Financial Analysis and Management Accounting Report for Zylla Company

This report provides a comprehensive analysis of management accounting principles and their application within Zylla Company. It begins with an introduction to management accounting, outlining its essential requirements and various reporting methods. The report delves into specific cos...Read More

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P.1 Management accounting and essential requirements............................................................1
P.2 Different methods used for management accounting reporting............................................2
TASK 2............................................................................................................................................4
P.3 Calculating costing by using marginal and absorption costing............................................4
TASK 3............................................................................................................................................6
P.4 Planning and budgetary control system with their merits and demerits...............................6
TASK 4............................................................................................................................................7
P.5 Adapting management accounting systems..........................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting is a process to manage financial factor in working environment.
In this context, future decision-making is based on financial sector. On the other hand, proper
financial management is the most necessary with activity of some methods acting to be used in
working situation. This report is based on Zylla. Further, it covered income statement and cost
analyses management is help to distribution of income in different field internal working
environment (Banerjee, 2014). The cost and tax write-off of the explanation scheme. As the
calculation cost to set up the commercial enterprise gain statement of the cited organisations.
TASK 1
P1. Management Accounting and essential requirements
Management system is also known as cost system of rules and social control system. It is
a cognitive process used for examine business operations and costs to gear up records, internal
fiscal reports and making known to aid decision maker, conclusion making administration goals.
In simple spoken communication, act of ready cost accounting and financial data and translating
it to useful subject matter for administration federal agency within Zylla firm (Bloomfield,
2015). Management explanation also assistance to accomplish better preparation and
powerfulness over the firm.
 Cost Accounting System: In this context, Cost account scheme estimates and measure
expenditure of employment and goods as well as outlay of business concern units and
beginning, such as section. It supply applicable and of import cost data to the managing
director, which assist them to impotence business concern enterprise action and make
thought of activity and thought for forthcoming within Zylla firm effectively and with
efficiency.
Benefits:
 In this context, cost accounting determination of cost of product and services, which is
helpful for manager?
 This is also helped at the time of set selling price of the product. In addition, cost is help
to increase customer in demand and profitability.
Inventory Management System: In this context, stock of any resources or product which is
used to improve internal environment of business activity (De, 2015). Inventory administration
grouping is a set of programme and argumentation which pull off and powerfulness the
1

monitoring device levels of stock list and also determines what commonplace should be fill
again, what flat should be managed and kept up and measure which arrangement should order
efficaciously and with efficiency.
Benefits:
 To be provide protraction against uncertainties, shortage of raw material.
 To be focus on strategies planning and take advantages of economic scale. This is help to
manage work and improve production level.
Job Costing System:-
Occupation costing framework is a procedure of cost recording and gathering where the
ID of employment or any gathering is nearness for which the cost can be gathered or overseen.
Employment costing framework is utilized as a part of organizations, where the creation of an
item is 'one off' that is diverse for an individual client proficiently (Otley, 2015). It is appropriate
and solid for associations where work is embraced towards a unique prerequisite of a client and
each request take brief term similarly.
Benefits:
 In this context, cost control planning and decision making process is to be involve to
improve internal environment performance.
 This is to be determination of different types of profit and loss in organisation. In
addition, selling price must be inculcated in financial carrying into action.
Price Optimising System: In this context, program of activity which allows a steadfast to know
the old customer' sensitiveness to modification the commodity monetary value according to the
profitableness levels within Zylla firm effectual (Altawati, 2018). Price optimising grouping use
by business organization to tailor evaluation for various customized based on their response to
modification in different pricing. This is focus on how the customer will be respond from
different price on similar products.
Benefits :
 It is to be focus on increase the level of profitability and change level of customer.
 To be defining the profitability based on existing clients.
2

P2. Different methods used for Management Accounting Reporting
Management Accounting Reporting
Management accounting policies and description of different management accounting
principal to be used in market share (Bedford, 2018). Management explanation report helps
business concern administration to make advised and effectual decision-making which is vital to
organize business activity. Such reports also provide message of different aspect of the firm to
managing director which assistance them to create effectual and economical decision-making
that may have an optimistic and deep effect on an organisation.
Job Cost Reports: The report in which the cost of specific work or project recorded is
called Job Cost Reports. During the preparation of reports mainly figuring and revenues are used
so that reports can be easily read and work effectiveness is observed at a glance by Zylla. These
reports also help to focus on that area of business where there is more profit rather than wasting
the time over low margin profit business (Brink, 2018). Therefore, these reports are very
helpful in saving our time and money. These reports also include the other work progression cost
that gives an estimate idea of investing money.
Inventory Management Reports: These are reports which are made to monitor level of
inventory like which should be preserved, which stock is to be refilled and the amount is to be
invested for the firm. This inventory management reports also include per unit cost of item and
labour so that it would be easy to compare different assembly and in finding better performing
department for reward offer.
Operating Budget Report: Zylla organisation use these reports to analyse the execution
of all departments which are helpful in monitoring and controlling the cost of operational
activities.
Accounts Receivable Ageing Reports: These reports work as balance which shows
profit and loss of an organisation. This ACR report shows that how much cash is flowing in
respect of credit. Records have different invoice columns (30, 60, 90) respectively that shows
collection process of cash during these intervals that give rough ideas of profit or loss. If the
balances are not paid by the customers, credit polices and plans are made tight by the
organisation (Guerreiro, 2018). It is also very helpful for business collection department. On the
other hand, customers are unable to pay balance, and then the business concern should fasten its
credit logical argument and program. Time to time analyse of accounts due ageing reports also
1

