Comprehensive Analysis of Management Accounting at Zylla Company

This report analyzes management accounting practices within Zylla Company, a small business. It begins with an introduction to management accounting, emphasizing its role in decision-making, performance evaluation, and cost management. The report then explores the essential requirements of various management accounting systems, including cost accounting, inventory management, and job costing. It details different methods used, such as budget reports, job costing reports, and performance reporting systems. The report further examines the merits of using a management accounting system, emphasizing its role in enhancing profitability and efficiency. It analyzes cost techniques to prepare income statements using marginal and absorption costing. The report also evaluates planning tools used for budgetary control and discusses how organizations adapt management accounting systems to address financial problems, concluding with an overview of financial issue resolution strategies.

MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Management accounting and essential requirements of various types of management
accounting systems......................................................................................................................1
P2 Different methods used for management accounting............................................................4
M1 Merits of using management accounting system..................................................................5
D1 Critical analysis of reporting system:....................................................................................5
TASK 2............................................................................................................................................6
P3 Costs using proper techniques of cost analysis to prepare an income statement by using
marginal and absorption costs.....................................................................................................6
M2: Use of management accounting techniques........................................................................8
D2: Critical evaluation of income statements............................................................................9
TASK 3............................................................................................................................................9
P4 Advantages and limitations of various types of planning tools used for budgetary control..9
M3 Evaluation of planning tools...............................................................................................11
D3 Tools used for resolving financial issues............................................................................11
TASK 4 .........................................................................................................................................11
P5 Organisations are adapting management accounting systems to respond to financial
problems....................................................................................................................................11
M4 Evaluation of financial issues.............................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Management accounting is very necessary and it plays an important role in a business
firm. It is an area of accounting which helps a manager in an organisation in giving the useful
and also effective information and data used in the decision making, performance evaluation,
planning, cost managements etc. This kind of accounting is beneficial for the internal
management such as managers and officers (Abdel-Kader, 2011). Zylla is a small business firm
and in this company there are more than the 50 staff members are working and its turnover is not
more than the large companies. In this given business report mentions about the management
accounting and also various types of accounting system which are beneficial for the business.
Under this report discuss about the various methods which a business firm used in an
organisation. In each and every situation of a company, there is a need to manger to do its
business activities after making the plan so with the help of this company can achieve its aims
and objectives in an effective manner. Under this mentions report discuss about the advantages
and limitations of various kinds of planning tools which an organisation used in controlling the
budget. There is a comparison that a business firm adopt the management accounting system in
order to responding to the problems related to finance discuss in this given report .
TASK 1
P1 Management accounting and essential requirements of various types of management
accounting systems
Management accounting refers to the process of making management reports and also
accounts which is helpful in providing the timely, relevant and also accurate financial data or
information which are necessary to the employer for doing the daily activities and helpful in
taking the short term decisions which are beneficial for an organisation. Basically, the
management accounting helps in generating the monthly and also weekly basis report for a
business form for its internal people like for an instance employees and managers. If the data and
information will be proper then in this case manager can perform the business operations and
also activities in a proper way (Alleyne and Weekes-Marshall, 2011). The management
accounting is concerned with the collection of data from the different sources like for an instance
external and also internal sources. After collecting the data, it is necessary for the Zylla business
firm to measure, process, determine and also effective communication in a business firm.
1

