Ernst & Young Global Limited: Professional Services Firm

This is a summary of a text about Ernst & Young Global Limited (EY), a worldwide professional services firm with a main office in London and regional offices in Birmingham, Southampton, and Singapore. The group's revenue for the year was £200 million, with 25% coming from markets outside the UK. EY has a policy of accepting smaller customers with potential for rapid growth and aims to create a better working environment. The text also mentions an online blog promoting EY's accounting services, covering topics such as the purpose and scope of accounting, the accounting function in decision-making, the main branches of accounting, accounting systems and technology, and issues of ethics, regulation, and compliance.

TABLE OF CONTENTS
INTRODUCTION................................................................................................................3
About Ernst & Young Global Limited (EY) in United Kingdom.........................................3
1. The role of accounting in an organization........................................................................4
1.1. The purpose accounting in complex operating environments....................................4
1.2. The scope of accounting in complex operating environments...................................5
1.2.1. Individual............................................................................................................5
1.2.2. Business organizations........................................................................................5
1.2.3. Non-profit organizations.....................................................................................6
1.2.4. Government organizations..................................................................................6
1.2.5. Non-profit organizations.....................................................................................6
1.3. The accounting function in informing decision-making and meeting stakeholder and
societal needs and expectations........................................................................................6
1.3.1.An evaluation of the environment and objectives of an organization's accounting
function.........................................................................................................................7
1.4. The main branches of accounting and job skillsets and competencies.......................8
1.5. Accounting systems and the role of technology in modern-day accounting............11
1.6. The organization's ethical, legal, and compliance issues.........................................12
2. Memorandum.................................................................................................................15
2.1. Cash budgeting........................................................................................................15
2.1.1. Preparing a cash budget for the company..........................................................15
2.2. Analyzing the change in the master budget.........................................................20
2.2.1. Scenario 1.........................................................................................................20
2.2.2. Scenario 2.........................................................................................................23
2.2.3. Scenario 3.........................................................................................................26
2.2.4. Scenario 4.........................................................................................................29
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2.3. The role that budgets play in the effective planning and control of resources in an
organization....................................................................................................................32
2.3.1. The benefits of budgets, budgetary planning, and control for an organization.. 32
2.3.2. The limitation of budgets, budgetary planning, and control for an organization.
.................................................................................................................................... 32
2.4. An outline of a range of budgetary control solutions...............................................33
CONCLUSION.................................................................................................................. 35
REFERENCES...............................................................................................................36
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LIST OF TABLES AND FIGURES
Figure 1. The main branches of accounting.....................................................................................10
Table 1. Schedule of expected cash collection................................................................................16
Table 2. Schedule of expected merchandise purchases...................................................................17
Table 3. Schedule of expected cash disbursements for merchandise purchases..............................18
Table 4. Schedule of expected cash disbursement for selling and administrative expenses...........19
Table 5. Schedule of expected cash budget.....................................................................................21
Table 6. Schedule of cash collection of Scenario 1.........................................................................22
Table 7. Variance of Scenario 1.......................................................................................................23
Table 8. Schedule of cash budget of Scenario 1..............................................................................24
Table 9. Schedule of cash disbursements for merchandise purchases of Scenario 2.......................25
Table 10. Schedule of cash collection of Scenario 2.......................................................................26
Table 11. Schedule of cash disburse for selling and administrative expenses of Scenario 2..........27
Table 12. Schedule of cash disbursements for merchandise purchases of Scenario 3.....................29
Table 13. Schedule of expected cash disburse for selling and administrative expenses.................30
Table 14. Schedule of expected cash disbursements for merchandise purchases of Scenario 4.....31
Table 15. Schedule of expected cash disburse for selling and administrative.................................33
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INTRODUCTION
About Ernst & Young Global Limited (EY) in United Kingdom
A worldwide professional services firm called Ernst & Young Global Limited (EY) has
certainly done considerable business consulting for its clients. They have a main office in
central London and regional offices in Birmingham and Southampton in the UK. The
group's revenue for the year was clear: it was £200 million, with 25% of that coming from
markets outside the UK, mainly in Southeast Asia. In Singapore, they have a small
regional office. The business also has a policy of accepting smaller customers when they
feel there is potential for rapid growth. Ernst & Young Global Limited's goal is to create a
better working environment. The skilled workers and top services they provide contribute
to the growth of confidence and confidence in financial markets and economic
fundamentals worldwide.
I recently started working for the company as a Graduate Trainee in their UK SME
(Small and Medium Enterprises) Unit, which provides accounting and financial services to
companies that typically have a turnover between £0.5 million and £15 million. I have
been invited to participate in some exercises as part of continuous training.
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1. The role of accounting in an organization
The aim of this online blog is to promote and market EY accounting services to new and
existing clients. “The role of accounting in the organization” focuses mainly on the
following objective:
 the purpose and scope of accounting in complex operating environments
 the accounting function in informing decision-making and meeting stakeholder and
societal needs and expectations
 the main branches of accounting and job skillsets and competencies
 accounting systems and the role of technology in modern-day accounting
 issues of ethics, regulation, and compliance and the extent to which they are
constraints or threats to the organization.
Earlier than we dive into the significance of accounting in business, let’s cowl the basics
– what's accounting? "Accounting is a service provided for those who need information on
an entity's financial performance and its financial position", defined by Dyson and
Franklin (2020). From this definition of accounting, we could understand that accounting a
service activity, is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decision by users of the information.
1.1. The purpose accounting in complex operating environments
First, like any other created service, accounting serves its purpose, which is to provide
quantitative information about economic institutions that are essentially financial and
designed to be useful in making economic decisions. The preparation of financial
statements that provide information about the company is the primary goal of financial
accounting. Within the laws and regulations of a given country, financial accounting is
performed according to generally accepted accounting principles (GAAP) in the United
States and International Accounting Standards Board(IASB)/ International Financial
Reporting Standards(IFRS) in all other countries. Accounting is a tool to support
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management. It is a system that records financial transactions and checks them to generate
reports on the financial and operating status of an economic entity.
The information regulator receives the data it needs to make decisions through the
accounting process. Interested parties, both internal and external to the organization,
request this information. In addition, the main scope of accounting is very wide due to
social needs and economic and monetary developments; it includes both for-profit and
non-profit organizations as well as governments and individuals. Accounting is widely
used in the field of business it is called the phrase "The language of business". Every
company takes profit as the top goal. To determine the operating results and financial
position of a business, financial transactions are recorded in the accounting books.
Also, a common misconception is that the field of accounting is primarily concerned
with the financial activities of commercial enterprises. But practically every type of
business, including individuals and families, needs an accountant. In addition, they
perform some kind of accounting to collect financial data and make financial decisions on
their own. The scope of accounting also exists in governments. These companies use
accounting systems for a number of functions, including income and expense calculations
as well as efficient administrative management.
1.2 The scope of accounting in complex operating environments
1.2.1. Individual
Accounting is the process of collecting, recording, and analyzing financial transactions.
You can use your accounting skills to apply them to your personal or daily life. For
individuals, accountants help in calculating tax payable, income, bills, etc. In addition,
they engage in some financial activities to generate income. In order for them to make
judgments, accountants provide them with access to personal financial data.
1.2.2. Business organizations
The scope of accounting in business organization is a very broad field and their
financial accountants produce some important company documents and have profit and
loss statements. Financial accounting in a business also creates a balance sheet that
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provides valuable information to the business about its assets, liabilities, and equity at a
particular point in time. Without these financial accounting documents, it would be very
difficult to run the business organization. Therefore, the field of accounting in business
organizations is very important.
1.2.3. Non-profit organizations
Non-governmental organizations are included in the scope of accounting. The object of
accounting in nonprofit organizations is to do good for members through reasonable clarity
about the cost of their money. These organizations keep track of all their financial
transactions, including membership fees, gifts, and other spending. The audience of the
organizations are clubs, schools, hospitals, mosques and other non-profit organizations all
associated with accounting. To achieve this, reports including balance sheet, income and
expense accounts, income and expenditure accounts are prepared according to accounting