assistance enterprise collection department to topographic point its old debts efficaciously and
with efficiency.
Performance Report: In performance report is help to internal department of
organisation about product and services are performed of group services. This also helps
production department inside organisation as well as marketing segmentation. It also activity
system to attempt gainfulness analytic thinking for commodity lines, market portion and go away
so that they gain their performance and profits efficaciously and expeditiously (Mussati, 2018).
These reports enable firms to restorative mensuration at place in order to bring off and relation
the costs which brings efficiency in the business trading operations effectively.
All such methods of management accounting are helping to take new decision-making
policies in organisation. Some changes are made to increase current market performance as per
needs of current market network. On the other hand, to make new strategies and plans for
increase the number of profitability and managing resources for future accomplishment. To
manage inventory level, account receivable report and operation management in organisation.
TASK 2
P3 Calculating costing by using marginal and absorption costing
Absorption Costing
This is a type of technique of costing would be defined to as which is incorporating all
cost including both variable and fixed (Bloomfield, 2015). Then all of them would be absorption
rates this method is ensuring that all cost which are incurred after the selling of goods and
service Absorption costing would be helping company in determining all inefficiency or lack
into the supply chain so that they could be ensuring Zylla Company is maximising their
efficiency of operations. This method is very important which helps them to identify actual cost
and profits of company enabling to analyse actual position within market.
PARTICULARS (Income for month of May 2018 Zylla Company) Amount (in £)
Sales 1500*200 300000
Cost of production 13*2000 26000
Less: Closing stock 500*13 6500
Less: Fixed production overheads
Machine department 100*5*7 3500
2

Finishing department 5*20*4/6 150
Dispatch department 1*20*1/5 4
Gross profit 315846
Less: Packing box 0.50*2000 1000
Net Profit 314846
Interpretation:
In the above table which is depicting the actual cost of Zylla company would be enabling
them to recognise financial condition within markets including both fixed and variable expense.
So from total sales of company which is about 1500 units are sold with the per unit cost of about
200 which is about 300000 so this becomes the most important step in taking out the actual sales
per unit. Then the cost of production for company which is around £13 on 2000 total production
of about 26000. From this, we have to subtract the closing stock which is 500 multiplied by cost
per production of units £13 this will be about 6500. Then all fixed production overheads are to be
subtracted like that of cost of machinery, finishing and that related to dispatching of goods. With
the help of all these, gross profits for that period would be £315846 from this all variable
expense which is of packing around 1000 would be subtracted. From this whole calculation, net
profits for the month of May 2018 for Zylla Company would be £314846.
Marginal Costing
On the other hand, marginal costing is that which is not incorporating all types of cost but
only taking variable cost and excluding fixed cost (Banerjee, 2014). Only the cost which is
associated by production of product or from process that could be called to as incremental
costing techniques. Marginal costing techniques would not be allowing Zylla Company to take
out or make actual or real profits for the firm. In this order it becomes much tough for company
to come on taking what is income or loss for business as they are been including only certain cost
which is also only that of variable.
PARTICULARS (Income for month of May 2018 Zylla Company) AMOUNT(in £)
Sales 1500*200 300000
Less: variable costs of goods sold 1500*12 18000
Less: closing stock 500*12 6000
3

Add: cost of production 2000*12 24000
Production contribution 300000
Less: Variable non- manufacturing costs
Packing boxes 0.50* 2000 1000
Total contribution expenses 299000
Less: Expenses
Fixed manufacturing costs 100*7*5 3500
Finishing department 2500
Dispatch department 1000
Net Profit 292000
Interpretation:
From the above table, it could be concluded that if a company is taking cost by using
marginal costing they would be arriving at profits which is not actual. If Zylla Company is
selling about 1500 units in the month of May 2018, each at £200 so their total sales for that
month will be around 300000 which is same as that of absorption costing. Then they would be
subtracting variable cost of goods sold of 1500 units at £12 each and is coming to about 18000.
After this if they are to less closing stock during that period which is about 6000 and
adding cost of production around 24000 they would be getting production contribution to about
300000. Then they have to subtract variable non- manufacturing cost or packing of all boxes to
about 1000 but in this we would also be including total contribution expense which was not done
in above absorption costing techniques. Then in last stage, all expenses would be subtracted
which are fixed manufacturing cost, finishing and dispatch department so the net profits would
be around £292000.
TASK 3
P4 Planning and budgetary control system with their merits and demerits
Activity Based Budgeting
This type of budgeting techniques would be calling for taking out cost of all different
types of activities which are been operated within company. Activities like manufacturing,
packaging, finance, production or that related to marketing which company need to operate on
daily bases (Gooneratne and Hoque, 2016). All these activities need to be allotted cost so that it
4

