MANAGEMENT ACCOUNTING

Management Accounting and Decision Making

TABLE OF CONTENT

INTRODUCTION1

DISCUSSION1

FUNCTIONS OF BUDGET1

REVENUE BUDGET2

LABOR BUDGET4

MATERIAL BUDGET6

CASH BUDGET8

Cash receipts:9

Cash Disbursements10

The Net Cash Flow, Ending Cash and Financing10

BREAK EVEN ANALYSIS10

Determinants11

RATIOS12

Liquidity Ratios12

Profitability Ratios13

Important of these two Ratios13

RECOMMENDATION14

1)RATIOS14

Asset Turnover Ratios15

Financial Leverage Ratios15

2)FINANCIAL INDICATORS15

3)NON FINANCIAL FACTORS17

REFERENCES18

Appendix Table

APPENDIX A REVENUE BUDGET20

APPENDIX C LABOUR BUDGET22

APPENDIX D CASH BUDGET23

APPENDIX E BUDGET FOR INCOME24

APPENDIX F FINANCIAL POSITION BUDGET25

APPENDIX G BREAK EVEN CALCULATIONS26

APPENDIX H ALTERNATIVE CASH BUDGET27

APPENDIX I RATIOS28

Report

Introduction

The objective of this document is to present a coordinated overview of the concepts that constitute the different type of the budget. Companies prepare different budgets at the end of the month in order to see the clear picture of the spending and receiving and how much amount should be in the bank account. In this document we will discuss what these different types of budgets and ratios indicates and on the basis of the budget prepared, recommendation will be provided to improve the budget and the efficiency of the operations.

Discussion

A budget is a plan is a financial plan in which the entire list of planned revenues and expenses determined. A plan which is prepare for borrowing, spending and lastly saving.

Functions of Budget

The roles of budgets largely depend on the direction of the company itself. Management needs and expectations and use of budgets are strongly influenced by a number of factors that are related to the management and business system. Ideally the management expects that the budget function provides:

An analytical tool, accurate and timely.

The ability to claim performance.

Support for resource allocation.

The ability to monitor actual performance in progress.

Warnings deviations from the forecasts.

Advance indications of the opportunities or the risks ahead.

Ability to use past performance as a guide and learning tool.

Understandable concept, leading to a consensus and the support of the annual budget.

Revenue Budget

A revenue budget is the estimation of the sales scheduled in quantitative terms by an organization. It is established in harmony with the strategic objectives of the company (positioning, segmentation). It takes in to an account the entire external or internal constraints that weigh the company and highlights the available opportunity. The realization of revenue through the development of trade action plans to achieve target sales.

The sales budget is the first step in a master budget, which is the budget that contains all the planning. If the plan is unrealistic and sales forecasts have been prepared carefully and accurately, the following steps in the budget process will be unreliable, as the sales budget provides the data to prepare budgets for production, purchasing, selling expenses and administrative costs.

A forecast is a statement or quantified assessment of future conditions surrounding a situation or particular subject, based on one or more explicit assumptions. A forecast must always make the assumptions on which it is based. This should be seen as an input in developing the sales plan and may be accepted, modified or rejected by management (www.alacarteconsultinggroup.com).

The sales forecast is the basis on which rests the master budget, so if this has been prepared carefully ...