regulations.
1.2.4. Government organizations
Government agencies always need accounting to achieve accountability goals, financial
information must be relevant and reliable for the reasonable users of the information.
Government agencies always need accounting information to help with planning,
budgeting, and apportionment of government funds. Organizations must execute a national
plan, devise a financial strategy, assess a nation's growth or decline, and conduct a variety
of other tasks.
1.2.5. Non-profit organizations
An important role of accountants in a business is to ensure the quality of financial
statements. Therefore, the scope of accounting in the specialty is very large and wide.
Sometimes professionals like doctors, engineers have to pay taxes on their income. In
addition, they want financial data to understand their financial statements and invest or
save money. For this reason, they must take their income into account. Therefore, their
account holding system is different from business institutions.
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1.3 The accounting function in informing decision-making and meeting stakeholder and
societal needs and expectations.
We need to understand first that the ultimate aim of accounting is to provide financial
statements to organizations (Dyson & Ellie, 2010). To assist users in decision making,
financial statements will provide both internal and external users with a summary of
financial performance and financial position such as providing investors, regulators
creditors and creditors. While the management accounting system is aimed at internal
decision-makers such as managers, to critically appreciate the role of accounting in
providing information to the decision-making process to meet the needs and organization's
expectations. To perform that function, the accounting function may need to work with
other parts of the organization, such as the purchasing function, the production function,
the marketing function, the sales function, and the sales function, sales ability, supply
capacity, and service level (Kosinski, 2021).
1.3.1.An evaluation of the environment and objectives of an organization's accounting
function.
Management accountants will be tasked with gathering information and providing data
for these options. They will highlight additional factors that need to be taken into account
before making a final decision, even though the information they provide is primarily
financial in nature (Dyson & Ellie, 2010). In other words, owners and managers rely on
accounting information to analyze and check the performance and position of
organizations. In a for-profit organization, the accounting function also interacts with other
business functions. In the purchasing function, accountants take into account finding credit
terms, setting prices to be paid for goods and services, making payments, gathering data,
and inventory details. Firstly, in the manufacturing function, the accounting department
will consult with the purchasing department to help with sourcing at economical prices and
optimal quality. Second, the production department determines the relationship between
factors and the quantity of inputs for production and the number of goods it produces most
efficiently. Another functional area that accountants will have to work with is the
marketing department. Third, the accounting department assists the marketing department
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in setting the budget and determining if it is cost-effective. It answers questions about
marginal productivity, the level of production, and the cheapest mode of production of
goods. Finally, there are a number of issues where the accounting department needs to
cooperate in providing a service, such as establishing a service charge rate, providing an
estimate of the costs incurred in providing the service, and estimating the cost of the
service. additional benefits for customers.
1.3.2. A critical of the accounting function's role in guiding decision-making and
satisfying stakeholders' and society's requirements and expectations.
The accounting process provides direct managers with a thorough view of the financial
statements, the evolution of the financial position, the performance of the organization, its
capabilities and risks. Financial accounting is important in helping organizations keep
track of all their financial activities. It is the process by which companies collect and report
financial data in and out of their organizations, helping both company management as well
as outside investors and analysts understand the health of the company. company and
make informed decisions (Vu Thi Hoai Anh, 2021).
According to The Investopedia Team (2021), fundamental analysis relies heavily on
accounting data recorded on a company's financial records, such as balance sheets, income
statements, and cash flow statements. bad. It is regulated by the Financial Accounting
Standards Board (FASB) and it is registered with the Securities and Exchange
Commission (SEC). Jawahar (2009) has found that published financial statements are
almost certainly more helpful in forecasting future performance, which is of course the
primary concern of investing. It contains statistics on human capital. Therefore, according
to Kren (1992) accounting data is usually separated into two categories: data that support
decision-making, which is mainly used for internal cooperation of the company, and data
that affects decision-making and is primarily used by corporate management. It is clear
from the comments made in the aforementioned studies that financial accounting and
financial information should always be used before, during and after the decision-making
process. Although the above opinions are slightly different, everyone agrees that
accounting information is important to an organization's decision making because it
provides authentic information based on the activities and company reviews.
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In summary, Patrick (2020) recognizes that the success of organizations depends on the
data collected. The information collected will serve as the basis for any business decisions
made by your senior management. To ensure proper and efficient implementation of your
new platform, it is important to follow the procedures outlined above. In short, having a
well-developed and maintained accounting information system will provide you with
efficient and accurate data, which is a key component of a successful business.
1.4. The main branches of accounting and job skillsets and competencies.
The main branches of accounting are financial accounting and reporting, management
accounting, auditing, tax accounting, financial management, and bankruptcy and
liquidation or insolvency or forensic accounting.
Figure 1. The main branches of accounting
To begin with, a financial accountant is a process of recording, analyzing, summarizing,
and reporting financial data (Doan,2022). This specific job requires such important skills
as digital skills, strong accounting ethics, and teamwork to incorporate functions within the
entity. Managers prepare income statements and summary balance sheets as formal
statement of the management of the resources entrusted to them, but in the case of publicly
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traded companies, they also should assist interested parties (such as investors) in decision
making. Documents may be made public depending on the type of business entity.
Bookkeeping is an important component of financial accounting which is a mechanical job
that involves the collection and recording of financial figures into the ledger and then
extracted in the form of balances used to prepare the financial statements. Bookkeeping
includes the recording, on an everyday basis, of a company’s monetary transactions. With
bookkeeping, agencies are capable of song all records on their books to make key
operating, investing, and financing decision (CFI Team,2022).
The following major branch of accounting is management accounting, which is
characterized as a specialist area of accounting to understand the real difficulties,
particularly the financial position of the business, and so assist business managers in
making the best possible operational decisions. Managers use the information produced by
management accounting, which is thorough and current, to plan and manage their actions.
This data is private to the organization that created it and is not accessible to the general
public. Cost bookkeeping is a crucial area of financial accounting. Institute of Certified
Management Accountants (CIMA) defines the verb "to cost" as "to ascertain the cost of a
particular product or activity" but does not provide a specific definition of cost
bookkeeping. (CIMA, 2005, Official Terminology). We can therefore create a useful
working definition of cost bookkeeping by fusing this definition of "cost" with the
definition of "bookkeeping" that was previously provided: the properly categorized
recording of financial transactions in a company's books in order to calculate the price of a
given good or service ( Luenendonk, 2021).
The next branch of accounting equally important is taxation is a part of the accounting
function related to tax work such as calculating the amount of tax payable by both
businesses and individuals, combined with tax authorities to declare and pay tax amounts
by the law (Doan,2022). Tax accountants are those responsible for calculating the amount
of tax payable by both businesses and individuals. Furthermore, they are required to have
such necessary skills as digital skills, problem-solving, and customer service. Another
highly specialized branch of accounting is financial management involves setting financial
goals, making plans based on those goals, obtaining the financing necessary to achieve the
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plans, and generally preserving all of the entity's financial resources (Doan,2022). Career
opportunities for this specific branch are chief financial officers (CFO) and financial
support staff who also have accounting qualifications. However, their job requires more
areas of knowledge, than other accounting disciplines, such as economics, statistics, and
mathematics. They often use more non-financial and qualitative data for financial goal
setting, planning, digital skills, problem-solving, and negotiation, where the high demand
is negotiation to find the source financing needed to achieve business objectives (
Luenendonk, 2021).
The next area of accounting is financial management, which is a highly specialized area
of accounting. It involves setting financial goals, creating strategies based on those goals,
obtaining the capital needed to execute the plans, and generally protecting all of your
financial resources. organization. Alternatively, it can mean planning, arranging, directing
and regulating financial activities such as the acquisition and use of corporate funds. It
requires the application of general management ideas to the financial resources of the
enterprise.Financial managers like chief financial officers (CFO), and financial supporting
staff are also qualified accountants but work needs a much wider range of knowledge
fields than other branches of accounting, such as economics, statistics, and mathematics.
They often use more non-financial and more qualitative data to set up financial objectives
and make plans. Besides, managing finances requires skills numerical skills, problem-
solving, and negotiation which negotiation is highly required to seek finance needed to
achieve the business objectives (Vu Thi Hoai Anh, 2021).
Accounting also has another significant branch of auditing. Auditing has traditionally
been the primary service offered by most public accounting practitioners. Auditing is the
examination and verification of the truthfulness of financial statements, thereby providing
the most accurate information about the financial position of an enterprise or organization.
There are two main types of auditors: external auditors and internal auditors. Auditing
skills are key skills required are integrity, customer service especially needed for external
auditors, and digital and problem-solving skills (Vu Thi Hoai Anh, 2021).
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Last but not least, bankruptcy and liquidation or insolvency or forensic accounting is
also known as the default of forensic accounting is a process of examining an entity's
financial records to find any illegal financial activity. The activities of this process involve
investigating fraud and audit fraud in accounting work so that they can understand the
causes and find solutions to deal with difficulties, which is also the role of forensic
