Detailed Report on Management Accounting System for Zylla Company

This report provides a comprehensive overview of the management accounting system implemented at Zylla Company. It begins with an introduction to management accounting, its importance, and various types of accounting systems such as price optimization, cost accounting, inventory management, and job costing. The report then delves into different reporting systems used in management accounting, including account receivable reports, performance reporting systems, job costing reports, inventory management reports, and operating budgets. The benefits of management accounting are discussed, highlighting its role in achieving group goals and optimizing resource utilization. Furthermore, the report examines costing methods and accounting techniques, providing a critical analysis of income statements. It also explores planning tools, their benefits, and limitations, along with an analysis of financial issues and comparisons with other companies. The report concludes with an evaluation of the financial issues faced by Zylla Company, offering insights into the company's financial health and performance.

MANAGEMENT
ACCOUNTING

Table of Contents
FROM: MANAGEMENT ACCOUNTING OFFICER..................................................................1
TO,...................................................................................................................................................1
GENERAL MANAGER..................................................................................................................1
ZYLLA COMPANY.......................................................................................................................1
SUB: MANAGEMENT ACCOUNTING SYSTEM .....................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Different types of management accounting and its essential use.....................................1
P2: Various reporting systems used in management accounting...........................................3
M1: Benefits of management accounting...............................................................................5
D1: Critical analysis of reporting system ..............................................................................6
TASK 2............................................................................................................................................6
P3: Few costing methods considered in management accounting.........................................6
M2: Analysis of accounting techniques.................................................................................8
D2: Critical analyse of income statements.............................................................................8
TASK 3............................................................................................................................................8
P4: Benefits and limitations of planning tools.......................................................................8
M3: Analysis of planning tools............................................................................................10
D3:Critical evaluation of financial issues.............................................................................10
TASK 4..........................................................................................................................................11
P5: Comparison with other company's about financial issues.............................................11
M4: Evaluation of financial issues.......................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

FROM: MANAGEMENT ACCOUNTING OFFICER
TO,
GENERAL MANAGER
ZYLLA COMPANY
SUB: MANAGEMENT ACCOUNTING SYSTEM
INTRODUCTION
Management is the process through which every operations of an organisation can be
managed in well organised manner. Whether related with accounting or any other aspects.
Management accounting is one of the important part of any business organisation which is
running at small or large scale. It help the company to attain future growth and sustainability in
the coming time. Basically, it is a tool which provide accounting information in relation to
perform various activities such as planning, organising, motivating and controlling or to make
effective decision (Ajibolade, Arowomole and Ojikutu, 2010). In an organisation there are
various financial transaction are recorded on regular basis that needs a system which can record
them into proper format. Under this project report, accounting systems are discussed with there
essential use. Different aspects of accounting reporting and costing methods which are used for
the purpose of evaluating profitability of an organisation is explained. This project also covers
several advantages and disadvantage of using planning tools those are linked with budgetary
control. Information about financial problems and there measure that are present their in an
organisation are examine properly.
TASK 1
P1: Different types of management accounting and its essential use
Meaning: Management accounting look at the events that provided in and around a
business at the time of considering the requirements of the business. From this particular data
and estimate emerged (Albelda, 2011). In simple terms, it means analysing and recording
business operation for internal company use in an effect to maximise efficiency and productivity.
Accounts managers uses the provision of accounting information in order to better inform
themselves before they reached matters within their organisations.
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Definition: Management accounting is the process of preparing various financial reports
and accounts that provide accurate and reliable or timely financial as well as statistical data
which are required by managers to make their daily decision. It will help the managers to attain
their short and long term aims and objectives (Arroyo, 2012). It takes information about any
form of accounting that enables Zylla company to operate more efficiently into their day-to-day
operations. It provide the crucial data to an organisation regarding the financial position of the
company. It consists of information about entries, ledgers and budgets. All these are taken into
consideration during formulation of financial statements (Advanced Management Accounting,
2017). It is known as primary aspects of accounting system that guide managers the necessary
information regarding the accounts in regards to determine company's total sales volume,
account receivable and payables etc. The accountant need these information at the time of
evaluating the performance so that essential decision-making can be done so. For investor, these
accounting informations are more crucial as they are able take an ideas about financial health of
Zylla company and thereafter take steps whether to invest their capital in it.
