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.
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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.
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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.
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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
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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.
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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
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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
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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
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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.
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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.
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