Pearson BTEC HND Business Unit 5: Management Accounting Report

This report delves into the core concepts of management accounting, exploring various reporting systems like cost accounting and inventory management, and their benefits. It analyzes different costing methods, such as absorption and marginal costing, to determine net profitability. The report also examines accounting tools and techniques, along with a critical evaluation of income statements. Furthermore, it discusses the advantages and disadvantages of planning tools in budgetary control and addresses various financial issues faced by companies, including measures to overcome them, using Zylla Company as a case study. The report highlights the importance of effective accounting systems for informed decision-making and financial stability, emphasizing the role of accurate data and analysis in achieving organizational goals. The report concludes with an overview of the key findings regarding financial reporting, costing methods, and planning tools.

Management Accounting

Table of Contents
P2: Different types of management accounting system reporting......................................................3
M1: Benefits of using management accounting system.....................................................................5
D1: Critical evaluation of accounting reporting system.....................................................................5
TASK 2.................................................................................................................................................5
P3: Costing method which are use to determine net profitability.......................................................5
M2: Analysis of accounting tools and techniques..............................................................................7
D2: Critical evaluation of income statements....................................................................................7
TASK 3.................................................................................................................................................7
P4: Advantage and disadvantage of using planning tools in budgetary control.................................7
M3: Analysis of planning tools..........................................................................................................8
D3: Critical analysis of financial issues.............................................................................................8
TASK 4.................................................................................................................................................9
P5: Different financial issues that are being faced by company and measure to overcome them...........9
M4: Analysis of financial issues........................................................................................................9
CONCLUSION.....................................................................................................................................9

Types of management accounting system:
In order to record all necessary information regarding financial transaction which will be
incur by company during an accounting period of time are summarise and recorded with the help of
below mentioned systems:
Cost accounting system: according to this particular accounting system, managers can easily be able
to analyse total costs a company has done during the period of time. These types of cost are directly or
indirectly related with production of product and services. The primary motive of using this system is
to examine overall costs of the company so that chances of profitability can be enhanced.
Price optimisation: By the help of this system, manager can be able to determine effective prices
which would increase total interest and overall satisfaction of customers by offering economical
prices for their products. This system assists in evaluation total perception of customers regarding all
those prices which are being set by Zylla Company for their products. The project manager uses this
system to make numerical analysis that would assist in determining total attitude and behaviour of
customers.
Job costing system: As per this accounting system, it will be helpful to determine total costs which
are related for the purpose of completing particular activity. This would be useful to determine total
cost to their customers that are required to implement effective plans for their upcoming projects.
These types of costs are incurred with production of an individual or group of products manufacture
in lot size.
Inventory management system: These accounting systems would be useful to track overall
movement of products that are being used in the business operations by which they can attain their
aims and objectives in more quick time. These systems used to record all necessary information
regarding stocks through preparing bills, stocks invoices and so on.
P2: Different types of management accounting system reporting
In every business organisation, whether related production of retail sectors need to have
perfect accounting reporting systems. This can assists managers to record all crucial information that
are valuable for making decision more effective in coming time. On the basis of various reports that
are prepared in Zylla Company, they can manage to record data as per their date of occurrence. These
reports would be more valuable for the investors or other shareholders of the company to make
analysis of current position of the company. The primary purpose of using reports is to examine total
cash making ability and overall financial condition of the company. The investors can use this

