Monitoring Budget To Prepare Financial Statement

Answer :

ACCOUNTING ACTIVITY

Introduction 

Accounting activities includes preparation of financial statement by accountant by following guidelines related to GAAP principles in order to assist auditor to provide an unqualified financial statements. The current critique takes into consideration two different activities namely practical activity along with written activity which deals with explaining steps in terms of preparing different types of budget. 

4.1 Written activity

Task 1: 

Policy: The mission of monitoring budget helps accountants to prepare financial statement in an efficient manner along with following GAAP and IFRS.

Purpose:  The major purpose of monitoring budget includes conducting the operation of business in a profound manner along with earning high amount of profitability.

Scope:  In terms of implementing budget, the accounting and auditing sector is being affected.

Responsibility: The boards of directors along with executives are responsible for operating different types of activities which are related to implementation of budget.

Definition: In case of monitoring budget, it is essential for accountants for gather knowledge about principles which assist them to prepare financial statement in an authentic manner.

Procedures:  There are various steps for monitoring budget which includes:

• Execution of strategic plan
• Implementation of business goal
• Implementation of both fixed and variable projections
• Analysis of target profit related margin

Effectiveness criteria: In terms of implementing budget, it is crucial for managers to measure total amount of revenue along with expenses and the different in this amount is termed as profit earned by business venture.

Revision: The accountants while reviewing financial statement for implementation of budget has to follow stringent guidelines which aids in enhancing hike in profit.

Task 2: Analysis of detail research

Key principles of accrual accounting

As stated by Batkovskiy et al. (2015), the key principles related to accrual accounting imply measurement of performance along with analyzing financial position of business.

Budgetary control

The process of budgetary control signifies process which is implemented by managers in terms of setting performance goals along with implementation of budgets. The method of budgetary control is important as it aids in maximization of profit along with minimization of cost which aids in improving growth of business.

Corporate governance

The method related to corporate governance signifies policies and procedures which are implemented by business to be controlled and directed in a profound manner. 

 One of the major principles related with corporate governance is that all stakeholders are required to be informed about activities of business to promote transparency (Braga & Panteghini, 2018)

Double entry bookkeeping system

This process has two side- debit and credit side for each of transaction

Statistical analysis along with analysis of variance

The process aids in promoting growth of business.

Forecasting techniques

As stated by Bogoviz et al. (2017), forecasting process includes two techniques which are qualitative and quantitative methods. On one hand qualitative methods are subjective in nature and quantitative data used to forecast data.

Expenditure and revenue items

Expenditure = Cost related to purchasing any property

Revenue = Total amount of money earned by company for example profit (Ezeagba & Adigwe, 2015).

Sources of data

The data can be sourced from any financial institution

Issues in budgeting

• Non compliance of regulation
• Lack of inappropriate knowledge among staff.

Task 2:  Discussion

• Ethical consideration used for handling of files
• Maintenance of various security related issues
• Execution of controlled assess
• Recording related to management and ethics (Ezeagba & Adigwe, 2015).
• Key features of related financial legislation

In terms of Taxable transaction

              Federal and state based legislation

In terms of reporting requirement

                 State based process of legislation

• Methods related to work practices and routine
• Process of work schedule and timelines
• Execution of operational along with organizational guidelines
• Work related models along with multi-skilling process
• Guidelines related to organization

Corporate governance

In terms of conducting operation of business, it is essential for board of directors to conduct operational process and they are mainly responsible for enhancing success of business.

Financial accountabilities

In terms of running business, finance is core requirement which assist in earning high amount of profit (Braga & Panteghini, 2018)

• Key principles related to internal control system and auditing
• Methods of integrity
• Safeguarding assets
• Detecting frauds and errors (Schroeder & Shepardson, 2015).

4.2 Practical activity Question 1: Preparation of fees income budget

In book of Hay and list

Total number of labor hours = 2800 hours/12

                                              = 233 hours

Current market rate included on hour basis = $ 200*233 hours

                                                                      = $ 46600

Current market rate= 10%

Enhanced rate related to market = 15%

Question 2: Execution of purchase budget for month of April

In books of Sea Green trading company

Table 1: Calculation of purchase budget for month of April

(Source: Bogoviz et al. 2017)

Question 3: Preparation of factory overhead cost

In the books of Amy Dolls Pty Ltd

Table 2: Implementation of factory overhead cost

(Source: Morgan et al. 2017)

Question 4: Preparation of direct labor budget

In books of Isabel Pty Ltd

 Table 3: Preparation of labor budget

(Source: Shevchenko, 2017)

Question 5: a. Execution of cost of production budget

 Table 4: Preparation of cost of production budget

(Source: Ezeagba & Adigwe, 2015)

b. Report on budget

In terms of preparing any budget, it is essential for both managers along with executives to follow certain principles which in turn assist in promoting level of productivity. It was estimated that preparation of budget is important as it aids in promoting planning process which aids in conducting day to day operation of business.