accountants. (Doan,2022). The job skillset includes digital skills, problem-solving,
negotiation, integrity, and customer service.
1.5. Accounting systems and the role of technology in modern-day accounting.
A set of accounting tasks with integrated controls is called an accounting system.
Accounting systems are used to track, evaluate, and improve business operations by
recording transactions, grouping them into collections, and generating reports for decision-
makers. While it is possible to have a paperless accounting system, most small businesses
do not use it. Accounting systems are typically built primarily on pre-existing accounting
software, with any additional processes needed to feed data into the software.
Over the past few years, accounting technology has evolved to adapt to changing needs
in the workforce. With the development of technology, the method of performing tasks
within the scope of activities has changed, and accounting-related transactions have begun
to be performed through electronic means. Ours is the information age, because accounting
is an information system, technology has revolutionized the way companies conduct their
daily business activities. Instead of using handwritten ledgers and computers, accounting
professionals can now automate equations in an electronic spreadsheet. Business
Information Technology and how it has affected strict accounting. Electronic accounting is
one of the digital applications created in this field. Electronic accounting can manage all
online activities more efficiently, rationally and flexibly than ever before. The original
spreadsheet software, for example, paved the way for more advanced technology,
including account automating software and payroll and tax automation programs. Besides,
automatic account billing software also eliminates the need for manual data entry by taking
the necessary information from financial documents and entering that information into the
database. Tax automation and payroll software streamlines HR tasks by automatically
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calculating payments, applying tax rates, and storing employee tax information (Rubino,
2021).
All parties involved in the operation (employees-managers-customers-public-business
partners-suppliers) use the system in real time and share updates quickly. Through
accounting training, accountants can implement this structure in the business and the
establishment of this system in the business is mandatory. Therefore, the success of the
enterprise personnel and then the company depends directly on the quality of the
accountant's training.
1.6. The organization's ethical, legal, and compliance issues.
Financial reporting is necessary for stakeholders and businesses, the application of
GAAP (Generally Accepted Accounting Principles) and the regulatory environment are
very important to ensure accounting transparency and quality. GAAP is made up of
authoritative standards (established by policy bodies) and generally recognized methods
for collecting and disclosing accounting data. Businesses use GAAP to streamline
financial data into accounting records and condense accounting records into financial
statements to improve the efficiency of their business infrastructure. The revenue
recognition principle, the relevance principle, the materiality principle, and the consistency
principle are some of the most notable principles under GAAP. Users of financial
statements can assess the financial position with confidence. The company that the
information contained in the report is complete, consistent and comparable thanks to
standardized accounting rules. As a result, investors can easily examine and glean valuable
information from a company's financial statements, including historical trend data. In
addition, it makes it easier to compare the financial data of other organizations.
EY uses International Financial Reporting Standards (IRS), world standards.
Accounting standards, according to EY, are an important component of the accounting
language used to communicate a business's results in financial statements. The IRS has
assisted EY in developing a standard language for internationally consistent financial
reporting. IFS can be used as a basis for a more accurate assessment of the financial
position and performance of the business. Using the IRS allows EY's financial reporting to
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better serve the company's needs, be more transparent, and protect business interests (Ross,
2022).
The American Institute of Certified Public Accountants (AICPA) is a professional
organization responsible for developing professional accounting ethical values. Ethics is
considered one of the most important basic principles of a professional accountant. AICPA
requires professional accountants to act responsibly when engaging in accounting services
and reviewing information. Financially sensitive. Accountants should always exercise
reasonable ethical judgment in all accounting activities. A professional accountant must
always be honest and straightforward in all professional and professional work.
Professional accountants have an obligation to be honest in all business relationships. They
must be fair and honest in all matters related to business and should refrain from gaining
personal gain or benefit by using confidential information. Although errors or differences
of opinion exist regarding the application of accounting law, professional accountants
should avoid the intentional opportunity to deceive and manipulate financial information.
In the accounting profession, many organizations publish their own ethical
principles(Vitez, 2019).Some codes of conduct, for example, require initial and periodic
ethics checks to maintain a Certified Public Accountant (CPA) license.
Codes of ethics are fundamental principles that professional accountants choose to
adhere to in order to enhance their profession, maintain public trust, and demonstrate
honesty and fairness. This principle helps professional accountants with objectivity.
Professional accountants should not allow any conflict of interest in professional business.
In addition, they should not compromise their professional or business judgment through
favoritism and undue influence on others. The ethical and moral duty of a professional
accountant is to expose situations that would impair objectivity. Undue influence
relationships of professional accountants should be avoided to protect ethical principles in
the business organization.
Sadly, not everyone who works in accounting is trustworthy. Violation of public and
private trust occurs every day and dealing with ethical dilemmas does not always have a
favorable outcome. Fraud, theft, and blatant corruption may make for better movies and
front-page stories, but the day-to-day work of an accountant involves much more delicate
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ethical situations. Decision-making is not always a “yes” or a “no”. The thin line between
the two can be explained and will make up the majority of the encounter’s accountants
face in their careers. In summary, ethical, regulatory, and compliance challenges are rising
issues in every single organization. They can help enterprises while also providing
opportunities for undesirable fraud.
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2. Memorandum
2.1. Cash budgeting
2.1.1. Preparing a cash budget for the company
Table 1. Schedule of expected cash collection
Dec/N-1 Jan/N Feb/N Mar/N Apr/N May/N Jun/N
NEW sale volume 12,150 9,420 8,800 8,900 8,750 8,850 9,120
Price £9.0 £9.0 £9.0 £9.0 £9.0 £9.0 £9.0
NEW price £109,350.0 £84,780.0 £79,200.0 £80,100.0 £78,750.0 £79,650.0 £82,080.0
Sales £71,077.5 £55,107.0 £51,480.0 £52,065.0 £51,187.5 £51,772.5 £53,352.0
Cash sales £38,272.5 £29,673.0 £27,720.0 £28,035.0 £27,562.5 £27,877.5 £28,728.0
Credit sales from
previous month £16,200.0 £38,272.5 £29,673.0 £27,720.0 £28,035.0 £27,562.5 £27,877.5
Total cash collection £87,277.5 £93,379.5 £81,153.0 £79,785.0 £79,222.5 £79,335.0 £81,229.5
Jul/N Aug/N Sep/N Oct/N Nov/N Dec/N
NEW sale volume 8,980 8,910 8,120 8,890 8,250 12,990
Price £9.0 £9.0 £9.0 £9.0 £9.0 £9.0
NEW price £80,820.0 £80,190.0 £73,080.0 £80,010.0 £74,250.0 £116,910.0
Sales £52,533.0 £52,123.5 £47,502.0 £52,006.5 £48,262.5 £75,991.5
Cash sales £28,287.0 £28,066.5 £25,578.0 £28,003.5 £25,987.5 £40,918.5
Credit sales from previous
month £28,728.0 £28,287.0 £28,066.5 £25,578.0 £28,003.5 £25,987.5
Total cash collection £81,261.0 £80,410.5 £75,568.5 £77,584.5 £76,266.0 £101,979.0
Sale for cash: 65%
Sale on credit: 35%
Sales = Sale volume x Price
Cash sales = Sales x 65%
Credit sales = Sales x 35%
Total cash collection = Current month’s cash sales + Previous month’s credit sales
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The largest revenue was achieved in December and the lowest performance was observed
in September according to the schedule of anticipated cash collection.
Table 2. Schedule of expected merchandise purchases
Jan Feb Mar Apr May Jun Jul
Budgeted cost of
goods sold £33,912.0 £31,680.0 £32,040.0 £31,500.0 £31,860.0 £32,832.0 £32,328.0
Add desired
ending inventory £7,920.0 £8,010.0 £7,875.0 £7,965.0 £8,208.0 £8,082.0 £8,019.0
Total needs £41,832.0 £39,690.0 £39,915.0 £39,465.0 £40,068.0 £40,914.0 £40,347.0
Less beginning
inventory £48,800.0 £7,920.0 £8,010.0 £7,875.0 £7,965.0 £8,208.0 £8,082.0
Required
purchases £0.0 £31,770.0 £31,905.0 £31,590.0 £32,103.0 £32,706.0 £32,265.0
Jan Feb Mar Apr May Jun Jul
Budgeted cost of
goods sold £32,076.0 £29,232.0 £32,004.0 £29,700.0 £46,764.0 £34,236.0
Add desired
ending inventory £7,308.0 £8,001.0 £7,425.0 £11,691.0 £8,559.0 £0.0
Total needs £39,384.0 £37,233.0 £39,429.0 £41,391.0 £55,323.0 £34,236.0
Less beginning
inventory £8,019.0 £7,308.0 £8,001.0 £7,425.0 £11,691.0 £8,559.0
Required
purchases £31,365.0 £29,925.0 £31,428.0 £33,966.0 £43,632.0 £25,677.0
The company's gross profit margin is 60% of revenues, according to its report. In other
words, 40% of sales are made up of COGS. The month-end inventory must also match
25% of the COGS for the following month.Therefore, the total needs are equal budgeted
COGS adding ending inventory of that month sales. After that, to find out the required
purchases, we take the total needs minus the beginning inventory in the month sales
(which is also the ending inventory of previous month).
Budgeted COGS = Sales x40%
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Desired ending inventory = 25% x Following month’s COGS Beginning inventory =
Previous month’s ending inventory
Required purchase = Total needs – Beginning inventory
Table 3. Schedule of expected cash disbursements for merchandise purchases
Jan Feb Mar Apr May Jun
December/N-1 purchases £24,000
January/N purchases £0 £0
February/N purchases £15,885 £15,885
March/N purchases £15,953 £15,953
April/N purchases £15,795 £15,795
May/N purchases £16,052 £16,052
June/N purchases £16,353
July/N purchases
August/N purchases
September/N purchases
October/N purchases
November/N purchases
December/N purchases
Total cash disbursements
for purchases £24,000 £15,885 £31,838 £31,748 £31,847 £32,405
Jul Aug Sep Oct Nov Dec
December/N-1 purchases
January/N purchases
February/N purchases
March/N purchases
April/N purchases
May/N purchases
June/N purchases £16,353
July/N purchases £16,133 £16,133
August/N purchases £15,683 £15,683
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September/N purchases £14,963 £14,963
October/N purchases £15,714 £15,714
November/N purchases £16,983 £16,983
December/N purchases £21,816
Total cash disbursements
for purchases £32,486 £31,815 £30,645 £30,677 £32,697 £38,799
Inventory purchases are paid in two installments: half is made during the month of purchase and
the other half is made the following month, meaning that half of the inventory purchase is paid in
the month of sale. , the other half is paid the following month.
Cash disbursement of purchase = required purchases this month * 50% + required
purchases last month * 50%
Table 4. Schedule of expected cash disbursement for selling and administrative expenses
Jan Feb Mar Apr May Jun
Salaries and wages £11,000 £11,000 £11,000 £11,000 £11,000 £11,000
Marketing expense £3,200 £3,200 £3,200 £3,200 £3,200 £3,200
Add: advertisement project 1 in March £1,800
Add: advertisement project 2 in August
Rental cost £6,800 £6,800 £6,800 £6,800 £6,800 £6,800
Machine
A new copy machine in February £3,700
A computer in December
Maintainance service (in August)
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Other expense £100 £100 £100 £100 £100 £100
Total expense £30,100 £33,800 £31,900 £30,100 £30,100 £30,100
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Total cash disbursements for selling and
administrative expenses £21,100 £24,800 £22,900 £21,100 £21,100 £21,100
20