Management accounting is a system of gathering the financial information and data from
business operations such as change in stock, change in the raw material and also financial data
and then transforming all these reports in to an analysis for an organisation. There are many
advantages of this management accounting like it is helpful in providing the accurate data and
information to the managers so that they can work in a proper manner and accomplish
organisational targets and aims in a specific time period. The target or aims of this Zylla business
firm to achieve the long term along with the short term objectives (Becker, Messner and
Schäffer, 2010). It is helpful in providing an effective and necessary outcome to this business
company regrading its financial performance at the time of working. Under this there is a need to
an accountant to maintain and record the financial data so that employers can take an effective
decision and also determine the performance level of business firm in an effective and aloes
proper manner.
If the data and information is not proper and also accurate then it can develop an impact
on the profitability and the development of an organisation. With the help of using the effective
and proper accounting system, many kinds of problems and issues can be arise related to
development of new plans and policies. It is necessary that manager should make the good and
proper solution so that the productivity of firm will not be affected badly. Under this, it is noted
that there is a more burden to Zylla company in order yo manage its financial records. The
management of Zylla company makes some of the effective policies and also tools for increasing
the development and also growth of this business firm. There are some importance of
management accounting system in context to this organisation are given below as above:
Qualitative information- It is essential that the information and also data should be
accurate and also proper so that firm can do its business activities in a proper manner and also
solve the issues related to business.
Ongoing training as well as information- Management accounting system is helpful for
the management of Zylla organisation if the staff members know the use of this ( Becker, Ulrich,
and Staffel, 2011). It is necessary for the manager to provide the on going training to employees
so that they can upgrade about the new policies and activities.
Provided critical information- This kind of accounting system is so effective and also
flexible in order to get the accurate data. It is helpful for the Zylla business firm to do the
activities of business fast and also making the business successful.
2

Types of accounting system
Cost accounting system- It is that type of management system which is helpful for the
business firm in order to estimating the products and services cost with the help of using the
approach of profitability analysis, cost control and also valuation approach (Bennett, Schaltegger
and Zvezdov, 2011). In context to this, it is difficult to estimate the proper cost control so in this
case it is necessary for the firm to use all these methods or approaches in order to make the
business and its products profitable.
Inventory management system- It is very useful system of the management accounting
because it is helpful for the business firm in enhancing the turnover of organisation. It helps in
controlling the cost and also assuring about the minimum cost which is required in the stock
through Zylla business firm. There are many different kinds of tools which are used through a
business form:
 Just in time approach
 EOQ (Economic order quantity)
These both tools are helpful to an organisation in order to maintaining proper balance
among the cost and also stock in that way in which a company can achieve its organisational
aims and goals in an easy manner.
Job costing approach- It includes an accumulation cost of labour, overhead and slap
materials cost for the particular cost. The main aim of this effective approach is to manage and
also control all the expenditures in order to enhancing the profit level of an organisation. In this
firm can determine the production cost of products in an effective manner and it is divided in to
the three different parts which are mentions below:
 Labour cost
 Direct material
 Overhead
Price optimisation system- Under this there are different factors which are responsible
for impacting on product cost and in this involves supply and demand. It the demand will be
increased then cost will be minimized of products.
P2 Different methods used for management accounting
Management accounting is helpful to the small business companies and in this context it
is the duty of manager in monitoring and controlling the performance level of an organisation.
3

Management reporting refers to the process of delivering and preparing the relevant data and
information to the top management of the Zylla company. It is a continuous of reporting which is
helpful in decision making process. It is necessary to make the good reporting and it is helpful in
proving the positive outcome in an organisation.
Significance of management reporting system:
Beneficial in profitable operations- This reporting system is helpful in providing an
effective or proper direction to moving business and also operational level. According to this an
administration of an organisation give the accurate and relevant information in order to
increasing profit.
Effective in managing system of control- In this specific system, target or set objective is
very important. In context to this, it is the responsibility of an employer to look staff member that
they are working according to the organisational aims and targets. For evaluating an exact or
correct position or taking some corrective actions, this system will be helpful.
There are various methods which are used by the Zylla business firm in order to
preparing an accounting reporting:
Budget report- This method is helpful to business firm in order to determining the
performance level of an organisation. It refers to an important or necessary report which is used
through the management in order to comparison about the budgeted projections with its actual
performance level in order to achieving the goals of company in a given period of time. If in case
the budget of previous year was over budgeted then in this case it is necessary for the company
to develop an effective budget on the basis of organisation requirement in this present year.
Job costing reports- Under this kind of report, firm shows its actual expenditure
concerned with the particular and important project of an organisation. It is necessary that the
expenses should be matches with the estimated revenue of firm so from this firm can increase it s
profit level (Bennett, Schaltegger and Zvezdov, 2013). It is essential that the management should
be focus on reducing the wastage and work on enhance its profit margin in an effective or proper
manner. Job costing is related with the method for recording the production cost instead of the
process. With the help of this, managers of the Zylla company can track the record of every job
cost in an effective and also systematic manner.
Performance reporting system- On the basis of this system, firm can determine its
financial statements in that way in which an organisation can measure its actual performance. In
4