Question 6: a. Preparation of cash receipt budget

Table 5: Preparation of cash receipt budget

(Source: Braga, Infusino & Panteghini, 2015)

b. Execution of cash receipts budget showing GST separately

Table 5: Preparation of cash receipt budget without GST

(Source: Braga & Panteghini, 2018)

4.3 Written/ Verbal Questions activity Question 1: Different types of budget

As opined by Antony, Bertone & Barthes (2017), the different types of budget which are required to be prepared by business venture for enhancing growth includes:

• Execution of Master budget
• Operating budget
• Preparation of financial budget
• Cash along with static level of budget
• Flexible along with capital expenditure related budget

Question 2: Typical based budget cycle

Based on information obtained from Paul et al. (2018), the budget cycle signifies life related to execution of budget which takes into account from creation process to evaluation process. This budget cycle is common in terms to different government based agencies which are included in terms of using transparent budgeting process. There are different stages undertaken for conducting operation of business in a profound manner and it includes:

• Preparation of budget
• Approving different stage included in budget
• Executing plan undertaken in planning stage
• Passing the budget

Question 3: Purpose of each budget

The major purpose of different types of budget includes:

Cash budget

The primary purpose of cash budget is to plan and execution of various strategies in terms of covering expenses along with anticipating both expenses along with revenue.

Labor budget

Major purpose of this budget is used in terms of calculating total number of labor hours along with categorizing information on the basis of labor category.

Production related budget

One of the major purposes of production budget includes preparation of financial plan by manufacturer along with estimating the total amount of cost which is included in manufacturing of product.

Purpose of materials budget

The primary purpose of material budget shows expected cost which is related with material and it is solely used for budgeted related process of production along with sales.

Overhead budget

This type of budget is essential for estimating different expenses related with budget in terms of conducting business in an efficient process.

Question 4: Usages of budget negotiation procedures

It can be determined that budget negotiation process is used by accounting firm as it assists in following stages as:

• Planning process of negotiation
• Forming engagement with other party during negotiation
• Closing the process of negotiation

Question 5: Milestone in terms of budget

According to information implemented from Batkovskiy et al. (2015), the milestone implies a tool which is generally used in project management in order to prepare specific timeline. The milestone is crucial as it assist in adding value to project scheduling process.

Question 6: Different steps included in forecasting estimation

Different steps included in forecasting process and it includes:

• Identification of problems
• Collecting various types of information
• Performing preliminary analysis
• Implication along with choosing of forecasting model
• Interpretation of data analysis
• Verification of model performance

Question 7: Factors included in preparing cash flow estimation

Various factors which are included are:

• Determination of cash inflow and cash outflow
• Implication of overhead expenses
• Execution of variable expenses
• Preparation of cash related flow budget

Question 8: Coverage of budget spreadsheet report

According to statement of Di Francesco & Alford (2017), the budget spreadsheet report covers

• Setting and achieving goals of any business
• Minimizing unnecessary expenses
• Allocating various forms of revenue to other areas related to business

Question 9: Different types of formatting for budget

As cited by Batkovskiy et al. (2015), various types of formatting budget include:

• Activity based budgeting process
• Execution of Zero based budgeting method

Question 10: Role and duties involved in establishing timeline for budget

In terms of Di Francesco & Alford (2017), various duties for establishing time include:

• Distribution of related budget request forms
• Return based on completed budget process
• Approval of budget by Board of Trustee

Question 11: Discussion of format to be reported

As proposed by Batkovskiy et al. (2015), format for reporting can be illustrated as:

• Initiation of insight process
• Definition of related data
• Developing of reliable charts

Question 12: Various steps to be considered in terms of monitoring budget outcome

According to statement gained from Paul et al. (2018), different steps to be considered for monitoring budget outcome can be discussed as:

• Process of budget allocation along with monitoring methods
• Usages of reserves
• Process followed in monitoring expenses

Conclusion 

Hence, based on above analysis it can be summarized that it is essential for accountant to prepare various types of budget in terms of preparing different financial statement in terms of determining total amount of cash transactions.