Using Accounting for Decision-Making - Minting Ltd - Essay Example

ASSESSMENT TITLE: SPA#3 COURSE CODE: ACCT 11059 COURSE NAME: USING ACCOUNTING FOR DECISION MAKING STUDENT NAME: HE MINTING STUDENT NUMBER: S0214758 ASSESSMENT DUE DATE: SUN (13 JAN 13) 11:00 PM AEST. ‘Budget’ is the most ideal item that firms need to design to determine their successes. After the fervent study on the chapter I understand the need of the managers to plan for the for the company goals. Basing on the skills from budgeting theory, I understand that the process of developing and implementing budgets is tactical and requires clear mind of the company to form and enact. I urge managers to consider clear communication of the budget objectives and determine a strategic paradigm to initiate the plan. According to the handiness research from my past study I understand the bulkiness nature of formation of successful budget by the manager’s, I recommend the use of accounting team so as to impact on the veracity of budget ideas and sequential steps to adopt in order to successfully sway on. I consider economically insightful for managers to develop the key policies that can be adopted to support the firms budgeting process. In cases of inadequacy of clear lines of communication relating the plan, I think as per the concept from this chapter manager’s should adverse by involving a base of expertise from accounting department in making vital firm budgets and idealistic procedure to be espoused. With focus in the short-term planning, I configure budgets to intensively provide remedies for the setbacks before their advance stages. I found this guide interesting as I had to understand the idyllic imperatives of budgeting, with me didn’t knew budgeting has a wide role to the firm, from this guide I have understood the positive contribution of budgeting towards success of the firm. Clear communication of vital budgeting process encourages; co-operation, co-ordination, entrustment and motivational features which aid in realizing the firm’s goals. I am not still convinced on the contribution of budgets to the business firms, having learned allot from this guide I found other sections hard to clearly comprehend. Basing on the short-term planning realization, budgets for short duration utilizes limited time to be initiated. I understand this would disturb the schedule for time needed for successful communication between different harms of the firm. Still unclear enough is that with my experience in this subject I understand managers and top management are the responsible key personnel for short term planning. The only effective communication I understand is when the manager’s wants to affect the short- term planned already establish. Thus according to me this can form stubbornness in the part of staff in the firm to take the managers forecasted plans. With concern to co-ordination, I am in line with stipulation from this guide. The mission for the budgets is to arrive at a set targets, thus with clear every staff is allotted each roll to play in relation to the success of the budgets. With my view I realize that co-ordination would be highly encouraged in the firm. Similarly, I understand that though it is difficult to form a group decision due to differed opinions from different staff, I urge managers to consistently form a strategy to promote co-operation among the member staff. Having a background on the benefits of cooperation in the firm in forming opinions, I think managers should adopt clear lines to communicate the need for planning though short it is as this would bring the notion of mutual aid that propel the firm to realize its short-term goals. In one of my past research on communication, I understand that the root to efficient control is absolutely clear lines of communication. Managers should communicate at an early stage about the need of the plan. I consider the need of early communication to the staff as this would bring a mutual concern on planning of the firm’s budget. I realize that the effectiveness accounting staff in initiating the budget process. With my clear conscience I think communication is a fervent item for successive budget. Also due to the concept of delegation of activities, I realize without clear lines of communication this would not successfully achieved. To me the role of the managers in delegating duties to the staff and in order to achieve better results out of the entrusted activities, managers should have to inaugurate a well based communication system. In my experience to motivational aspect in the firm, I got disturb to correlate the argument in this guide has I understand that employees are motivated by meeting their financial obligations. This can through bonus and commissions services to staff. According to this guide, I don’t understand how the budgets motivate employees. I am not agreement with the motivational technique of budgets to staff has this act as disincentive for any stride towards staff inspirations. Budgeting improves the organizational strategies to adopt desired targets in the firm; it is reality that budgeting does not any impact to the motivational aspect. According to the immense accounting skills I understand the great role accountants can take part in hindering the manager’s plans and facilitating clear modes of communication within the firm. I consider accountant’s favorable impacts in regularly ensuring the consistency with manager’s objectives, vision and mission regarding the budgeted goals. Most preferably I realize that with the effect of using accounting department will earn more advantages in using budgets in the firm. From the experience accountants will provide basis to plan for short-term budget with detailed information that boost the coordination and cooperation in the firm. With