order to taking an effective and beneficial decisions in favour of an organisation then it is
necessary for manager to prepare a final performance report (Boyns and Edwards, 2013.). Under
this an evaluation can be completed through taking a corrective information and data from the
present and also past year in a proper way.
Manufacturing and inventory report- Those business organisations which have the
physical inventory, they should use this management accounting system in context to develop
their production process in an effective and efficient manner. In this report involves the overhead
cost, labour cost, inventory wastage etc. This report is helpful to the employer in order to
estimating the total inventory which are available in an organisation. With the help of this
manager can control an inventory.
M1 Merits of using management accounting system
Management accounting plays an important role in managing and monitoring the
financial transactions in an effective and efficient manner. It is important for company to use
various accounting system such as price optimisation and job costing system which help them in
getting high profitable outcomes. Using such accounting system also helps in enhancing
profitability and efficiency of company through which company attain stable position in
competitive environment.
D1 Critical analysis of reporting system:
Evaluation of performance and growth stability are the main objective of using reporting
system by an organisation. Therefore it is important for managers of Zylla company to prepare
report by using critical information about past and present year performance so that they can
analyse overall performance of company. It is also used with an objective of taking investment
plan in the upcoming projects (Busco and Scapens, 2011). There are two important and crucial
techniques of reporting such as performance report and accounts receivable report with the help
of which company determine their financial stability.
TASK 2
P3 Costs using proper techniques of cost analysis to prepare an income statement by using
marginal and absorption costs
Income statement is helpful in evaluating the income level and also primogeniture of an
organisation. It is only a method which helps in making profit and also loss account.
5

Marginal costing- Under this, firm take the fixed expense on the periodic basis. It is
helpful in reducing the cost and increasing production cost in producing one additional unit. It is
a very effective costing method where the fixed and variable cost is charged for particular period
of time.
Absorption cost- It refers to the managerial accounting method of expenditure and in
which all costs are related with the producing specific products and goods ( Callahan, Stetz and
Brooks, 2011). This method of costing assures that all the incurred costs should be recovered
from selling price of products or services.
Difference among marginal cost and absorption cost
Marginal costing Absorption costing
It is used in the process of decision making. This costing is used by Zylla company for the
external costing.
Under this, only variable cost is in to
consideration (Christ, 2014).
IN this fixed and variable both cost is in to
consideration for the purpose of valuation.
In this, profitability of firm is determined
through the Profit Volume Ratio.
Because of fixed cost inclusion, profit of
company will be impacted.
Per unit contribution Net profit per unit.
Calculation as per Absorption costing.
Working notes:
Absorption costing
Working 1: Calculate full production cost
Direct material £6
Direct labour £5
Variable cost £2
Fixed cost £3
Total £16
Working 2: calculate value of inventory and production
6

Opening inventory Production Closing inventory
0 700*19 = £13300 100*16 = £1600
Working 3: under/ over absorbed fixed production overhead
Actual fixed production: £2100
Fixed overhead: £2000
Total £100(over absorbed)
Administration Cost: In this budgeted cost is £800 and Actual cost is £700
Production Cost: £700
Selling cost: In this budgeted cost is £400 and Actual cost is £600
Net profit using absorption costing £ £
Sales
(-) Cost of Sales:
Opening stock
Manufacturing
Closing stock
(Under)/ Over absorbed fixed prod.
O/h
Gross Profit
Less Expenses
Variable sales expenditure
Fixed administration expenses
Fixed selling expenditure
Over absorption
Net Profit
0
11200
(1600)
600
700
600
(100)
21000
(9600)
11400
(1800)
9600
Working 1: Calculate variable production cost £
Direct material 6
7

