools and techniques
It has been determine that every business such as Zylla company required to have
effective planning option by which they can analyse their future aims and objectives in
impressive manner. There are various types of accounting tools which are helpful to attain
maximum profit and growth in coming period of time. It is an effective planning process for
managers to get their set outcomes. In accordance with this, financial statement analysis is done
to analyse present position of the company as compare to other one. Standard costing is
responsible to make comparison of actual outcomes that are generated during the time.
D2: Analysis of income statements
According to the above calculations which are done by taken into account both marginal
as absorption costing. By using them company is getting various results at the same level of
production process. The outcomes are more positively reflects the growth position of Zylla
company. By using marginal cost they are responsible for getting profit of 7500, whereas with
absorption costing they are getting 7800 of total gains. The difference of 300 is arising because
of fixed cost treatment. It means that in order to make better outcomes in near future time,
marginal costing is taken into accounts for future decision-making.
TASK 3
P4: Merits and demerits of various planning tools used in budgetary control
Budget is an effective financial plan for certain period of time which is mainly for future
period. It can also consist of planned sales, volumes and earning incurred by the company during
the period of time. A budget is predicated the financial outcomes of Zylla company for one or
more periods. It is said to be an effective planned and systematic gathering of records for a
particular period of time (Lim, 2011). This seems to be framework of operations and estimated
vision and mission of an organization targets. Budgetary control is said to be an effective tools
and techniques which is being related with planning, organising and controlling performances of
an organisation. In this actual earnings and overall spending are determine with planning
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incomes. There are various types of planning tools which are helpful for an organisation to
control implications of an organisation. Some of them are discussed underneath:
Forecasting tools: It is known as one of the vital assumption which is to be done on
internal level of an organisation that consists of effective ability which is done for making
effective decision-making. It is mostly depend on historical data for the aims estimation future
profitability for an organisation. Future values of growth process that are used for the selected
period of time. The more accurately a company can estimate internal and external factors
affecting internal business performance of an organisation.
Advantages: Every organisation uses a wide variety of forecasting techniques to assess
best possible results for the company. It is mostly relies on an individual performances and
industry in which they operates.
Disadvantages: It is not taken as best possible aspect that is accurately estimated for
future. Because of qualitative scope of estimation a business can come up various situations that
depend upon the data interpretation.
Scenario analysis: From various planning tools a managers can use for effective
planning, situation strategies which stands out for their ability to collect a wide range of
possibility in effective manner. Through determining basic trends and uncertainties, managers
can estimate a wide series of situations that will assist them to help for analysing errors those are
arises in an organisation (Van der Stede, 2015).
 Advantages: It has been seen that decision formulators uses as data to take better
understanding of information that are able to reorganise a situation in their early stages
which is actually unfold.
 Disadvantages: The major limitation of using these tools is that the early warning of risk
and decision support system is not controlled.
Contingency Tool: This seems to be an appropriate planning tool which is devised for a
valuable result other than usual strategies. It is mainly used to measure all risk administration in
case an exceptional risk that are most unlikely estimated to be occurs. It is mostly devised
through governments and other business forms. It is mostly prepared for all such events such as
loss of information, customer and suppliers data and so on.
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 Advantages: An effective documented plan that allows employees to change rapidly in
case of advance mode rather than ready for instructions. Chances of minimum damages
can be controlled early.
 Disadvantage: The major limitation of these planning tools is related with inadequate
literature. Henceforth, it is not reliable to provide various types of actions which can be
taken into account under a given situations.
M3: Analysis of planning tools and their application
In accordance with all crucial aspects which are helpful for increasing the reputation of
Zylla company. It is necessary to make use of effective planning tools in more reliable manner.
Maximum targets can be taken over on proper utilisation of resources by using appropriate
planning tools and techniques. Some of them are forecasting tools which will be reliable for the
company to estimate future costs and expenses that are arises in an organisation. While
contingency tools can provide valuable data for risk management of the company.
TASK 4
P5: Different measure to overcome financial problems
There are many issues are arise in the organisation which have direct impact upon their
capability regarding earning of the adequate amount of profits. The different issues which are
noticed within Zyalla includes low quality of products, lack of skills among workers etc. which
has negative impact upon the profitability of organisation. There are various kinds of financial
issues those are present in an organization. Some of them are mentioned underneath:
Profit level: It is said to be utmost important aspect for Zylla Company but without
selling maximum products they cannot be able to generated sufficient amount of gain in near
future time. This seems to be major concern for an organization to maintain definite level of
earnings in near future time (Lavia López and Hiebl, 2014).
Product and service quality: Another important issue found in an organization is
associated with product and services delivery to their customers. It has been noticed that plenty
of problems are mostly arises because of not satisfactory products offered by the company to
their customers.
Budgeting issues: The other crucial issue related with finance is associated with budget
preparation done by an organization. In case the company cannot be able to make reliable and
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accurate budget then they need to deal with various issues those are directly affecting
profitability for an organization.
Management accounting plays an important role to overcome from such financial issues
through use of different tools. The different aspects provides the opportunity to respond such
financial issues are defined below:
KPI: It is refers as key performance indicator which helps to assess the actual
performance and development of the appropriate solution to improve their performances. This
can be of two types which are known as financial and non financial. Financial KPI includes
income statement which helps to improve financial performance. On the other hand, non
financial KPI helps to improve the coordination among the employees to provide their best
regarding accomplishment of desired objectives.
Benchmarking: This method provides the opportunity regarding establishment of
standards which are required to adhere while performing their functions. This helps to remove
their issues and build good organisational structure.
Financial governance: This method helps to follow all the regulations which are
provided by the government of different nations. It helps to prevent themselves from penalties
and fines and improves their brand image in market through which they can earn large number of
profits.
Zylla Company Rowlinson Knitwear
KPI tool is used to improve financial and non
financial performance
SMART objectives are used to provide
direction to employees
Benchmarking contributes to perform the
functions as per standards
Financial governance is used to fulfil different
regulatory requirements.
M4: Evaluation of financial issues
In respect to get more reliable outcomes in near future for Zylla Company, they need to
make examination of various financial issues those are affecting profitability of an organisation.
Some of them are associated with profit generated during the time as, it cannot be sufficient
helpful to meet out their demand of the customer as well as stakeholders. Some of them are
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