Financial and Managerial Accounting Assignment (GC01326)
Table of Contents
Introduction.
Task 1: Financial Planning and Control
- Is budgeting used primarily for scorekeeping, attention, directing or problem-solving?.
2.0 How to do strategic planning, long-range planning, and budgeting differ?.
- Why is budgeted performance better than past performance as a basis for judging actual results?.
- What are the major benefits of budgeting?.
- Is budgeting an unnecessary burden for day to day problems? Explain your answer.
- Why is the sales forecast the starting point for budgeting?.
- How do Spreadsheets aid the application of sensitivity analysis?.
Task 2: Prepare Budget.
Production cost budgets.
Sales budgets.
Cash budgets.
Debtor budget.
Creditor budget.
Finished goods budgets.
Raw materials budgets.
Profit and loss account budget.
Balance sheets budget.
Conclusion.
Reference.
Introduction
This report focuses on managerial accounting which includes financial planning and control and preparing the budget. As part of financial planning and control, the report answers a set of questions that solve particular financial planning and control issues. As part of budget preparation, the report prepares sales budget, debtors budget, creditors budget, production costs budget, raw materials and finished goods budget, profit and loss account budget, and balance sheet budget for a company, namely Europe Ltd. Finally, the report concludes the prepared budgets with a short management report.
Task 1: Financial Planning and Control
1. Is budgeting used primarily for scorekeeping, attention, directing or problem-solving?
As an accountant’s responsibilities are not often clear, it can be challenging to answer this question. Budgeting can primarily be used for scorekeeping. It makes sure a depreciation schedule which helps to prepare financial statements and to report the outcome of activities. It may report on the results of decisions and what has happened. Budgeting report items are also required for financial statements (Attril and McLaney, 2011).
Budgeting can also be used for problem-solving. It assists the manager to assess the influence of a decision. Managers can make decisions by cost comparison from two alternatives. In a word, it helps to make decisions regarding planned activities (Attril and McLaney, 2011).
Budgeting focuses on the areas and activities which require attention and helps the manager to get information from performance report. It can also be attention directing when management decisions require in a scrap area. Managers can find out variances areas by different outcomes from expectations. It also directs attention to opportunity activities, hence, directing attention (Attril and McLaney, 2011).
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2.0 How do strategic planning, long-range planning, and budgeting differ?
Strategic planning is quite general which does not have a specific time period. It does not focus on the financial statements. Long-term planning has a specific time period, generally a five or ten years horizon. It includes information from financial statements but not in detail. Budgeting has a specific time period, usually one or less than a one-year horizon. It focuses on financial statements with detailed descriptions (Chegg, 2013).
3. Why is budgeted performance better than past performance as a basis for judging actual results?
The budget is prepared with estimated financial information for an advanced period of related times. The outcome of budget assists for forward-thinking and planning. It also a set of policies that are followed during the specified time period to gain organizational goals and objectives. Inefficiencies included in past results can be identified and determined from the budgeting. In addition, budgeting differ expected future conditions from the past condition (Attril and McLaney, 2011).
4. What are the major benefits of budgeting?
According to Attril and McLaney (2011), budgeting has a number of benefits. Firstly, it helps organizations to gain control over finances. It obtains control over unnecessary and indispensable expenditures and adjusts these expenses with business requirements. It also helps organizations to get rid of debts. Secondly, budgeting keeps organizations informed to allocate their funds and continuously remind their plans and gap with their goals and objectives. Thirdly, budgeting improves financial communication to describe financial issues and to make decisions about costs and expenses. In a word, budgeting reinforces the management process of planning ahead through the creation of a course of action, resource planning and actions, through the promotion of continuous improvement and co-ordination among managers, and through control of different business activities.
5. Is budgeting an unnecessary burden for day to day problems? Explain your answer
As Attrill and McLaney (2011) note, budgeting can be treated as an unnecessary burden for organizational day to day problems. Firstly, if the budgeted figures are very high, it may de-motivate employees. Secondly, budgetary slack and budgeting padding may be occurred by managers when they are forced by top management. As budget focuses on results ignoring the real reasons, unrealistic budgets may detriment the organizational managers’ decisions. Thirdly, as budgeting is never being able to reflect the true reality and complexities of an organization, it is needed to be revised updated which is cost-effective and time-consuming.
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