Management Accounting Report: Zylla Company - Detailed Analysis

This report provides a detailed analysis of management accounting principles, focusing on the case of Zylla, a small diversified products company. It explores the essential requirements of different management accounting systems, differentiating between management and financial accounting, and highlighting the strategic, performance, and risk management roles of these systems. The report examines various reporting systems, including job cost, accounts receivable, and performance reports, emphasizing their importance in decision-making, resource allocation, and risk management. It also delves into costing methods, planning tools, and budgetary control, discussing their benefits and limitations. Furthermore, the report addresses the adoption of management accounting systems to effectively respond to financial problems, providing a comprehensive overview of how these systems can be utilized to enhance organizational performance and achieve business objectives. The report concludes with a discussion on the practical application of these concepts within the context of Zylla's operations and the broader implications for management accounting practices.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Essential requirements of different types of management accounting systems ....................1
P2 Various reporting systems used in management accounting.................................................3
M1...............................................................................................................................................6
D1................................................................................................................................................6
TASK 2............................................................................................................................................6
P3 Few costing methods considered in management accounting...............................................6
M2...............................................................................................................................................8
D2................................................................................................................................................8
TASK 3............................................................................................................................................8
P.4 Benefits and limitations of planning tools............................................................................8
M3.............................................................................................................................................10
D3..............................................................................................................................................11
TASK 4..........................................................................................................................................11
P.5 Adopting management accounting systems for responding the financial problems ..........11
M4.............................................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14

INTRODUCTION
Management accounting is considered as effective technique which main aim is to focus
on organisational resources. It provides the support to managers of organisation to enhance
customer and shareholder value. It is an effective tool which includes the preparation of various
accounts and reports which provides the financial and non financial information. Such system
enhance the decision making power of management of organisation and helps in planning,
organising, motivating, controlling, risk management etc. It is one of the important part of every
organisation whether running at small or large scale. The various information which is produced
by the use of such system is about cash, accounts payable, outstanding debts, raw material,
inventory, accounts receivable etc. Large number of advantages are achieved by organisations by
the use of management accounting systems like increased financial return, reduction of expenses,
high productivity etc. Zylla is small company which deals in diversified products (Baldvinsdottir,
Mitchell and Nørreklit, 2010).
In the present report explain about, essential requirement of different types of
management accounting systems, different methods of management accounting reporting,
preparation of income statement by the use of marginal and absorption costing method,
advantages and disadvantages of different types of planning tools and their use in budgetary
control. Also, adoption of management accounting systems by different organisation to
effectively respond financial problems.
TASK 1
P1 Essential requirements of different types of management accounting systems
Management Accounting: It is effective system which includes the use of different
accounting methods regarding production of the information which is further used in preparation
of internal reports. Such reports provides the opportunity to the management of organisation to
enhance their decision making power. Financial and non financial informations are generated by
the use of such systems which helps in planning, organising, controlling, strategic management,
risk management, appraisal of performance etc. Management of zylla also uses different
accounting systems like cost accounting, inventory management, job costing etc. to improve
their performance and achieve their business targets. Every single accounting system have their
own role in organisation. By the use of such different methods large number of benefits are
1

achieved by Zylla company like reduction of expenses, more financial return, more productivity,
improved market positioning, development of employees etc.
Difference between management and financial accounting
Financial accounting is different concept which includes financial matters of
organisation. Such accounting system helps in determination of profit and loss and flow of cash
in organisation. The major differences between these two systems are mentioned below:
Management Accounting Financial Accounting
The main function of this system is to focus on
past information to draw important conclusions
which is used to make future policies and
strategies.
This system provides emphasis on past
financial information of organisation only.
Under this system reports are prepared but
there is no requirement to follow any standards
While use such systems in preparation of
financial statements required to comply with
accounting standards
It is done for internal parties of organisation to
enhance their decision making power
It is done for external parties so, they can take
informed decisions regarding their investments
in organisation
Essential requirement of management accounting systems
Zylla is a small company which main aim is to improve their performances and expand
their business operations in market. Therefore, management uses different accounting systems to
plan and control existing performance of different departments of organisation. This provides the
opportunity regarding preparation of effective strategies which provides direction to their
employees in completion of their tasks. The main three essential requirements for which manager
of zylla uses this system is mentioned below:
Strategic management: These systems helps the manager of zylla company to improve
their position and works as strategic partner in an organisation. These systems provides the
opportunity to advance their role and power in organisation regarding effective management of
different functions (Christ and Burritt, 2013).
2