Jul Aug Sep Oct Nov Dec
Salaries and wages £11,000 £11,000 £11,000 £11,000 £11,000 £11,000
Marketing expense £3,200 £3,200 £3,200 £3,200 £3,200 £3,200
Add: advertisement project 1 in March
Add: advertisement project 2 in August £4,500
Rental cost £6,800 £6,800 £6,800 £6,800 £6,800 £6,800
Machine
A new copy machine in February
A computer in December £2,000
Maintainance service (in August) £2,100
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Other expense £100 £100 £100 £100 £100 £100
Total expense £30,100 £36,700 £30,100 £30,100 £30,100 £32,100
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Total cash disbursements for selling and
administrative expenses £21,100 £27,700 £21,100 £21,100 £21,100 £23,100
Table 4 illustrates schedule of expected cash disbursements for selling and administrative
expenses. To calculate out the total expenses, we combine all the factors such as salaries
and wages for employee, marketing expenses, rent expenses, equipment expenses,
maintenance service, and depreciation. However, to give out the total cash disbursement,
we need to minus total cash expenses with the non-cash expenses (which is depreciation).
Total expense = Salaries and wages expense + Marketing expense + Rental cost +
Equipment expense + Depreciation (Non-cash expense) + Other expense
Total cash disbursement for S&A expenses = Total expense – Depreciation (Non-cash
expense)
21