information in order to make necessary decision about capital investment. Every company required
certain amount of capital to run their business so they need to have maintained their financial stability
in more accurate and balance manner.
As reports are said to be systematic information about all data and resources zylla company is
investing during the time. This seems to be utmost important aspect which includes collection and
disbursement of data during an accounting period of time. By the implementation of reporting system
would be having wide number of advantages to an organisation such as planning for future
management, allocation of resources, evaluation of employee performance and to make improvement
in upcoming decision making at internal level. There are various types of accounting reporting
systems are available with Zylla Company. Out of which some are discuss underneath:
Performance report: According to this particular report which is based on recording of companies’
performance about their overall financial situations. This can be analysing by using actual or standard
data which is being incur during the time. It is primary role of manager to make sure that every
information mentioned in the report must be accurate and reliable. By the help of this report, proper
coordination between various functions of the department can be analysing more effectively.
Operational budget report: Such kind of report is prepared by an organisation to make analysis of
all expense and costs that are incur by the company during the period of time. This report also consists
of valuable procedure for formulating budgets so that organisation cannot get any reduction of capital
during the time. These reports provide complete shape of any crucial decision making in order to
attain maximum gains during the time.
Job cost report: According to this report, that consists of specific data about total costs Zylla
Company is incurring during the production of particular products. This kind of report developed by
accounting managers. This will help to gain adequate amount of funds to an organisation.
Account receivable report: according to this particular report, managers would easily able to
understand total lists of unpaid customers invoices of various debtors. This type of report is helpful to
an organisation to provide management to make valuable decision regarding making modification
about the recovery of amounts from the debtors. Hence, these types of report are formulated to receive
payment from the parties during the time.
Inventory management report: According to the Zylla company, they can get more valuable
outcomes in near future only in that condition, if they are having proper control of total stocks that are
being kept by the company. This report used to record all data regarding opening and closing stock
keep by company in their warehouses. There are various tools and techniques which would be helpful

for an organisation to control inventory. Some of them are inventory turnover ratio, EOQ and ABC
costing.
M1: Benefits of using management accounting system
According to the above mentioned accounting systems, it has been seen that Zylla Company
can only be become more effective in case they use to adopt accounting system in more effective
manner. This need to identify adoption of management accounting practices, retain profit and make
maximum emphasis on future targets. With the use of cost accounting system all necessary data
regarding costs and expenses should be analyse more effectively. While, price optimisation is an
essential systems to analyse overall perception of customers regarding prices of products that are set
by the company.
D1: Critical evaluation of accounting reporting system
According to the all above reporting systems that are discuss above are needed to be use in
more effective manner so that chance of errors can be controlled up to an extent. The primary role of
managers is to make use of best alternatives that are related with the company. As per the mentioned
reports such as performance report which is more reliable in analysis overall performance of Zylla
company during an accounting period of time. While account receivable report can provide benefits
by evaluating total time required to analyse recover overdue amounts from debtors.
TASK 2
P3: Costing method which are use to determine net profitability
Cost is anything that is related with the production of product and delivery services to an
organisation. As it is said to be value of money which will be paid by the company for getting
something. The costs can be categorising into various parts either directly or indirectly. Every cost is
having specific relationship among each other. It is an essential part of an organisation which is use in
manufacturing process by the company. It encourage in production of effective products and services
to respective customers. This seems to be utmost important aspects for attaining desire outcomes by
using more reliable costs. It is monetary valuation of efforts, raw material and utility that are essential
for the growth of an organization. Costing is said to be an essential process of cost management in an
organisation with using specific tools and techniques. It consists of all those variable costs that are
helpful for increase profitability of an organisation. There are various types of costing methods which
are use as primary tools to calculate net profit of an organisation. Some of them are discuss
underneath:
Absorption costing: According to this particular costing method which is applicable to all
manufacturing costs. It included both variable and fixed costs because of that its is said to be full
costing approaches.

Marginal costing: It refers as those particular costing tools which is charges with the
additional units of production. It only considered variable costs as fixed costs are apportion at the time
of production.
Comparison:
Absorption costing Marginal costing
Under this particular costs, managers use to
consider both variable and fixed costs expenses.
In this, only variable costs are taken for the
calculation of contribution per unit.
The main motive behind using this costs is to
analyse per unit cost on total investment done by
the company during the time.
Under this, per unit costs are evaluated by using
overall impacts which are seen over extra units
production done by company.
This is not taken effective methods for future
decision making.
It is consider as more reliable for making future
decision by any project managers.
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 using Marginal costing Income statements
Particulars Amount
Sales 35*500 17500