becomes easy for firm to identify which task is including how much cost. Activity based
budgeting technique is the best suited for that company which is manufacturing products or
having many different types of activities or task.
Merits
 This type of technique would be helping in managing all cost related to each type of cost
so the operational efficiency could be enhanced.
 Activity based budgeting would also be helping firm to optimally allocate overall cost to
firm based on activities done by them.
Demerits
 This technique would be requiring highly experienced or skilled manager or accountant
who is having full and correct knowledge of identifying and allocating funds or cost
(Otley, 2015).
 Time taken in identification and allocation would also be very high so there is a chance of
wasting time would be done by managers.
Zero Base Budgeting
This is the most used and widely accepted type of budgeting technique which is helping
manager in lowering down their burden by not incorporating last year’s budget or left over cost
to this current year (De Baerdemaeker and Bruggeman, 2015). Zero Base Budgeting or ZBB is a
technique used by firm in order to prepare new budget included in this year only and avoiding
last year cost. However, it is required on the part of manager of Zylla Company that they are
identifying merits and demerits of ZBB before using or applying it.
TASK 4
P.5 Adapting management accounting systems
There are some financial problems must be faced by organisation. On the other hand,
organisation becomes successful through completing challenges and facing problems inside as
well outside organisation. Some changes are made from long period as per the need of current
market network. One of this, commercial enterprise difficulty is a state of affairs for every
business concern to grow up and pull off their functional human action. Here are some financial
difficulty which an administration faces during their trading operations are as follows:-
 Funding: - In this context, new business is needed more money and capital to start a new
venture in organisation. In addition, many problems are faced at time to take decision of
5

business expansion. In this context, organisation focuses on improving current market
network as well as overall development of organisation (Fullerton, 2014). On the other
hand, business necessarily backing option that it can cut down or remove these types of
problems effectively.
 Cash flow: Cash flow is deliberate by takeoff expenses from business concern total
financial gain. Positive number of consequent shows the net financial gain of the
establishment and antagonistic Scribe the failure. Modest hard cash flow business interest
find problems to spread out their transaction and arrangement with antagonistic hard
medium of exchange flow have only few derived device for increase. Lack of creating
affirmation cash flow can begin too much liability for a concern interest which can sink it
for good.
 Too much level of debt: In this context, there are too much debt is harmful for business
and operational level activity inside organisation. It is help to improve current market
level of organisation (Chenhall, 2018). Too much debt also adjacent the possibility for
approving loans from the banking concern and also financial support as well.
Commercial enterprise debts and possession can affect currency flow and revenues that
firm is hold to be bankrupt.
 Poor financial management: - In this context, poor financial problem by commercial
enterprise managing director raise the fiscal monetary fund difficulty for the firm. Poor
social control, no proper research of markets, approximation competition will cause
difficulty which impact revenue content and risk for wellness and property of steadfast.
 Budgeting problem: In this context, budgeting is one of the most important parts for
internal and external working environment (Stafford, 2017). A mechanically and bolt
monetary fund can cut down the invention and inaugural at lower berth level. It can also
origin perceptual experience of partiality. Budget difficulty also feeling the enterprise
concern plan of action and programme as asymptomatic as decision-making effectual.
Characteristic of management accounting
 Helping in decision-making: It helps to take new decisions in organisation and provide
relevant information from different sources such as financial and cost accounting. This
helps to improve current market network.
6