Table 5. Schedule of expected cash budget
Jan Feb Mar Apr May Jun
Cash balance, beginning £18,000.0 £66,279.5 £106,747.5 £131,795.0 £158,170.0 £184,558.5
Add cash collections £93,379.5 £81,153.0 £79,785.0 £79,222.5 £79,335.0 £81,229.5
Total cash available £111,379.5 £147,432.5 £186,532.5 £211,017.5 £237,505.0 £265,788.0
Less cash disbursements
Merchandise purchases £24,000.0 £15,885.0 £31,837.5 £31,747.5 £31,846.5 £32,404.5
Selling and
administrative £21,100.0 £24,800.0 £22,900.0 £21,100.0 £21,100.0 £21,100.0
Total cash disbursements £45,100.0 £40,685.0 £54,737.5 £52,847.5 £52,946.5 £53,504.5
Excess (deficiency) of
cash £66,279.5 £106,747.5 £131,795.0 £158,170.0 £184,558.5 £212,283.5
Financing s
Borrowing
Repayments
Interest
Total financing
Ending cash balance £66,279.5 £106,747.5 £131,795.0 £158,170.0 £184,558.5 £212,283.5
Jul Aug Sep Oct Nov Dec
Cash balance, beginning £212,283.5 £239,959.0 £260,854.5 £284,678.0 £310,486.0 £332,955.0
Add cash collections £81,261.0 £80,410.5 £75,568.5 £77,584.5 £76,266.0 £101,979.0
Total cash available £293,544.5 £320,369.5 £336,423.0 £362,262.5 £386,752.0 £434,934.0
Less cash disbursements
Merchandise purchases £32,485.5 £31,815.0 £30,645.0 £30,676.5 £32,697.0 £38,799.0
Selling and
administrative £21,100.0 £27,700.0 £21,100.0 £21,100.0 £21,100.0 £23,100.0
22