Less:
Production cost 6+5+2 - 7800
Closing stock: 100*13 - 1300 -6500
Contribution 11000
Less:
Variable sales overhead 500*1 500
Fixed overhead -1800
Selling and administrative cost expenses (800+400) -1200 -3500
Total Profit / Loss 7500
M2: Analysis of accounting tools and techniques
It has been seen that organisation can only attain their valuable aims and objective if they are
having sufficient amount of ability and cash to deal with all kind of issues that are arises in an
organisation. For this purpose certain kind of accounting tools are also helpful to determine net profit
a company is generating during the time. By the help of marginal costing more reliable results can be
attain because it consider only variable costs. Standard costing is an important tool that assists in
betterment of an organisation.
D2: Critical evaluation of income statements
According to the above calculation done by using both effective costing methods. It has been
found that results are different from either of the methods. If using absorption costing they are able to
get 7800, whether as with the use of marginal costing they are able to earn total of 7500. The
difference of 300 is only arises because of fixed costs treatment. From the above table, absorption is
more accurate and providing more positive results in terms of profit. Thus, it will be more reliable for
the company.
TASK 3
P4: Advantage and disadvantage of using planning tools in budgetary control
In any profit motive business, it is necessary to have proper planning which will be helpful to
generate more positive results in coming time with the use of resources in more effective manner.
There are various planning tools that are helpful for an organisation to manage their performance and
future costs and expenses. Some of them are discuss underneath:

Forecasting tools: This seems to be one of the more effective tools which are effective in future
planning of an organization resources. By the use of these particular tools Zylla Company can be able
to estimate total earning and losses done by the company and measures to control them.
Advantage: This is taken into accounts as utmost important techniques for the firms to evaluate pre-
determine overall vision of an organization. By the help of this, managers can easily be able to
estimate future costs and expenses.
Disadvantage: As it is seen that future are unpredicted so the chance of mistakes can be more in some
kind of situations.
Contingency planning tool: This seems to be one of the primary tools which are use by managers to
frame effective objectives in order to develop firms in any critical situations. This technique is more
valuable in case problem is harder to manager. In this company use to make prior planning to control
their upcoming implications that can affect performance of an organisation.
Advantage: This planning tool is more accurate and reliable for small and medium size organisation
because they operations are quite small and chances of mistakes can be high too. In that particular
situation it will work more effectively.
Disadvantage: In some kind of situation, it does not take as more reliable as because of their complex
and dynamic nature.
M3: Analysis of planning tools
In accordance to increase overall productivity for an organisation, managers need to make use
of planning tools in more effectively. There are various kinds of tools such as forecasting tools which
is responsible for increasing overall profitability through controlling costs and expenses for the
company. Another one is scenario tools which are helpful for the company in any kind of situation to
control risks in more effective manner.
D3: Critical analysis of financial issues
In every business there are certain kinds of issues that are related with an organisation. These
are related with the company directly or indirectly to control huge implication on overall productive
of an organisation. These are needed to be resolve by using key performance indicators and
benchmarking tools.

TASK 4
P5: Different financial issues that are being faced by company and measure to overcome
them
It has been noticed that in every organisation various kind of issues are arises those are related
either with finance or non-finance. All these issues are affective overall profitability of an
organisation. Some of them are mentioned underneath:
Profit level issue: If the company is lacking behind of cash shortage they cannot be able to generate
more profit during the time.
Product and quality issues: There are certain aspects those are related with quality and services
provided to customer are not effective. This can only be determining by lack of financial supports.
In context to remove these issues, manager needs to make use of certain tools that are helpful
in increasing productivity and efficiency at the same point of time. Some of them are:
KPI (key performance indicators): According to these particular tools, all those issues related with
financial stability of the company can easily be resolved.
Financial governance: These types of tools are made on the basis of rule and regulations that are
made by government to regulate business in more effective manner.
Comparison of two companies
Zylla company Sainsbury
As this company is working as small level so
they do have lot of financial transaction during
the time. To control all of them they need to use
cost accounting system.
This particular company is one of the largest
supermarket chains which are having various
issues related with management of stock. This
can be resolve by using stock turnover ratios.
M4: Analysis of financial issues
From the above mentioned various financial issues that are related with business is having
great chance of making certain kind of impacts on overall productivity. This can be higher, if certain
measure cannot be taken into consideration. This can be resolve by using various financial tools such
as KPI, Benchmarking and operational budget techniques.
CONCLUSION
From the above project report, it has been concluded that management accounting is an
essential aspects for every business. This can assist in controlling overall performance of an

organization by using accounting systems and reporting at the same time. With the use of best costing
method net profit for company can easily be identified. To control budgets, role of planning tools are
more helpful for the managers. Further, by effective utilisation of financial tools all any of financial
issues can easily be resolved.