It can affect the profitability, if the information is not mentioned in appropriate manner or
correct. By the use of effective accounting system such kind of problems associated with the
formulation of new policies and forecasting can be solve easily. The issues should be rectify in
more quick time so that it would not get major impact on the productivity. In the present
situation, it has been observed that there is huge burden to manage financial records of Zylla
company because of their large scale of operations (Bodie, 2013). This can be arises for any of
the business organisation whether related with private and public company.
The efficiency of Zylla company can be increase at one cost that is though the use of
perfect techniques which can provide them great chance of growth opportunities. The decision-
making should be made after keeping future at one side. Under the mentioned company they
need to have system which can be more effective in recording and analysing the every day
transaction those are performed by an organisation. The net profitability and growth can be
mainly be relies on the outcomes which is collected from using accounting systems.
Importance of management accounting
 It helps in attaining group goals: By the use of proper accounting system, it arranges
the factors of productions, assembles and organised the resources in order to attain
organisation as well as team goals.
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 Optimum utilisation of resources: All those physical and human resources those are
used during the production process should be utilised in proper manner to that best
possible results can be achieved with minimum cost.
Types of accounting system:
Price optimisation system: This particular system consists of crucial decisions
associated to the particular prices of a products developed by the company. It is used to
determine response of customers towards the costs of their products (Herzig and et. al. 2012). In
case of Zylla company they are estimating setting up the prices that will help them to attain
profits in the form of operating gains.
Cost accounting system: Under this accounting system, the major role of account
managers is to monitor and control the business operations and control extra cost of production.
A well effective system would enables Zylla company to evaluate cost of sales and means for
analysing stock keeping costs. Such kind of concepts can minimise the wastage by which cost
can be controlled.
Inventory management system: This helps in proper supervision of non-capitalized
assets and inventories products. It control all the activities which begin from production and last
with sales. For zylla company, it provide a detailed information regarding new and old products
at the time when its keeps in warehouses with the motive to sell.
Job costing system: It is essentials to tract labour cost that are used during production
process. The overhead costs incurred at the time of manufacturing a specific lot of products
(DRURY, 2013). Generally, the order cost is mainly effective in that situation in which goods
developed are totally different from one another.
P2: Various reporting systems used in management accounting
Meaning: The reporting in management is a systematic process of rendering information
to respective stages of management so as to change in analysing the potency of their
responsibility centre. It become a perfect base for taking corrective actions, required necessary
for the company.
Developing and professional accounting practices is crucial for the growth of a business.
Management accounting differs from financial accounting in that it develop reports for Zylla
company's internal stakeholders as opposed to outside stakeholder. In an organisation, it is
essential for them to work for attaining positive outcomes for the company. Sustainability and
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growth is the primary part of any accounting managers. For this, they uses a well organised
reporting system that can help them to record and maintain there everyday transactions. It will be
helpful for the accountant to take crucial decision for the betterment of an organisation. This
report is made by taking all those information which are gathered from each departments like
HR, operations, marketing and finance departments (Kotas, 2014). The entire detail of data is
tranfer into financial statements. The investors of Zylla company used to analyse all those reports
and statements in order to make critical decision-making.
The future growth and stability is mostly relies on these statements which is prepared by
using information from every departments. It has been seen that information collected for
reporting is taken from financial and non-financial sources. It is important for Zylla company to
evaluate every accounting data in order to get positive results. Perfect data is gathered from
various financial records to analyse performance of company during the period in front of
stakeholders. They used to see various statements such as, income statements, balance sheet and
cash-flow statements. On the basis of there analysis they used to make investment plans.
The aims is to get maximum return from their investments in the projects of company's.
Report are necessary for increasing future growth chances by keeping the thought about
profitability. It is related with financial activities and transactions performed by zylla company
during one accounting year. In this, a perfect strategies is developed in the manner to increase the
position and goodwill of the company so that to gain market attention. The various aspects of
this particular reporting is to earn maximum advantages from other competitors those are related
in similar businesses. It is termed as one of the vital tool for Zylla company by which proper
outcomes can be generated with their minimum resources. The primary purpose of using such
kind of reporting system is to determine present position as compare to previous one. The target
of the company is to reach at there long term objectives by using effective reporting system.
Importance of reporting system:
 Role of control system: Under this, a target is set well in advance in Zylla company. It is
the responsibility of an organisation to look whether the employees are working as per
the set standards (Macintosh and Quattrone, 2010). The reports are design in such a
manner in order to measure the actual performance with the budgeted target.