Total cash disbursements £53,585.5 £59,515.0 £51,745.0 £51,776.5 £53,797.0 £61,899.0
Excess (deficiency) of
cash £239,959.0 £260,854.5 £284,678.0 £310,486.0 £332,955.0 £373,035.0
Financing
Borrowing
Repayments
Interest
Total financing
Ending cash balance £239,959.0 £260,854.5 £284,678.0 £310,486.0 £332,955.0 £373,035.0
Table 5 shows the formulas of ending cash balance, which is calculated by minus the total
cash available with the total cash disbursement.
Total cash available = Cash balance + Cash collection
Total cash disbursement = Cash disbursement for merchandise purchase + S&A
expense
Excess = Total cash available – Excess
Total Financing = Borrowing + Repayments + Interest
Ending cash balance = Excess + Total financing
After that, we compare the excess of cash. If the result is higher than 18,000 pounds, then
it would not necessary to borrow more from the bank. The end-of-period cash balance
gradually improves over time, demonstrating that the business's operations have grown
successfully and sustainably.
23

2.2. Analyzing the change in the master budget
2.2.1. Scenario 1
Table 6. Schedule of cash collection of Scenario 1
Dec/N-1 Jan/N Feb/N Mar/N Apr/N May/N Jun/N
Sale volume £12,150.0 £9,420.0 £8,800.0 £8,900.0 £8,750.0 £8,850.0 £9,120.0
NEW sale volume £13,365.0 £10,362.0 £9,680.0 £9,790.0 £9,625.0 £9,735.0 £10,032.0
Price £9.0 £9.0 £9.0 £9.0 £9.0 £9.0 £9.0
NEW price £7.2 £7.2 £7.2 £7.2 £7.2 £7.2 £7.2
Sales £96,228.0 £74,606.4 £69,696.0 £70,488.0 £69,300.0 £70,092.0 £72,230.4
Cash sales £62,548.2 £48,494.2 £45,302.4 £45,817.2 £45,045.0 £45,559.8 £46,949.8
Credit sales £33,679.8 £26,112.2 £24,393.6 £24,670.8 £24,255.0 £24,532.2 £25,280.6
Credit sales from previous
month £16,200.0 £33,679.8 £26,112.2 £24,393.6 £24,670.8 £24,255.0 £24,532.2
Total cash collection £78,748.2 £82,174.0 £71,414.6 £70,210.8 £69,715.8 £69,814.8 £71,482.0
Jul/N Aug/N Sep/N Oct/N Nov/N Dec/N
Sale volume £8,980.0 £8,910.0 £8,120.0 £8,890.0 £8,250.0 £12,990.0
NEW sale volume £9,878.0 £9,801.0 £8,932.0 £9,779.0 £9,075.0 £14,289.0
Price £9.0 £9.0 £9.0 £9.0 £9.0 £9.0
NEW price £7.2 £7.2 £7.2 £7.2 £7.2 £7.2
Sales £71,121.6 £70,567.2 £64,310.4 £70,408.8 £65,340.0 £102,880.8
Cash sales £46,229.0 £45,868.7 £41,801.8 £45,765.7 £42,471.0 £66,872.5
Credit sales £24,892.6 £24,698.5 £22,508.6 £24,643.1 £22,869.0 £36,008.3
Credit sales from previous
month £25,280.6 £24,892.6 £24,698.5 £22,508.6 £24,643.1 £22,869.0
Total cash collection £71,509.7 £70,761.2 £66,500.3 £68,274.4 £67,114.1 £89,741.5
24

Table 7. Variance of Scenario 1
Dec/N-1 Jan/N Feb/N Mar/N Apr/N May/N Jun/N
Sale volume 10935 8478 7920 8010 7875 7965 8208
Price
-
£24,057.0
-
£18,651.6
-
£17,424.0
-
£17,622.0
-
£17,325.0
-
£17,523.0
-
£18,057.6
Sales
-
£13,122.0
-
£10,173.6 -£9,504.0 -£9,612.0 -£9,450.0 -£9,558.0 -£9,849.6
Jul/N Aug/N Sept/N Oct/N Nov/N Dec/N
Sale volume 8082 8019 7308 8001 7425 11691
Price -£17,780.4 -£17,641.8 -£16,077.6 -£17,602.2 -£16,335.0 -£25,720.2
Sales -£9,698.4 -£9,622.8 -£8,769.6 -£9,601.2 -£8,910.0 -£14,029.2
Table 8. Schedule of cash budget of Scenario 1
Jan Feb Mar Apr May Jun
Cash balance, beginning £18,000.0 £55,074.0 £85,803.6 £101,276.9 £118,145.2 £135,013.5
Add cash collections £82,174.0 £71,414.6 £70,210.8 £69,715.8 £69,814.8 £71,482.0
Total cash available £100,174.0 £126,488.6 £156,014.4 £170,992.7 £187,960.0 £206,495.5
Less cash disbursements
Merchandise purchases £24,000.0 £15,885.0 £31,837.5 £31,747.5 £31,846.5 £32,404.5
Selling and
administrative £21,100.0 £24,800.0 £22,900.0 £21,100.0 £21,100.0 £21,100.0
Total cash disbursements £45,100.0 £40,685.0 £54,737.5 £52,847.5 £52,946.5 £53,504.5
Excess (deficiency) of
cash £55,074.0 £85,803.6 £101,276.9 £118,145.2 £135,013.5 £152,991.0
Financing
Borrowing
Repayments
Interest
Total financing
25

Ending cash balance £55,074.0 £85,803.6 £101,276.9 £118,145.2 £135,013.5 £152,991.0
Jul Aug Sep Oct Nov Dec
Cash balance, beginning £152,991.0 £170,915.1 £182,161.4 £196,916.7 £213,414.5 £226,731.6
Add cash collections £71,509.7 £70,761.2 £66,500.3 £68,274.4 £67,114.1 £89,741.5
Total cash available £224,500.6 £241,676.4 £248,661.7 £265,191.0 £280,528.6 £316,473.1
Less cash disbursements
Merchandise purchases £32,485.5 £31,815.0 £30,645.0 £30,676.5 £32,697.0 £38,799.0
Selling and
administrative £21,100.0 £27,700.0 £21,100.0 £21,100.0 £21,100.0 £23,100.0
Total cash disbursements £53,585.5 £59,515.0 £51,745.0 £51,776.5 £53,797.0 £61,899.0
Excess (deficiency) of
cash £170,915.1 £182,161.4 £196,916.7 £213,414.5 £226,731.6 £254,574.1
Financing
Borrowing
Repayments
Interest
Total financing
Ending cash balance £170,915.1 £182,161.4 £196,916.7 £213,414.5 £226,731.6 £254,574.1
26