Performance management: The another use of such systems is to appraise the
performance of employees. These systems are used by the management in providence of
standards which are compared with the actual performance of employees. It helps in
identification of issues faced by employees and provides appropriate solutions which improves
their skills and knowledge.
Risk management: Another important role of management accounting systems is that it
helps in identification, measuring, managing and reporting of risks regarding achievement of the
different objectives of organisation.
Different types of accounting systems
Price optimisation system: It is effective system which helps in taking crucial decisions
regarding the prices of products which are prepared by organisation. It helps in determination of
customers attitude towards the cost which is decided by the management of Zylla. This provides
the opportunity to fix such prices which helps to improve their sales and profits.
Cost accounting system: It is effective system which is used by the manger of Zylla
company to keep control over the business operations and costs which are incurred during the
production of different products. This helps in elimination of extra costs which is not necessary
in production process. It provides the opportunity regarding minimisation of wastage and
increase their profit margins (Cinquini and Tenucci, 2010).
Job costing system: This method is used by the management of Zylla company
regarding identification of the cost and revenue which is associated with the production of
particular product. This will also helps in assigning of of costs to individual products and
determine the profit margins which they are going to earn from such products. It is effective
method for Zylla because it deals in diversified products.
Inventory management system: This system includes the functions of supervision of
non capitalized assets and raw materials. This system is used by the management of Zylla
company to keep track on their actual inventories so, they can effectively allocate to their
production department.
P2 Various reporting systems used in management accounting
Reports: It is a document which includes important information about the financial and
non financial transaction of organisation. Such reports have large number of importance for
different stakeholders of organisations. Management of Zylla uses these reports in preparation of
3

their future strategies and polices. Such polices are works as standards and provides direction to
employees regarding effectively deployment of their services. Investors uses such information to
enhance their their decision making power. The different kind of reports which are prepared
under Zylla company is job cost, accounts receivable, inventory management, performance
report etc.
The most important report of every organisation is their profit and loss account. This
report provides information regarding the income and expenses incurred by organisation during
one accounting period. Such information is helpful in determination of the profit and loss earned
by organisation. This report plays an important role for the manger of Zylla company regarding
enhance their decision making. The information provide by this report is further used by the
management in reduction of their extra expenses and improves their profitability.
Reporting also helps in development of effective communication channel among the
different department of organisation. This will provides the information regarding the activities
and functions of different departments of Zylla. Such reports works as essential aspect for
organisation to attain positive outcomes. To maintain sustainability in their performances, every
organisation needs to adopt effective reporting system which record day to day activities on
continuous basis. The information which is collected by such reports includes about marketing,
HR, finance, production etc. Through use of such different information large number of benefits
are achieved by the manager of Zylla company like planning of future operations, risk
management, preparation of budgets, proper guidance to employees etc. Ultimately, this provides
the opportunity to improve their performance and achievement of their desired results (Fullerton,
Kennedy and Widener, 2014).
Importance of reporting systems
Different reports are prepared by the accounting officer of Zylla company. Such reports
provides true and fair information regarding organisational operations. This helps to attain the
trust of customers and government upon their business functions. This will enhance their brand
image. Large number of benefits which are gathered by Zylla is mentioned below:
Role of control system: Reports provides the opportunity to set the targets which is
required to achieve in future. This system is used by the management of Zylla company to keep
monitor and control over the performance of their employees as per such standards and targets
4

which are fix by organisation. Actual performance is compared with such standards to find out
deviations and provide solutions.
Improved decision making: Different reports contains different information regarding
various aspects. This provides the opportunity in selection of the best alternative which is more
beneficial for company. So, ultimately it improves decision making ability of managemnt.
Efficient use of resources: Different reports provides the information regarding such
resources which are not optimally utilised in organisation. This can be further used by the
management in identification of the operational inefficiencies and effectively allocate resources
according to their current requirements. So, it contributes in efficient and effective use of
available resources.
Reduction of loss: The past information which is carried by such reports helps in
identification of future problems and issues. On the basis of such information, contingency
provisions are prepared by organisation to manage their future risks.
Large financial returns: Different reports provides different informations. Job cost
report helps in identification of most profitable project and reduction of their extra costs. Also
provides the information regarding lack of knowledge among employees. Adequate training
programmes are adopt by Zylla according to their requirements to improve their skills. This
helps to increase their production capacity and reduction in wastage of resources.
Different types of reporting system
Zylla is small company which uses different reporting systems to accomplish their
targets. The use of such different reporting systems is mentioned below:
Accounts receivable report: This report contains the information regarding the debtors
of company from which the amount is outstanding. This information is further used by the
manager of Zylla to effectively manage their cash flows and credit period which is given to
customers. Records of debtors helps in determination of the fact that their existing credit policies
are workable or not. It also provides support in preparation of much better strategies (Garrison
And et. al., 2010).
Job cost report: It is effective report which shows the amount of expenses required to
start new project. Such expenses are further used by the management of Zylla company to match
with the revenue to ascertain the profitability of project. This also provides the opportunity in
identification of the high earning areas of business. So, they can provide full emphasis on such
5

