Management Accounting Systems & Techniques: Zylla Company Analysis

This report provides an in-depth analysis of management accounting systems and techniques, focusing on their application within Zylla Company to address financial challenges and promote sustainable success. It begins by defining management accounting and outlining the essential requirements for different types of management accounting systems, including cost accounting, inventory management, and pricing optimization. The report then explains various methods used for management accounting reporting, such as budget reports, sales reports, and investment reports. It evaluates the benefits of management accounting systems, such as improved financial decision-making, cost analysis, increased productivity, and better investment decisions. Furthermore, the report applies marginal and absorption costing techniques to prepare an income statement and analyzes the use of planning tools for budgetary control. Finally, it compares how organizations adapt management accounting systems to respond to financial problems, emphasizing how these adaptations can lead to sustainable success for Zylla Company. The report concludes by highlighting the critical role of planning tools in solving financial problems and driving organizational success.

Managment accounting
1

Contents
Introduction:...............................................................................................................................3
LO1: Demonstrate an understanding of management accounting systems...............................4
P1. Explain management accounting and give the essential requirements for different types
of management accounting. [P1, M1]....................................................................................4
P2 Explain different methods used for management accounting reporting...........................7
M1 Evaluate the benefits of management accounting systems and their application within
an organisational context........................................................................................................9
D1 Critical evaluation of how management accounting systems and management
accounting reporting are integrated within organisational processes...................................11
LO2: Apply a range of management accounting techniques...................................................12
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing.................................................................12
D2 produce financial reports that accurately apply and interpret data for a range of business
activities................................................................................................................................15
LO3: the explanation of the application of planning tools in management accounting:.........16
[P4.] Advantages and disadvantages of planning tools for budgetary control: -..................16
[M3]. Analyse the use of different planning tools and their application for preparing and
forecasting budgets...............................................................................................................18
LO4: Compare ways in which organisations could use management accounting to respond to
financial problems....................................................................................................................20
P5, Compare how organisations are adapting management accounting systems to respond
to financial problems............................................................................................................20
M4, you should analyse how, in responding to financial problems, management accounting
can lead organisations to sustainable success.......................................................................22
D3, you should critically evaluate how planning tools for accounting respond appropriately
to solving financial problems to lead organisations to sustainable success.........................23
Conclusion:..............................................................................................................................24
References:...............................................................................................................................25
2

Introduction:
Zylla company is the largest corporation which is indulged in adopting management
accounting systems and increase the use of management accounting software in order to
resolve financial performance and manage the level of operational and decision-making the
process at the time of acquisition and business expansion project. This company needs to
evaluate and monitor the whole situation and new market expansion project through the
proper and effective implication of management accounting process and systems. Therefore,
this report is being prepared to give proper acknowledgement and make discussion regarding
the significance of management accounting systems. This reading will include an explanation
related to various costing technique to deal with managerial and financial issues and
problems. Relevant use of management information & planning tool will also discuss in order
to examine the sustainable growth of an organisation.
3

LO1: Demonstrate an understanding of management accounting systems
P1. Explain management accounting and give the essential requirements for different
types of management accounting. [P1, M1]
Definition of management accounting:
Management accounting can be taken as study concept of the collection of data, records and
documentation, evaluation and interpretation of financial facts are also included in this in
order to make proper responsive and effective statement of financial decisions. Management
accounting is kind of profession that is used in an organisation in order to generate
quantitative and qualitative forecasting proposals with effective regard to improvement and
management of business activities.
Management accounting is based on using accounting principle, convention and planning
tools and systems management systems are used in managing a business operation of an
organisation to get long-term achievements and positive process.
A principle of management accounting:
(Source: Author, 2018)
4

The origin of management accounting is started form the UK revolutionary age in order to
satisfy the requirements of cash, funds and make the optimum plan and make reliable use of
financial resources. It was categorised into two parts: first was traditional accounting systems
and second was modern accounting systems. Traditional accounting systems were quite well
in performing financial data and unable to give proper managerial and financial analysis of
business performance. On the other side, modern accounting systems were based on
following principles:
1. A principle of casualty: Modern management accounting systems are quite able to
maintain cause and an effective relation between standards and actual variables. It establishes
cost revenue relation in order to provide effective statements of practical results (Otley and
Emmanuel, 2013).
2. A principle of transparency: it provides relevant and accurate information to the
customers and an organisation in order to manage transparency and reliability in the facts.
Essential requirements of various kinds of management accounting systems:
(Source: Author, 2018)
1. Cost Accounting Systems:
5