Direct labour 5
Variable production O/h 3
Variable production cost 14
Working 2: Calculate value of inventory and production
Opening inventory Production Closing inventory
0 700*14 = 9800 100*14 = 1400
Net profit using marginal costing £ £
Sales value
Less: Variable costs
Opening stock
Manufacturing
Closing stock
Contribution
Less Fixed costs
Variable Production expenses
Administration cost expenditure
Selling cost
Net Profit
0
9100
(1300)
2000
1300
600
21000
(7800)
13200
3900
9300
M2 Use of management accounting techniques.
Zylla company need to adopt various latest technique in order to attain financial stability
and desired objectives. The management of company need to focuses on using control techniques
such as standard and budgetary control techniques in order to manage limited resources in an
organised manner (Kihn, 2010). Statistical and graphical tolls should also used by management
to get meaningful information in order to formulate effective decision. Reporting is also
8

considered as one of the vital techniques that provide data at different levels of departments.
This all effective techniques help company to analyse and measure their overall performance
during accounting year.
D2 Critical evaluation of income statements
From the above information which is taken on assumption basis is used to evaluate the
variations in Net Profit through using two different costing methods such as marginal costing and
absorption costing. It will help in making future investment plan through evaluating actual net
profit by using these two costing methods.
TASK 3
P4 Advantages and limitations of various types of planning tools used for budgetary control
Budget is a summary or description of the expenses and income which are expected to
spend in the future. It is an effective tool which is helpful in give the priority to spending and
also keep maintaining the money matters (Mat, Smith and Djajadikerta, 2010). There are some
advantages of developing the budget:
 It is helpful in controlling and also managing an expenses which are to be
expended in future.
 It helps in focusing in the money related objectives or neglect the unnecessary or
relevant expenses which are not beneficial in achieving the goals and objectives.
There are some objectives of the budgetary control mentions below as above:
Planning- Budget is a detailed action plan for a specific period of time. With the help of
planning, firm can solve the problems and also issues in an easy manner with in an effective
period of time.
Coordination- When business activities are effectively planned then it is necessary for
the staff members to work together and also coordinate with the each other so that objectives of
company can be achieved in a proper manner (Salehi, Rostami and Mogadam, 2010).
Motivation- Budget is helpful in motivating staff members through rewarding them if in
case they do the business activities which are assigned to them in an effective or proper manner.
Communication- In a business firm, proper communication is necessary among the staff
members related with the information and also data related to products in Zylla company.
9

Control- IT is essential for the business firm to prepare the budget in an appropriate
manner and firm should make for the benefit of company.
There are different planning tools and techniques which firm used for the budgetary
control in a business firm given below as above:
Zero based budgeting- Firm makes this budget as as base and it is developed on the basis
of future related activities.
Performance budgeting- It refers to using an information regarding results and
performance in budget process and allocation of resources (Schäffer, 2013).
Responsibility accounting- Under this, it fixes targets for every responsibility centres and
also comparison among the budgets in a proper manner.
Benefits and disadvantages of planning tools are as follows:
Planning tool Advantages Disadvantages
Zero- based budgeting The main advantage of this
planning tool us that its main
focus is on using the resources
and also helps in removing the
wastage.
It is a very complex or difficult
process and it is costly without
any king of long term planning.
Responsibility accounting It is helpful in raising
performance level of company
if the staff members will work
properly and also focus on the
assigning task (Sharma,
Lawrence and Lowe, 2010). It
is a best motivational tools.
It is emphasize on short term
results and in this to
management can do the
mistakes.
Performance budgeting It tool of planning is has a
better practices of management
at the time of comparing
objectives with achievements.
It included all alternative
method where money will be
spend or spend.
10

