Importance of Budgeting and Management Accounting Techniques in Sunny Horizons Ltd

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BS1054: Accounting for Managers
Coursework Part 2: 2018/19

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Executive Summary
This report has been undertaken for examination of the importance of implementing
budgeting process and management accounting techniques within Sunny Horizons ltd for
promoting its future growth and development. It has been depicted with analysis of the forma
budgeting process advantages and drawbacks that its adoption would help the company to gain
an estimate of its future income and expenses. However, the company needs to also place
emphasis on reducing its drawbacks that is it can be costly and time-consuming for management.
Also, the use of management accounting information such as cost accounting, pricing decisions
and capital appraisal could help the business managers in improving the decision-making process
within the company.

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Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Role of Budgeting in the organization and implementation of formal budgeting process within
Sunny Horizons Limited..................................................................................................................4
Importance of budgeting process in organization like Sunny Horizons Limited........................4
Some of important benefits of budgets are as follows.................................................................4
Advantages of using the formal budgeting process within the organization...............................5
Disadvantages or limitations of using the budgeting in the organization....................................6
Final Recommendation................................................................................................................6
Use of management accounting information to direct the business activities.................................6
Cost Information..........................................................................................................................6
Pricing Decisions.........................................................................................................................7
Appraising Capital Investment Projects.......................................................................................7
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

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Introduction
The present report is developed for demonstrating the importance of budgeting process
and management accounting techniques for achieving financial control and ensuring accurate
decision-making process within an organization. The overall analysis has been conducted in the
context of given case study that has presented the issue of absence of budgeting process and
management accounting techniques in the company Sunny Horizons Ltd that has been
established within UK involved in selling quality hand-made wooden garden benches. The
business has been established by Graham who emphasized on maintaining quality products and
paid little attention towards cost incurred. The demand for the product is high but the sales are
limited due to number of products that are produced. The company only maintains financial
records on a computer system on annul basis for gaining information about the profits attained.
Graham is reaching the age of retirement and is involving his daughter and son for making
decisions. The business is also seeking to expand the business by enhancing sales within current
market and developing new product lines. Angela, the daughter of Graham, is likely to
implement a budgeting process within the business by addressing its positive as well as negative
aspects. Also, she is also seeking to gain an understanding of the use of management accounting
information in improving the decision-making process within the business.
Role of Budgeting in the organization and implementation of formal budgeting process
within Sunny Horizons Limited
Budget refers to the formal managerial statements that reflect estimates on future sales,
production cost, cash outflow, cash inflows and performance of the organization. Budget is the
most effective tool for the business managers that help them to provide assistance on the ways of
maintaining cash flows within a business (Adler, 2013).
Importance of budgeting process in organization like Sunny Horizons Limited
There are multiple benefits that budgeting process can provide to the organizations such
as Sunny Horizons Ltd as this company is moving ahead to the big corporation and there is
requirement to move business process in systematic manner. The owner of Sunny Horizons Ltd,
Graham, is about to retire and his children need to implement a system that helps to grow the