This is the system which allows the organisation to monitor and measure qualitative and
quantitative variables to ascertain cost and procurement of financial resources based on the
financial operation.
Characteristics and requirements:
 These costs systems are based determination of each cost centre and job orders such
as production, purchase, services cost centre.
 These systems are highly qualified in measuring cost and revenue relation with the
help of job costing systems, the process determining systems etc. in order to track cost and
funds behaviour.
 These systems are basically designed for examining cost-effectiveness that allows
Zylla Company to a valuation of inventory, planning and plotting of production, proper
ascertainment of cost through procurement of funds.
2. Inventory Management Systems:
Inventory management systems are these systems which are used in determining and
understanding actual inventory level through recognising different components related to cost
of the stock. This inventory management systems basically provide knowledge related to
actual inventory to avoid future difficulties such as under-valuation and overvaluation of
inventory. These systems help the company to reduce carrying of ordering cost of inventory
through JIT, EOQ measurement.
 Economic Order Quantity: EOQ means economic order quantity which allows the
Zylla Company in determining proper timing and quantity of stocks in order to purchase and
handling the cost to make it minimum as per requirement. Ordering cost, carrying the cost,
handling cost is based on quantity and quality of inventory.
 JIT (Just in time): this tool is designed and helpful in managing storage capacity of
inventory properly to help an organisation in taking production and inventory management
decision just in time. It focuses on cost control and allows the company to create and manage
space in the warehouses for effective inventory management (Drucy, 2015).
3. Pricing optimising systems:
Pricing optimising systems are used in the organisation to recognise and filter the variation of
prices of company’s commodities according to market demand and customers’ choices. It
allows the company in integrating whole results and observations in the regards of
management tools and production cost in order to manage and create standards related to the
prices of the products.
6

P2 Explain different methods used for management accounting reporting.
Management accounting reports are produced and prepared by the management to get
specific and accurate results related to the financial performance of the company. Preparation
of management accounting reports is the medium of measuring and monitoring business
operations and each activity in order to get future decisions in an effective manner.
Management reports are:
(Source: Author, 2018)
1. Budget report: Budget reporting is the process of managing business audit and
budgetary control activity. Budget reports are prepared to contain knowledge related to
business operation and financial performance of the business. While preparing the budget,
estimated variances and actual results are compared in relation to monitor and create effective
budget decisions.
2. Sales report: Sales report are those report which is based on company’s sales volume
and production level. The company make this report in order to make effective knowledge
and understanding of sales revenue relation. It allows the company to manage production
level and increase the productivity of the company (Otley and Emmanuel, 2013).
7
Salesreport

3. Investment report: it is also known as appraisal report. Investment appraisal report is
prepared in order to optimise knowledge and create the understanding of investment
proposals according to market demand. It is produced to create funding, investment
forecasting, decision-related to forecasting management.
8

M1 Evaluate the benefits of management accounting systems and their application
within an organisational context.
Management accounting systems and their benefit in the context of Zylla Company:
(Source: Author, 2018)
1. Financial decision: MIS is essential and useful for the company to adopt and
implicate them as the decision-making tool. Zylla Company can utilise MIS tool as
accounting planning technique to make their objectives target oriented and provide flexible
knowledge of data and financial information with transparency and reliability in making
organisational decisions successful.
2. Cost analysis: MIS gives an opportunity to the company to regulate financial and
operational activities in the business through cost measurement and benefit analysis. A
company can effectively propose management decisions relate to forecasting through
variance analysis, balance scorecard and job order costing etc. it measures actual requirement
of cash and funds to manage and allocation of financial resources through cost-based analysis
(Paul Singh and Hahn Winther, 2017).
3. An increment in productivity level: MIS provides effective and proper knowledge
of utilisation of financial resources to achieve targets. Zylla can adopt managerial planning
9
Costanalysis

tools such as fund flow statement, cash flow statement, variance analysis, standard and
marginal costing to increment productivity and efficiency level of the company.
4. Investment decision: Application of MIS is beneficial in regards to Zylla Company
to measure fund requirements and cash flow behaviour in order to make perfect and effective
investment policies and decisions. Zylla is allowed to make investment policies with
perfection in relation to achieve long-term investment achievements.
10

D1 Critical evaluation of how management accounting systems and management
accounting reporting are integrated within organisational processes
Management accounting systems are those systems are that are adopted and implicated in the
company to avoid future financial difficulties effectively and easily increase managerial
profit from the market. MIS is useful for the company in providing accurate and flexible
information which help the management in observing the situation and change strategies
accordingly. Zylla Company needs to prepare usage of management accounting in order to
regulate cost and control internal management changes. Mostly planning tools are adopted in
an organisation to get responses from market and customers through comparative and
competitive analysis. Tools are helpful for the Zylla Company at the time of acquisition and
merger decision and investment decision to get a long-term achievement.
11

LO2: Apply a range of management accounting techniques.
P3 Calculate costs using appropriate techniques of cost analysis to prepare an income
statement using marginal and absorption costing.
Any organisation needs to make effective and relevant managerial and financial strategies in
order to maintain financial records, control budgetary and auditory activities, arrange the
effective range of managerial decision in the company. Applying management tools as
planning technique and a budgetary tool will be helpful in costing analysis, cost measurement
and making financial decisions. Using costing techniques such as marginal and absorption
technique as planning tool are helpful in measuring and monitoring each job order in the
company. These tools are associated with the managerial performance to determine effective
prices of company’s products and ascertain cost at the time of king financial statements
(Nuhu, et. al., 2017).
Zylla Company is the organisation that needs to adopt costing technique in a wide range to
measure cost business activity through marginal and absorption technique. Variable costing
tools are adopted in order to manage relevancy in sales revenue decisions, in another side,
absorption costing technique is used at the time of determining each cost such randomly at
the time of ascertaining production cost. In the marginal cost variable and fixed are
determined or ascertain separately. Following are the example of marginal and absorption
costing technique to produce Income statement account:
12