M3 Evaluation of planning tools.
In order to achieve accurate information, Zylla company need to uses various budgets
such as operating budgets and cash budgets. Using operating budget helps company to detect
total costs and expenses incurred during accounting year whereas cash budget enable company to
detect and analyse total inflows and outflows from various activities.
D3 Tools used for resolving financial issues.
There are various tools through which an organisation can resolve their financial
problems in an effective and efficient manner (Stergiou, Ashraf and Uddin, 2013). Such tools are
Key performance indicator, Benchmarking and financial performance which enable managers to
evaluate and measure performance of company. Therefore In order to resolve financial issues the
managers of Zylla company needs to implement specific steps such as balance score system
which helps in identifying financial problems and accordingly taking corrective actions which
help company in achieving desired goals and objectives in specifies within limited period of
time.
TASK 4
P5 Organisations are adapting management accounting systems to respond to financial problems
Financial issues is the major challenge that an organisation faces while operation of
business activities. It is difficult for an organisation to achieve desired goals and objectives if
they faces tough situation of financial crisis such as lack of financial resources, cash inability and
short term liabilities. Hence managers of an organisation are held liable to identify such financial
problems at earlier phase so that they are in position to tackle such situation through
implementing crucial and effective plan which helps the business to achieve long term stability
and profitability (Suomala, Lyly-Yrjänäinen and Lukka, 2014). It is essential for an organisation
to evaluate existing tools and techniques and need to upgrade them in order to achieve positive
result in competitive environment. The managers needs to find out the reasons behind occurring
such financial problems and need to take corrective actions which help an organisation to
overcome such financial issues. Such financial problems arises due to conducting errors in
maintaining financial records and misrepresentation or misconduct in accounting details which
are done by the members of an organisation and it is essentially required for an organisation to
implement following effective tools which help them in eliminating these financial problems:
11

 KPI: Key Performance Indicator helps in analysing and measuring performance of team
members as well as performance of an organisation during the year which help them in
achieving organisational goals and objectives in an effective and efficient manner. Zylla
company need to use KPI's at different levels in order to analyse the success in achieving
desired objectives (Talha, Raja and Seetharaman, 2010). For example, At high-level,
KPI's focuses on the overall performance of an organisation whereas at low-level, KPI's
focuses on process in different of an organisation such as sales, marketing or call centre.
Therefore it is important for manager of an organisation to implement such tools in order
to evaluate and measure the performance of entire company. Financial governance: It is important of an organisation to comply with rules and
regulations implemented by government in order to run business more smoothly.
Therefore the manager of Zylla company need to have knowledge about such
government's standards and guidelines through which they can control and monitor the
financial performance of an organisation. The result may be negative if the manager fails
to direct an organisation to follow such practices and processes which also affect in the
financial stability of business.
 Benchmarking: Benchmarking means when an organisation set standards or targets that
will be achieved in future in order to gain competitive advantage. The manager need to
direct and motivate the members of an organisation through implementing specific plans
and actions in order to to achieve desired targets in an effective and efficient manner. It is
important of Zylla company to first analyse the strategies of their competitors and
thereafter formulate standards or target that helps them in moving ahead from their
competitors (Zainun Tuanmat and Smith, 2011). This will also help company to attain
strong stable position in competitive market.
Comparison of Zylla organisation with other company's
Zylla company 4COM Plc
As company is dealing with multiple products
therefore it should required to adopt effective
accounting system which help them in
handling daily expenses.
It is small scale company dealing with
electronic gadgets. It performs and operates at
middle level.
12

Financial governance and benchmarking are
used as tool by an organisation in order to
resolve financial issues.
4COM Plc company need to use KPI tool to
analyse and measure their whole performance.
It has wider scope. It has comparatively less scope.
M4 Evaluation of financial issues.
Facing financial problems or issues will restrict the company to achieve desired goals and
objectives within limited period of time. Therefore it is required for managers to evaluate and
measure the perform of members working in different departments of an organisation through
which they can find out the causes of occurring deviations and thereafter put their maximum
efforts to favourable outcome (Becker, Messner and Schäffer, 2010). The company needs to
adopt advanced and updated technology which helps in improving their productivity and
profitability. The manager of Zylla company are held responsible to evaluate financial issues
through applying different tools such as KPI, Financial governance etc.
CONCLUSION
It has been concluded from the given business report that the management accounting is
an effective process by which a business firm can perform, and so different function related to
accounting and also with the help of this Zylla company take some of the appropriate decisions.
Under this given business report also studied about the different types of management
accounting system. Under this report involves various methods which are used for the cost
calculation and also reporting of management accounting by using the cost analysis related
techniques. In this given report also studied about the calculation of the cost with the help of
using the effective techniques related to the cost analysis by preparing the income statement.
13