configurations of this chapter, accounting role in forming budget is of the essence to the managers, as with me I recognize the advantages of accounting in forming and implementing budget. Budget not only requires managerial knowledge, but also calculation based on the targeted goals. This would work well with engaging accounting personnel. For example in valuing the future purchase of raw material given a target closing inventory; accounting panel are well efficient: Units needed for production 2,160 Target ending inventory 480 Total material to provide for 2,640 Less beginning inventory 330 Units to be purchased 2,310 Unit purchase price $ 2.00 Total purchase cost $4,620 The principle of budget setting withholding the accountability of parties involves appears interesting part to me, I realize that the parties such as the manger, accountants and the staff are held responsible for the success of the budget. The short-term nature of budgets will work well with the long term strategic plans. Which I consider managers to be forming short-term plans basing on review of the long term budgets of the firm. I feel that the joint efforts will generally give genuine budgets of the firm. My conversancy in budgeting tells me that several budgets are prepared in the company to meet each departmental forecast. I urge managers to utilize firm’s personnel to form respective departmental budgets. These budgets are then jointed to form a master budget, I configure intense use of accounting team as most of this budgets involved cash which to me I think this is handle well by the firm accountants. Minting Ltd Cash budget For three months ending 30th June 2013 April May June Bal b/d 1,000,000 1,015,000 4,650,000 Receipts Cash sales 1,300,000 1,500,000 2,000,000 Credit sales 3,000,000 3,750,000 3,375,000 Subtotal 5,300,000 6,265,000 10,025,000 Payment Generators Supplies Rent Wages Electricity 600,000 1,330,000 600,000 860,000 895,000 640,000 975,000 3,020,000 1,250,000 Subtotal 4,285,000 1,615,000 4,270,000 Balance Carried down 1,015,000 4,650,000 5,855,000 The figure shows the master cash budget which entails critical areas of which for manager to form a representative budget I comprehend the use of accounting team. In vital areas of the firm such as production and sales section I recommend the designing of their short-term budgets. I believe this budget allows the representative managers to measure the performances from the variances with their actual performance trend. Minting Ltd Production Budget Products A B Sales 13,000 21,400 Add closing stock 1,500 2,600 Less opening stock (2,500) (3,000) Production 12,000 21,000 In assessment of the fluctuation of the comprehensive income I see the need a premeditated vacillations as it will affect the mangers forecasted budget. From the competency background I perfected in accounting I consider the need of managers in studying the flow of income in the firm this will be shown in the income budget. Minting Ltd Budgeted Income Statement for the three months ending 30 June 2013 $'000 Sales Cash 1,500 Credit (30 days) 4,000 Total Sales 5,500 Less: Cost of Sales Direct Materials 2,600 Direct Labor 1,800 Direct Overheads 100 Gross Profit 2,500 Less: Overheads 1,500 1,000 From the figure above manager can detect their variations from the budgeted income. I consider the budget to track the diversity from the forecasted budget. Also in tracking the changes in the balance sheet statement, I believe managers would understand the variances in the capital items and the balance sheet items in total. Minting Limited Statement of financial position As at the year ends 30 June 2013 Assets Current Assets Inventory 300 Debtors 3,000 Total Current Assets 3,300 Non Current Assets Machinery 1,000 Less: Accumulated depreciation (100) Total Non-Current Assets 900 Total Assets 4,200 Liabilities Current Liabilities Accrued wages 400 Bank Overdraft 250 Creditors 950 Total Current Liabilities 1,600 Equity Share Capital 1,800 Retained Earnings/Losses 800 Total Equity 2,600 Equity + Liabilities 4,200 From the figure above, help the managers to trace the abnormality’s in the items of balance sheet. In benchmarking I trust the work of accounting team. Managers should use the work of responsible team as they can design the critical paradigm of identifying performances of the business. According to application of the contributory ostensible accounting and managerial approaches I consider the use of balanced scorecard as it economically assess the economic and business performances in comparing both financial measures and financial measures of the firm activities. Balance scorecard Mission Vision Strategic perspectives Strategic themes and results Objectives Strategy map Performance measure Strategic initiatives In regard to this guide I have understood the balanced scorecard benefits to managers. Having relating the missions, visions, strategic perspectives, themes and initiatives that provides a clear measure of the firm performances. In conclusion, I understood that the short-term plans should be strategically formed by the colluded managerial and accounting skills. Having versed knowledge in budgeting I have extent my skills by understanding the extra reasons of budgeting. On effecting the budgeting, I have realized the contributions by enhancing better communication, delegation, coordination and cooperation in the firm. Accounting department is concern in setting up the communication and entrustment in the process as well as providing valuable remedial opinions in the budgeting process. Since most of the budget plans is based on economic figures, managers should use the accounting team to impinge on the use of scorecard which provides clear performance of the business basing on the comparison techniques. Read More