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 Helpful in profitable operations: A report shows the direction of moving the business
and level of operation. On this basis, administration can provide distinct information as to
gain profitability to its worker.
Types of reporting system:
Account receivable report: Under this reporting, every information related with lists of
unpaid customers and bills as per the mentioned date (Otley and Emmanuel, 2013). The primary
objectives of this tools is to examine total payback time of outstanding debts amounts.
Performance reporting system: According to this system, financial statements are
analyse in such as way so that it would represent performance of an organisation. For taking
effective decision in the betterment of company they need to make performance report at the end
of year. It include analysis of accounting details of Zylla company as well as there members
those are working there. The evaluation is done by taking information from past and current year
data.
Job costing report: It is related with total costs which is related with production of total
units manufactured during the time. It consists information related with materiality, labour and
expenses which are used. The purpose of using this reporting is to identify total cost incur by
company at the production of each lot size of products.
Inventory management report: It is an important reporting system which is used for the
purpose of managing and controlling stocks of the company. There are various tools that can be
effect in doing so such as ABC costing, Inventory turnover ratios and EOQ.
Operating budget: This report is associated with production cost which is directly
related with income and expenses of Zylla company during the year. This objectives of using
such kind of report is to determine actual cost which is going to be incur by company at the time
producing one extra units (Ward, 2012). There are various ways to examine operating expenses
such as sales budgets, production budget and so on.
M1: Benefits of management accounting
It has been seen that without any purpose manager cannot use any of those tools which is
affecting performance of the businesses. For increasing the profitability and efficiency of Zylla
company they are using management accounting system. It can help them to record there regular
transaction in appropriate manner. By this, chances of getting more effective results will go high.
The major benefits of this is that it increased efficiency of the company in performing operations.
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It simplifies decision-making in financial statements by the managers so that maximum chances
of getting positive results can be attain.
D1: Critical analysis of reporting system
In Zylla company, every related employees and departments is performing there role with
the same common objectives. The use of perfect accounting reporting system can help them to
generate more effective and positive results for the company. The profitability and growth is
entirely depend upon the reporting system as it consists of various information regarding
financial statements of the company. The primary purpose of reporting is to determine
performance of organisation as well as each individual those are working in it. Critical
investment decision-making is done by stakeholders by analysing reports of the company.
TASK 2
P3: Few costing methods considered in management accounting
Cost: It is known as the amount which is incur by company for producing products and
services. It is mainly in monetary valuation of efforts, resources, material, utility consumed and
risk incurred or delivery of products.
Costing is an estimation of total costs which is associated with a particular project or a
venture. It consists of variable costs which are said to be costs that varies or chances with some
form of activities (Parker, 2012). It can be of main parts, direct or indirect costing. Generally, it
is related as the cost which can be analysed in financial terms that summarise various resources
those are used by managers during transaction of products to its customers. Such kind of costs
are effective at the time of taking crucial decision for the purpose of making future plan. Some of
the costing methods which is associated with Zylla company in determining profitability of the
company. Some costing methods are:
Absorption costing: It is said to be those costs which is linked with the production of
product and services. It consists of variable cost as well as fixed costs at the same point of time.
Such kind of method is used for the purpose of calculating cost of a product by taking into
account indirect overheads as well as direct.
Marginal costing: It refers to be that cost which is incur by company with the production
of one extra units. If the price charged per units is higher than the marginal cost of producing
extra units, then it is effective for the company to produce that units.
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Comparison
Absorption costing Marginal costing
Under this costing, the cost generated by Zylla
company can be examine as total cost that is
used at the time production.
In this, only marginal costs are valued during
manufacturing process.
The main benefits of using this is that per unit
cost can be reduce with additional units.
Contribution per units will not that much
changed with extra units.
It is related with companies long term planning
and costing.
It is associated with short-term planning
formulated by top management.
It is not that much effective method used for
decision-making.
Most of the organisation uses this method for
taking valuable decision for there company.
Sustainability is depend on external aspects of
reporting system.
It is associated with internal reporting system
for future growth and profitability.