part instead of wasting of time on other less profitable operations. It also helps in determination
of of the area of waste and correct them before cost escalates.
Performance reporting system: The main function of this system is to represent the
information which is analysed from the financial statements of company. This information
depicts the actual performance of organisation. This report is prepared at the end of year to make
effective decisions for achievement of pre-determined objectives.
Inventory management report: This report is prepared by the accounting officer of
Zylla company to monitor and control their stocks and raw materials. The methods which are
used in this regard are ABC costing, EOQ and inventory turnover ratio etc. This helps to provide
timely order of their stocks.
Operational budget report: This report is based on the estimation about the expenses
incurred by company on the production of their products. It gives insight to the management
regarding the revenue which is associated with their production activities. It contributes to
effectively price their products with good profit margins.
M1
This has observed that without any intention, employer cannot utilise any of such tools which is
impacting performance of the business. For enhancing the profit and efficiency of Zylla,
management accounting system is being used. It aids in recoding consistent transactions in
proper manner. Additionally, it simplify process of decision - making regarding financial
statements.
D1
In Zylla, each and every departments are liable to accomplish mutual objectives. There by ,
whole performance and growth of firm relies on reporting system because it entails different
information in context to financial statement. Here in critical decision-making regrading
investment is performed by stakeholders by evaluating reports of the venture (Nixon and Burns,
2012).
TASK 2
P3 Few costing methods considered in management accounting
Cost: In business and accounting context, cost means the amount which is incurred by
organisation in production of something valuable. Large number of factors are considered while
6

calculating the cost of product which are effort, material, time and utilities, resources, risk and
opportunity foregone. All costs related to direct labour, material, resources and workers are
included.
Costing is the concept which includes the estimation of costs which are related to any
project. It includes both variable and fixed cost. Variable cost means which varies with change of
functions and activities and on other hand, fixed cost is always remain same during the whole
project. Such estimated costs is further used by the manager of Zylla company to take important
decisions regarding their future actions. This also helps in determination of the profitability
which is associated with their projects and products. The two costing methods which are used by
Zylla are mentioned below:
Marginal costing: This costing method helps in identification of cost which is incurred
by organisation on production of one extra unit. The price collected by organisation is higher
from the marginal cost of one extra unit produced, then it is good for organisation to produce
such extra units. Under this, variable cost is considered only and fixed cost is ignored (Otley and
Emmanuel, 2013).
Absorption costing: This includes all such costs which are linked with the production of
products and services. Under this method, both costs are considered variable and fixed. In
calculation of effective cost both direct and indirect expenses are considered.
Marginal costing Absorption costing
While calculating cost only variable cost is
included.
This includes both variable and fixed cost
This method enhance the decision making
power of management
It is not considered as effective method for
decision making.
Computation of net profit by using marginal costing
Profit and loss statements
Particulars Amount
Sales 35*500 17500
7

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
◦ Calculation 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
M2
Zylla is generating maximum profitability by taking use of correct tools as well as techniques.
This would help in future foretelling and stableness. The main method that is used by cited firm
is conservatism in order to protect resources. Besides this, materiality is proved to be useful in
proper work forces utilisation (Pipan and Czarniawska, 2010).
D2
As per above calculation, it has been recognised that Zylla could use two critical costing
methodologies to acquire better results. They are attaining variant outcomes from both of them.
8

If they are utilising absorption costing net profit is being yield approx. 7800. Still, with marginal
costing they are gaining income of around 7500.
TASK 3
P.4 Benefits and limitations of planning tools
 Budget – It is information about the company activities for particular period of time. This
shows the expenses and profits of the company for producing the goods. Through this
company can effectively manage all the operations and activities. Firm can also make
plans related to various operational tasks. This is prepared by the organization for more
than 1 year. Through proper planning of expenses and profits activities run successfully.
It results in increasing the productivity and profits of the firm.
 Budgetary control – It is a tool used by the management for proper planning,organizing,
analysis and control of budgets of the company. These are linked with various parts of
business which are called budget centres. Through this firm tries to reduce the expenses
and manage the resources in the effective and efficient manner. This results in increasing
the profits and productivity of the company.
Process of budgetary control -
Consult with the concerned managers- Managers can take proper information and
analyse the data in an efficient manner. This helps the company in determining that budget is
required in managing the expenses and costs. Through this managers can communicate
relevant data to improve the position of Zylla company (Qian, Burritt and Monroe, 2011).
Do effective assumption - In this step suggestions from the managers are taken so that
they can make assumption to reduce the losses of future. Main objective of planning is to control
the tasks and extra expenses which are incurred by the company. This helps the firm in
increasing the profits.
Fixed organization data for budget to achieve the objectives - In this step account data
is collected from various departments and then manager prepares the list of the information.
Through this managers can make planning according to the set benchmarks.
Measurement of data with budgeted data - In this step actual data is compared with the
standard data to measure the performance of Zylla company. It will assist the managers to
evaluate the chances of development of the company.
9