2.2.2. Scenario 2
Table 9. Schedule of cash disbursements for merchandise purchases of Scenario 2
Jan Feb Mar Apr May Jun
Salaries and wages £11,000 £11,000 £11,000 £11,000 £11,000 £11,000
Marketing expense £3,520 £3,520 £3,520 £3,520 £3,520 £3,520
Add: advertisement project 1 in March £1,800
Add: advertisement project 2 in August
Rental cost £6,800 £6,800 £6,800 £6,800 £6,800 £6,800
Machine
A new copy machine in February £3,700
A computer in December
Maintainance service (in August)
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Other expense £100 £100 £100 £100 £100 £100
Total expense £30,420 £34,120 £32,220 £30,420 £30,420 £30,420
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Total cash disbursements for selling and
administrative expenses £21,420 £25,120 £23,220 £21,420 £21,420 £21,420
Jul Aug Sep Oct Nov Dec
Salaries and wages £11,000 £11,000 £11,000 £11,000 £11,000 £11,000
Marketing expense £3,520 £3,520 £3,520 £3,520 £3,520 £3,520
Add: advertisement project 1 in March
Add: advertisement project 2 in August £4,500
Rental cost £6,800 £6,800 £6,800 £6,800 £6,800 £6,800
Machine
A new copy machine in February
A computer in December £2,000
27

Maintainance service (in August) £2,100
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Other expense £100 £100 £100 £100 £100 £100
Total expense £30,420 £37,020 £30,420 £30,420 £30,420 £32,420
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Total cash disbursements for selling and
administrative expenses £21,420 £28,020 £21,420 £21,420 £21,420 £23,420
Table 10. Schedule of cash collection of Scenario 2
Dec/N-1 Jan/N Feb/N Mar/N Apr/N May/N Jun/N
NEW sale volume 12,150 9,420 8,800 8,900 8,750 8,850 9,120
NEW price £9.0 £9.0 £9.0 £9.0 £9.0 £9.0 £9.0
Sales £109,350.0 £84,780.0 £79,200.0 £80,100.0 £78,750.0 £79,650.0 £82,080.0
NEW Sales £131,220.0 £101,736.0 £95,040.0 £96,120.0 £94,500.0 £95,580.0 £98,496.0
Cash sales £85,293.0 £66,128.4 £61,776.0 £62,478.0 £61,425.0 £62,127.0 £64,022.4
Credit sales £45,927.0 £35,607.6 £33,264.0 £33,642.0 £33,075.0 £33,453.0 £34,473.6
Credit sales from
previous month £16,200.0 £45,927.0 £35,607.6 £33,264.0 £33,642.0 £33,075.0 £33,453.0
Total cash collection £101,493.0 £112,055.4 £97,383.6 £95,742.0 £95,067.0 £95,202.0 £97,475.4
Jul/N Aug/N Sep/N Oct/N Nov/N Dec/N
NEW sale volume 8,980 8,910 8,120 8,890 8,250 12,990
NEW price £9.0 £9.0 £9.0 £9.0 £9.0 £9.0
Sales £80,820.0 £80,190.0 £73,080.0 £80,010.0 £74,250.0 £116,910.0
NEW Sales £96,984.0 £96,228.0 £87,696.0 £96,012.0 £89,100.0 £140,292.0
Cash sales £63,039.6 £62,548.2 £57,002.4 £62,407.8 £57,915.0 £91,189.8
Credit sales £33,944.4 £33,679.8 £30,693.6 £33,604.2 £31,185.0 £49,102.2
Credit sales from
previous month £34,473.6 £33,944.4 £33,679.8 £30,693.6 £33,604.2 £31,185.0
Total cash collection £97,513.2 £96,492.6 £90,682.2 £93,101.4 £91,519.2 £122,374.8
28

Table 11. Schedule of cash disburse for selling and administrative expenses of Scenario 2
Jan Feb Mar Apr May Jun
Cash balance, beginning £18,000.0 £84,635.4 £141,014.0 £181,698.5 £223,598.0 £265,533.5
Add cash collections £112,055.4 £97,383.6 £95,742.0 £95,067.0 £95,202.0 £97,475.4
Total cash available £130,055.4 £182,019.0 £236,756.0 £276,765.5 £318,800.0 £363,008.9
Less cash disbursements
Merchandise purchases £24,000.0 £15,885.0 £31,837.5 £31,747.5 £31,846.5 £32,404.5
Selling and
administrative £21,420.0 £25,120.0 £23,220.0 £21,420.0 £21,420.0 £21,420.0
Total cash disbursements £45,420.0 £41,005.0 £55,057.5 £53,167.5 £53,266.5 £53,824.5
Excess (deficiency) of
cash £84,635.4 £141,014.0 £181,698.5 £223,598.0 £265,533.5 £309,184.4
Financing
Borrowing
Repayments
Interest
Total financing
Ending cash balance £84,635.4 £141,014.0 £181,698.5 £223,598.0 £265,533.5 £309,184.4
Jul Aug Sep Oct Nov Dec
Cash balance, beginning £309,184.4 £352,792.1 £389,449.7 £428,066.9 £469,071.8 £506,474.0
Add cash collections £97,513.2 £96,492.6 £90,682.2 £93,101.4 £91,519.2 £122,374.8
Total cash available £406,697.6 £449,284.7 £480,131.9 £521,168.3 £560,591.0 £628,848.8
Less cash disbursements
Merchandise purchases £32,485.5 £31,815.0 £30,645.0 £30,676.5 £32,697.0 £38,799.0
Selling and
administrative £21,420.0 £28,020.0 £21,420.0 £21,420.0 £21,420.0 £23,420.0
Total cash disbursements £53,905.5 £59,835.0 £52,065.0 £52,096.5 £54,117.0 £62,219.0
29

Excess (deficiency) of
cash £352,792.1 £389,449.7 £428,066.9 £469,071.8 £506,474.0 £566,629.8
Financing
Borrowing
Repayments
Interest
Total financing
Ending cash balance £352,792.1 £389,449.7 £428,066.9 £469,071.8 £506,474.0 £566,629.8
30