REFERENCES
Books & Journals
Abdel-Kader, M.G. ed., 2011. Review of management accounting research. Springer.
Alleyne, P. and Weekes-Marshall, D., 2011. An exploratory study of management accounting
practices in manufacturing companies in Barbados. International Journal of Business
and Social Science. 2(10).
Becker, S.D., Messner, M. and Schäffer, U., 2010. The evolution of a management accounting
idea: the case of beyond budgeting.
Becker, W., Ulrich, P. and Staffel, M., 2011. Management accounting and controlling in German
SMEs–do company size and family influence matter?. International Journal of
Entrepreneurial Venturing. 3(3). pp.281-300.
Bennett, M., Schaltegger, S. and Zvezdov, D., 2011. Environmental management accounting.
In Review of management accounting research (pp. 53-84). Palgrave Macmillan UK.
Bennett, M.D., Schaltegger, S. and Zvezdov, D., 2013.Exploring corporate practices in
management accounting for sustainability (pp. 1-56). London: ICAEW.
Boyns, T. and Edwards, J.R., 2013. A history of management accounting: The British
experience (Vol. 12). Routledge.
Busco, C. and Scapens, R.W., 2011. Management accounting systems and organisational culture:
Interpreting their linkages and processes of change. Qualitative Research in Accounting
& Management. 8(4). pp.320-357.
Callahan, K.R., Stetz, G.S. and Brooks, L.M., 2011. Project Management Accounting, with
Website: Budgeting, Tracking, and Reporting Costs and Profitability (Vol. 565). John
Wiley & Sons.
Christ, K.L., 2014. Water management accounting and the wine supply chain: Empirical
evidence from Australia. The British Accounting Review. 46(4). pp.379-396.
Kihn, L.A., 2010. Performance outcomes in empirical management accounting research: Recent
developments and implications for future research. International Journal of Productivity
and Performance Management. 59(5). pp.468-492.
Mat, T.Z.T., Smith, M. and Djajadikerta, H., 2010. Management accounting and organisational
change: an exploratory study in Malaysian manufacturing firms. Journal of Applied
Management Accounting Research. 8(2). p.51.
Salehi, M., Rostami, V. and Mogadam, A., 2010. Usefulness of accounting information system
in emerging economy: Empirical evidence of Iran. International Journal of Economics
and Finance. 2(2). p.186.
Schäffer, U., 2013. Management accounting research in Germany: From splendid isolation to
being part of the international community. Journal of Management Control. 23(4).
pp.291-309.
Sharma, U., Lawrence, S. and Lowe, A., 2010. Institutional contradiction and management
control innovation: A field study of total quality management practices in a privatized
telecommunication company. Management Accounting Research. 21(4). pp.251-264.
Stergiou, K., Ashraf, J. and Uddin, S., 2013. The role of structure and agency in management
accounting control change of a family owned firm: A Greek case study. Critical
Perspectives on Accounting. 24(1). pp.62-73.
14

Suomala, P., Lyly-Yrjänäinen, J. and Lukka, K., 2014. Battlefield around interventions: A
reflective analysis of conducting interventionist research in management
accounting. Management Accounting Research. 25(4). pp.304-314.
Talha, M., Raja, J.B. and Seetharaman, A., 2010. A new look at management
accounting. Journal of Applied Business Research. 26(4). p.83.
Zainun Tuanmat, T. and Smith, M., 2011. Changes in management accounting practices in
Malaysia. Asian Review of Accounting. 19(3). pp.221-242.
Online
Difference Between Marginal Costing and Absorption Costing. 2017. [Online]. Available
through: <https://keydifferences.com/difference-between-marginal-costing-and-
absorption-costing.html>./
What is management accounting system.2017.[Online]. Available
through:<http://www.ehow.com/facts_5460765_management-accounting-system.html>.
15