Review analysis – It is the last step of budgetary process. Manager evaluates the above
mentioned steps that they are going in correct direction or not. They send the budget to higher
authorities for their consent. This will help authorities to take relevant decisions.
Planning tools – These are the techniques and procedures used by the company to
achieve the vision and objectives of the firm. Manager creates business plans and policies to
attain the objectives. It is done to improve the position and long term growth of the firm. These
tools are -
 Forecasting tools- In this historical data is used for determining the recent opportunities
in the market. Manager uses his skills, knowledge to capture the trends and for judging
and taking relevant decisions. Through this forecasting manager can make future plans
and policies by gathering of the historical data.
Advantages -
It is crucial for the company to determine the pre decided goals of future. Through this
manager can find the expenses and sales for the future. It will help managers ion creation of the
budgets.
Disadvantage -
This process do not give correct estimation of the company's expenses which are suffered
by the firm in future. If the amount of the cost is higher then it influences the goals of the
company.
 Scenario tools – In these tools, manager can monitor the various options according to
different situations. It helps in planning, managing the operational activities and functions
of tasks of the Zylla company. This can increase the productivity and profits of the
company. These tools fluctuate according to the demand and accordingly expenses are
paid by the firm.
Advantages – Through using of these tools managers can have knowledge about the
selection of option, opportunities and its implementation (Vaivio and Sirén, 2010).
Disadvantage – These tools take more time as compared to other tools so it is not correct
for the firm.
10

 Contingency planning tools – Through this tool firm can develop itself to behave in an
efficient manner in difficult situations. Management creates a contingency plan so that
manager can evaluate the financial resources and management of human resource.
Advantage – This process help the management to control extra costs incurred by the
company. It prevents the firm from situation of losses.
Disadvantage – Complicated plan is made in various circumstances due to the complex
nature of plans
M3
For maximising efficiency from the accessible resources, zylla enterprise could make usage of
efficacious planning instruments. For instance, there are forecasting tools that would aid them to
forecast future sales and profits for the organization. Likewise, scenario and contingencies
techniques are also considered as an effectual choice for the company.
D3
Numerous of financial issues are emerging in venture that can impact on the profitableness of the
businesses. It is the duty of directors to use appropriate system that can eliminate all such
problems without giving any critical influence on performance of an enterprise. Balance
scorecard is treated as an effectual system that could be used by the company in resolving
commercial issues.
TASK 4
P.5 Adopting management accounting systems for responding the financial problems
Due to changes in the technology there are many changes occurred in the accounting.
Management accounting systems can put emphasis on the organization and not only on the
finance department. Main aim is to reduce the cost and wastage of the resources in the business.
Company can select the best sources of finance through various tools and can expand the
business (Van Helden and Northcott, 2010). There are differences between Zylla and Unicorn
grocery-
Zylla company Unicorn grocery
Company is operating their activities on the
large scale and thus they use KPI to evaluate
Unicorn grocery helps in creation of the
grocery goods so they use operational control
11