Computation of Net profit by using absorption costing
Income statements
Particulars Amount
Sales 35*500 17500
Less:
Production cost 6+5+2+3 = 16*500
8000 8000
Gross profit 9500
Less:
Variable sales overhead 500*1 500
Selling and administrative cost expenses (800+400) 1200 -1700
Total Profit / Loss 7800
Calculation through marginal costing using
Income statements
Particulars Amount
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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
M2: Analysis of accounting techniques
It has been noticed that perfect planning is always beneficial for the company. Zylla
company can generate maximum profit by using appropriate tools and techniques. It will be
profitable for the future forecasting and stability. For this, they always keeping look for getting
perfect tools that can help them to get more reliable outcomes for the company. In order to
control errors and mistakes which are arises in an organisation can be controlled by using right
techniques. Few techniques are conservatism which is used form protecting resources while
materiality can helpful in proper utilisation of manpowers.
D2: Critical analyse of income statements
According to the above calculation, it has been seen that Zylla company's can use two of
most critical costing methods which are help them to get more reliable results. With both of them
they are getting different results. If they are using absorption costing profit generated is about
7800. however, with marginal costing they are incurring a profit of 7500. The difference of 300
is arises because of fixed expenses which are not considered in marginal costing. The overall
analysis is positive. For taking necessary decision company must choose that options which is
more reliable.
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TASK 3
P4: Benefits and limitations of planning tools
Budget: It is known as well planned and detailed of information for a particular period of
time regarding company business operations. It determine cost and expenses which a company is
investing over production of products and services (Van der Stede, 2011). It is termed as
comprehensive design of operation and accounting planning for a specific gap. Generally, it is
prepared for more than one years but it can be followed if outcomes are not in favour of
company.
Budgetary control: It is said to be an important tools of budgeting that influence
management to carry out its operation like planning, coordination and analysis. This can be
associated with that parts of business which is divided into various sections known as budget
centre. Similarly, it provide managers an ideas about how to manage there resources without
paying extra costs.
Process of budgetary control:
Consult with concern managers: It has been necessary for the managers to make proper
analyse by taking information from each other. Whether they required any budgets for managing
their cost and expenses (Lukka and Vinnari, 2014). It will help them to communicate effective
information regarding betterment of Zylla company.
Do effective assumption: After collecting feedback from concern managers they need to
make an assumption in order to protect coming losses. The purpose of budget planning is to
control the upcoming activities and extra costs. It consists of various expenses those are going to
be incur by company.
Fixed organisational data for budget to attain objectives: Under this process, a proper
list of detail data is prepared by taking into account data which is assembled from all
departments. It will assists managers to make planning as per the set standards.
Measurement of data with budgeted: The performance of Zylla company is measure by
using actual data in order to compare it with budgeted one. It will help them to estimated exact
possibility of growth chances with available resources.
Review analyses: In the final stage of budgetary control process, managers looks that
above mentioned steps are followed in right direction or not. If everything goes is proper manner
then it is transfer to higher authorities for further approval.
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Planning tools: In an organisation, planning is said to be management techniques related
with defining aims for company's future direction and estimating its mission. In order to meet out
goals, managers used to develop plans like business plan or any other plan. Some of them are:
Forecasting tools: It is always starts with some specific assumption which is supported
on the management skills, knowledge and effective judgement (Vasile and Man, 2012). It is
mainly known as use of historical data used for the purpose of determining the direction of
coming trends.
Advantages:
It is important for the firms in order to determine pre-determine objectives. By this,
managers can predicts the total amount of costs and sales they are getting in coming times.
Disadvantage:
It does not make accurate estimation of firms total expenses which are incur by company
in the future. It affect the objectives if the amount of expenses are higher than the cost.
Scenario tools: Under this particular tools, managers uses it for evaluating alternative
options as per the needs of situation. It assists to planning, functional and operational
management of Zylla company (Bennett, Schaltegger and Zvezdov, 2013). It varies according
to the demand and accordingly cost would be incurred by the company.
Advantages:
By the use of this, company's managers can get proper ideas about the selection,
opportunities and execution which is uncertain.
Disadvantage:
It does not always accurate and right for the company. Because it is more time taking as
compare to other tools.
Contingency planning tools: It refers as that planning tool which is made for developing
a firm to react in an effective ways at the time of critical situations. Emerging a contingency plan
consists of forming analysis in advance regarding management of HR and financial resources.
Advantage:
It will help to cut down cost so that extra cost can be reduced. It can save company from
going in loss making situations.
Disadvantage: Some situations it is more complicated plan because of its complex nature.
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