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The report elaborates the cash budget, budgeted income statement and budgeted statement of financial position based on the available data that is estimated by Edith. Thus, it helps her to recognize the benefits and deficiency of her financial plan to start the new business. The capital budgeting techniques are applied to evaluate the financial position of the business. The sensitivity analysis is also executed for examining the effect of change in cost of sales and price on cash flow. The calculations are depicted in the excel sheet however, the tables are provided in the report to discuss about the financial viability of the business.
The table above highlights the fact that the business will encounter highly fluctuating ending cash balance during the period from January to June 2015. The fluctuation is shown in the figure provided below.
From the above figure it can be concluded that the business will encounter fluctuations in ending cash balance due to the variations in sales and expenditure of the business. Hence, it can be stated that the estimated sales value are not appropriate for the business. Edith needs to revise it for increasing the ending cash balance during the referred time period.
A budgeted income statement consist all the items that are present in the income statements of a particular company (Baker and English, 2011; Balakrishnan, Sivaramakrishnan and Sprinkle, 2009). The only difference is that the income statements are prepared after considering the actual value of the business whereas the budgeted income statements is a projection of the income statement during budgeting periods in the future. A budgeted income statement is prepared for Edith’s business to highlight its profit or loss at the end of 2015. The budgeted income statement is prepared for one year staring from January 2015 to December 2015 (including both months).
The table provided above evaluates the profit of Edith’s
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Accountability 12 Conclusion 13 Reference 15 Abstract This study represents one of the most important areas of management accounting i.e. desirability and effectiveness of accounting for management control. Accounting is the most effective device used by managers and management for organizational control.
XYZ Financial Consultants were engaged by Sprockets Ltd to evaluate their prevailing job costing system for its efficiency. It was understood that Activity Based Costing method is being considered to replace the current traditional system and that recommendations in this regard were required.
The main purpose of the operating statements of income statement is to help the companies to evaluate their performance on the basis of sales and expenses. The income statement reflects strongly upon the profit and loss occurred in the company according to the sales and expenses of the firm.
The management process is dynamic consisting of various activities, elements and functions (Hermanson 2010). The key major management functions involve planning, controlling, decision making and communicating. It is notable that management accounting information is very vital in executing these management functions in an organization.
The main reason for doing this is that, these investments involve commitment of large sums of funds; they take a long time, require much commitment from the management and are irreversible. The four major techniques used for evaluating investment in capital projects include: accounting rate of return (ARR), Payback period technique, net present value (NPV) technique, and internal rate of return (IRR) (Gotze, et al., 2007).
The decisive issue in management accounting is whether the government, organization or consumer is more contented with the transaction or dealing made. Civic actions will tend to generate either more benefits or demerits that determine
The cost driver in a particular group is selected depending on the cause effect link in the cost object and the firm’s ability to have overhead costs. The Institute of Management Accounting indicates that ABC is advantageous
However, following changes in overhead costs during 2015 saw the cost or producing one foot of pipe rise to $0.40 and the selling price remaining at $0.39. At this moment, if the company is making one foot of pipe at a cost of $0.40 and sells it at $0.39, it