 Provide new data: - An effectual social control accountant renders required information
to the direction of concern. It is up to the social control that how they use and utilise this
data for solving their commercial enterprise and cost difficulty through effectual
decision-making (Klychova, 2018). Some changes are needed for future improvement in
organisation as well as development of overall management.
 Selective nature: It is a potential to characteristic of management account that is only
factors which is responsible for financial position of organisation. On the other hand,
administration comptroller that he only collects this information and contents which is
useful and applicable for the social control and which creates more payment and easiness
for the business concern social control with effectual decision-making. This
discriminating nature assistance business concern to get important message about
organizational human action and trading operations efficaciously.
 Relented to future: This management accounting is directly related to future activity of
organisation. It is help to manage the entire financial resource musty used in internal as
well as external working environment. Some changes are made for long period of time as
well as future activities.
 Increment in efficiencies: Management bookkeeper assumes fundamental part in
expanding business efficiencies. As, the market is loaded with contenders, business
should build its adequacy and efficiencies to contend others at the same time. It will
likewise assist business with removing their poor money related administration issues
which drives it towards progress and increment gainfulness.
 Key execution pointer KPI: It can be portrayed as a quantifiable esteem which will show
key targets of business to accomplish viably. The procedure is utilized to assess
accomplishment of association keeping in mind the end goal to accomplish the
objectives. This will likewise react money related issues in the firm.
 Budgetary focusing on: Budget administration is vital for the firm to oversee and control
diverse assets under a particular spending plan successfully. This will lessen wastage and
will build productivity which react budgetary issues.
 Benchmarking: Benchmarking contrast the business procedure and adequacy with some
other firm in a similar market which will recognize different angles from which
association can react budgetary issues adequately.
7

 Money related administration: Financial administration is an arrangement of principles
and directions which is planned and issued by controllers to guarantee monetary
procedure is all around represented (Schaltegger, 2017). These will likewise deals with
monetary exercises keeping in mind end goal to react money related issues and issues.
CONCLUSION
Form the above report is focus on proper financial management is most essential with the
help of some method acting to be used in working environment. This report is based on Zylla
organisation. As per the above report is focus on decision maker, conclusion making mental
process to action administration goals. In simple spoken communication, it is the act of ready
cost accounting and financial data and translating it to useful subject matter for administration
federal agency within Zylla firm. Management explanation also assistance to accomplish better
preparation and powerfulness over the firm. Form the above report is focus on.
Activity based budgeting technique is the best suited for that company which is
manufacturing products or having many types of activities or task. As per the above report is
focus on Zero Based Budgeting or just ZBB is technique used by firm in order to prepare new
budget included in this year only and avoiding last year cost. However, it is required on the part
of manager of Zylla Company that they are identifying merits and demerits of ZBB before using
or applying it. Form the above report is focus on origin perceptual experience of partiality.
Budget difficulty also feeling the enterprise concern plan of action and programme as
asymptomatic as decision-making effectual.
8

REFERENCES
Books and Journals
Banerjee, B., 2014. COST ACCOUNTING THEORY AND PRACTICE. PHI Learning Pvt.
Ltd..
Bloomfield, R.J., 2015. Rethinking managerial reporting. Journal of Management Accounting
Research. 27(1). pp.139-150.
De Baerdemaeker, J. and Bruggeman, W., 2015. The impact of participation in strategic planning
on managers’ creation of budgetary slack: The mediating role of autonomous motivation
and affective organisational commitment. Management Accounting Research. 29. pp.1-12.
Gooneratne, T.N. and Hoque, Z., 2016. Institutions, agency and the institutionalization of
budgetary control in a hybrid state-owned entity. Critical Perspectives on Accounting. 36.
pp.58-70.
Otley, D., 2015. in Management Control. Critical Perspectives in Management Control. p.27.
Altawati, N.O.M.T., and Elmabrok, A.A., 2018. A Review of Traditional Cost System versus
Activity Based Costing Approaches. Advanced Science Letters. 24(6). pp.4688-4694.
Bedford, D.S. and Speklé, R.F., 2018. Constructs in survey-based management accounting and
control research: An inventory from 1996 to 2015. Journal of Management Accounting
Research.
Brink, A.G., Coats, J.C. and Rankin, F.W., 2018. Who’s the boss? The economic and behavioral
implications of various characterizations of the superior in participative budgeting
research. Journal of Accounting Literature. 41. pp.89-105.
Guerreiro, R. and Amaral, J.V., 2018. Cost-based price and value-based price: are they
conflicting approaches?. Journal of Business & Industrial Marketing. 33(3). pp.390-404.
Mussati, S.F., and Mussati, M.C., 2018. Configuration optimization of series flow double-effect
water-lithium bromide absorption refrigeration systems by cost minimization. Energy
Conversion and Management. 158. pp.359-372.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research, 31, pp.45-62.
Jermias, J., 2017. Development of management accounting practices in Indonesia. The Routledge
Handbook of Accounting in Asia, p.104.
Fullerton, R.R and et.al 2014. Lean manufacturing and firm performance: The incremental
contribution of lean management accounting practices. Journal of Operations
Management, 32(7-8), pp.414-428.
1

Chenhall, R.H 2018. The role of innovation in the evolution of management accounting and its
integration into management control. Accounting, Organizations and Society, 47, pp.1-13.
Klychova, G.S 2018. Management aspects of production cost accounting in horse
breeding. Asian Social Science, 11(11), p.308.
Stafford, D 2017. Precision Management for your Accounting System.
Schaltegger, S 2017. Contemporary environmental accounting: issues, concepts and practice.
Routledge.
2