Accounting Terms in Business Management

BUSINESS MANAGEMENT
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................3
Question 1........................................................................................................................................4
Cash budget ................................................................................................................................4
Cash position of company...........................................................................................................5
Issue of relevance in behavioral aspects of budgeting................................................................7
Overhead cost rate.....................................................................................................................10
Total production cost ................................................................................................................11
Advantage and disadvantage of single absorbing rate..............................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The study is based upon accounting terms which are used on a daily basis in organisations. These
include preparation of cash budget, cash position within the business and how the cash flow has
improved and the issues of relevance in behavioural aspects of budgeting which may motivate
and demotivate employees. In the second case, study has been done of accounting terms like
contribution, break-even point and assumptions of break even model has been emphasised. The
third case represents the overhead absorption rate, production costs and advantages and
disadvantages of singe rate for absorbing overheads compared to departmental rates.
Question 1
Cash budget
Particular Desk Amount (£)
Sales 1 = 700 * 30 = 21000
2 = 500 * 30 = 15000
3 = 600 *30 = 18000
4 = 800 * 30 = 24000
5 = 1000 * 30 = 30000
6 = 1100 * 30 = 33000
141000
1) 400 * 50 = 20000
2) 300 * 50 = 15000
3) 350 * 50 = 17500
4) 400 * 50 = 20000
5) 650 * 50 = 32500
6) 800 * 50 = 40000
145000
Total sales 286000
Total cost
Rent 12000
Filling cost 2500 * 6 15000
Marketing
and
8000

advertising
cost
Manager
salary
3000 * 6 18000
Insurance
cost
4000
Labor cost 4700 (700 + 500 + 600 +
800 + 1000 + 1100) * 30 /
60 * 12
2900 ( 400 + 300 + 350 +
400 + 650 + 800) * 30 / 60
* 12
28200
17400 102600
Total cost 102600
Cash budget 286000-102600
Cash position of company
The above mentioned cash budget indicate about the expected liquidity situation of
organization. The budget comprises with the expected sales and also the potential amount of
expenditure which organization needed to entertain against operations of company. The above
mentioned cash budget indicate that Woodrock Limited Company hold very strong liquidity
position. The expected sales of company indicate that it could address favorable inflow of cash
revenue in the next six months of business operations and also the revenue of organization could
cover up the potential level of outflow of financial resources of the organization. As the cash
budget mostly indicate the expected cash company will hold against the business operations
channelize by organization (Eschelbach, 2017). The expected amount of sales Woodrock
Limited Company will address in the next six month of tenure is 286000 and the expenditure the
organization will require to incurred is amount to total 102640. The cash balance in between the
income and expenditure is shown the liquidity position of organization that will hold by the
organization. The targeted amount of sales inflow is more than the expected amount of outflow
against the business operations incurred by the organization. Expenditure or the cash outflow
which organization will be addressed summarizes rent, fixed cost, marketing and advertising
cost, manager salary, insurance cost and labor cost. All these cost are different and will entertain
a certain amount of cash outflow. The basic aim behind the formation of cash budget is to
identify the level of cash entity will generate out of the operations it has entertained in the