the financial performance. device to evaluate the activities at operational
level.
This company uses SMART tools to achieve
the objectives. It is the best tool to solve the
problems of the firm
Company executes the financial governance
and due to it losses are controlled in the firm.
Organizations has to deal with various problems due to changes in the technology. So there are
various tools used by the Zylla to solve the financial issues. They are -
 Key performance Indicators – KPI is the process in which evaluates the success of the
organization. If KPI is high it means overall performance of the firm is evaluated but if
KPI is low then performance of some departments are evaluated. Through this gap
between objectives of finance department and actual performance is determined. By
making SMART goals company can set the objectives such as increase the sales by 20%
in 1 month. Goal is specific as employees has to increase the sales by 20%.It is
measurable as firm compare the present and past performance. Objective is achievable
which means employees can accomplish this target. This goal is relevant as it is
meaningful to the company as well as for the employees and goal can increase the
productivity as well as the profits of company. It is time bound as employees had to
achieve their targets in 1 year. All employees have to achieve this in particular time.
Through this various financial problems gets solved.
 Bench marking – Zylla company has to adopt the standards in the company which helps
it in improving the performance. Through this there is optimum utilization of resources
and it improves the performance of the firm. So firm adopt various standards of the
industry. Through this company can solve various financial issues and problems related
to cash flow and increasing pressure of cost of capital (Ward, 2012).
 Financial governance – Mostly firms do not fulfil the conditions of stakeholders. So
firm has to consider the interests of various stakeholders such as employees, customers,
suppliers, government etc. Organization do not any cheating and frauds with various
stakeholders. Through this it considers the interest of various stakeholders and it results
in removing the financial issues and problems. Thus firm can easily achieve the
12

objectives and goals. It results in improving the performance of the company in long
term. This results in growth and success of the company.
M4
Managers require to use different methods for controlling various issues. Some of those tools are
benchmarking, KPI, financial governance and smart tools.
CONCLUSION
It has been concluded from the above report that, management accounting systems are the
integral part of every organisation. It is not possible for management of every organisation to
deploy their functions effectively. These systems provides their assistance in planning,
controlling, monitoring, risk management etc. The information which is derived by the use of
such accounting methods is effectively provided to different stakeholder to enhance their
decision making and to gain their trust. Such information is used by organisation in preparation
of their budgets and guide their employees to improve their performances. Forecasting and
scenario are such planning tools which also helps in budgetary control. Different accounting
systems also further used by Zylla to overcome from their financial problems.
13

REFERENCES
Books and Journals
Baldvinsdottir, G., Mitchell, F. and Nørreklit, H., 2010. Issues in the relationship between theory
and practice in management accounting. Management Accounting Research. 21(2).
pp.79-82.
Christ, K.L. and Burritt, R.L., 2013. Environmental management accounting: the significance of
contingent variables for adoption. Journal of Cleaner Production. 41. pp.163-173.
Cinquini, L. and Tenucci, A., 2010. Strategic management accounting and business strategy: a
loose coupling?. Journal of Accounting & organizational change. 6(2). pp.228-259.
Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm
performance: The incremental contribution of lean management accounting practices.
Journal of Operations Management. 32(7). pp.414-428.
Garrison, R.H. And et. al., 2010. Managerial accounting. Issues in Accounting Education. 25(4).
pp.792-793.
Nixon, B. and Burns, J., 2012. The paradox of strategic management accounting. Management
Accounting Research. 23(4). pp.229-244.
Otley, D. and Emmanuel, K.M.C., 2013. Readings in accounting for management control.
Springer.
Pipan, T. and Czarniawska, B., 2010. How to construct an actor-network: Management
accounting from idea to practice. Critical Perspectives on Accounting. 21(3). pp.243-
251.
Qian, W., Burritt, R. and Monroe, G., 2011. Environmental management accounting in local
government: A case of waste management. Accounting, Auditing & Accountability
Journal. 24(1). pp.93-128.
Vaivio, J. and Sirén, A., 2010. Insights into method triangulation and “paradigms” in interpretive
management accounting research. Management Accounting Research. 21(2). pp.130-
141.
Van Helden, G.J. and Northcott, D., 2010. Examining the practical relevance of public sector
management accounting research. Financial Accountability & Management. 26(2).
pp.213-240.
Ward, K., 2012. Strategic management accounting. Routledge.
Weißenberger, B.E. and Angelkort, H., 2011. Integration of financial and management
accounting systems: The mediating influence of a consistent financial language on
controllership effectiveness. Management Accounting Research. 22(3). pp.160-180.
Zimmerman, J.L. and Yahya-Zadeh, M., 2011. Accounting for decision making and control.
Issues in Accounting Education. 26(1). pp.258-259.
Macintosh, N.B. and Quattrone, P., 2010. Management accounting and control systems: An
organizational and sociological approach. John Wiley & Sons.
Shah, H., Malik, A. and Malik, M.S., 2011. Strategic Management Accounting-A Messiah For
Management Accounting?. Australian Journal of Business and Management Research.
1(4). p.1.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Lukka, K. and Vinnari, E., 2014. Domain theory and method theory in management accounting
research. Accounting, Auditing & Accountability Journal. 27(8). pp.1308-1338.
Online:
14

Management accounting and its importance [Online]. Available through:
<https://www.invensis.net/blog/finance-and-accounting/what-is-management-
accounting-and-its-importance/>
15