2.2.3. Scenario 3
Table 12. Schedule of cash disbursements for merchandise purchases of Scenario 3
Jan Feb Mar Apr May Jun
December/N-1 purchases £24,000
January/N purchases £0
February/N purchases £31,770
March/N purchases £31,905
April/N purchases £31,590
May/N purchases £32,103
June/N purchases
July/N purchases
August/N purchases
September/N purchases
October/N purchases
November/N purchases
December/N purchases
Total cash disbursements
for purchases £24,000 £0 £31,770 £31,905 £31,590 £32,103
Jul Aug Sep Oct Nov Dec
December/N-1 purchases
January/N purchases
February/N purchases
March/N purchases
April/N purchases
May/N purchases
June/N purchases
July/N purchases £32,706
August/N purchases £32,265
September/N purchases £31,365
31

October/N purchases £29,925
November/N purchases £31,428
December/N purchases £33,966
Total cash disbursements
for purchases £32,706 £32,265 £31,365 £29,925 £31,428 £33,966
Table 13. Schedule of expected cash disburse for selling and administrative expenses
of Scenario 3
Jan Feb Mar Apr May Jun
Cash balance, beginning £18,000.0 £66,279.5 £122,632.5 £147,747.5 £173,965.0 £200,610.0
Add cash collections £93,379.5 £81,153.0 £79,785.0 £79,222.5 £79,335.0 £81,229.5
Total cash available £111,379.5 £147,432.5 £202,417.5 £226,970.0 £253,300.0 £281,839.5
Less cash disbursements
Merchandise purchases £24,000.0 £0.0 £31,770.0 £31,905.0 £31,590.0 £32,103.0
Selling and
administrative £21,100.0 £24,800.0 £22,900.0 £21,100.0 £21,100.0 £21,100.0
Total cash disbursements £45,100.0 £24,800.0 £54,670.0 £53,005.0 £52,690.0 £53,203.0
Excess (deficiency) of
cash £66,279.5 £122,632.5 £147,747.5 £173,965.0 £200,610.0 £228,636.5
Financing
Borrowing
Repayments
Interest
Total financing
Ending cash balance £66,279.5 £122,632.5 £147,747.5 £173,965.0 £200,610.0 £228,636.5
32

Jul Aug Sep Oct Nov Dec
Cash balance, beginning £228,636.5 £256,091.5 £276,537.0 £299,640.5 £326,200.0 £349,938.0
Add cash collections £81,261.0 £80,410.5 £75,568.5 £77,584.5 £76,266.0 £101,979.0
Total cash available £309,897.5 £336,502.0 £352,105.5 £377,225.0 £402,466.0 £451,917.0
Less cash disbursements
Merchandise purchases £32,706.0 £32,265.0 £31,365.0 £29,925.0 £31,428.0 £33,966.0
Selling and
administrative £21,100.0 £27,700.0 £21,100.0 £21,100.0 £21,100.0 £23,100.0
Total cash disbursements £53,806.0 £59,965.0 £52,465.0 £51,025.0 £52,528.0 £57,066.0
Excess (deficiency) of
cash £256,091.5 £276,537.0 £299,640.5 £326,200.0 £349,938.0 £394,851.0
Financing
Borrowing
Repayments
Interest
Total financing
Ending cash balance £256,091.5 £276,537.0 £299,640.5 £326,200.0 £349,938.0 £394,851.0
33

2.2.4. Scenario 4
Table 14. Schedule of expected cash disbursements for merchandise purchases of Scenario 4
Jan Feb Mar Apr May Jun
Salaries and wages £11,000 £11,000 £11,000 £11,000 £11,000 £11,000
Marketing expense £3,200 £3,200 £3,200 £3,200 £3,200 £3,200
Add: advertisement project 1 in March £1,800
Add: advertisement project 2 in August
Rental cost £5,780 £5,780 £5,780 £5,780 £5,780 £5,780
Machine
A new copy machine in February £3,700
A computer in December
Maintainance service (in August)
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Other expense £100 £100 £100 £100 £100 £100
Total expense £29,080 £32,780 £30,880 £29,080 £29,080 £29,080
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Total cash disbursements for selling and
administrative expenses £20,080 £23,780 £21,880 £20,080 £20,080 £20,080
Jul Aug Sep Oct Nov Dec
Salaries and wages £11,000 £11,000 £11,000 £11,000 £11,000 £11,000
Marketing expense £3,200 £3,200 £3,200 £3,200 £3,200 £3,200
Add: advertisement project 1 in March
Add: advertisement project 2 in August £4,500
Rental cost £5,780 £5,780 £5,780 £5,780 £5,780 £5,780
Machine
A new copy machine in February
34

A computer in December £2,000
Maintainance service (in August) £2,100
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Other expense £100 £100 £100 £100 £100 £100
Total expense £29,080 £35,680 £29,080 £29,080 £29,080 £31,080
Non-cash expense (depreciation) £9,000 £9,000 £9,000 £9,000 £9,000 £9,000
Total cash disbursements for selling and
administrative expenses £20,080 £26,680 £20,080 £20,080 £20,080 £22,080
Table 15. Schedule of expected cash disburse for selling and administrative expenses
of Scenario 4
Jan Feb Mar Apr May Jun
Cash balance, beginning £18,000.0 £67,299.5 £108,787.5 £134,855.0 £162,250.0 £189,658.5
Add cash collections £93,379.5 £81,153.0 £79,785.0 £79,222.5 £79,335.0 £81,229.5
Total cash available £111,379.5 £148,452.5 £188,572.5 £214,077.5 £241,585.0 £270,888.0
Less cash disbursements
Merchandise purchases £24,000.0 £15,885.0 £31,837.5 £31,747.5 £31,846.5 £32,404.5
Selling and
administrative £20,080.0 £23,780.0 £21,880.0 £20,080.0 £20,080.0 £20,080.0
Total cash disbursements £44,080.0 £39,665.0 £53,717.5 £51,827.5 £51,926.5 £52,484.5
Excess (deficiency) of
cash £67,299.5 £108,787.5 £134,855.0 £162,250.0 £189,658.5 £218,403.5
Financing
Borrowing
Repayments
Interest
Total financing
35

Ending cash balance £67,299.5 £108,787.5 £134,855.0 £162,250.0 £189,658.5 £218,403.5
Jul Aug Sep Oct Nov Dec
Cash balance, beginning £218,403.5 £247,099.0 £269,014.5 £293,858.0 £320,686.0 £344,175.0
Add cash collections £81,261.0 £80,410.5 £75,568.5 £77,584.5 £76,266.0 £101,979.0
Total cash available £299,664.5 £327,509.5 £344,583.0 £371,442.5 £396,952.0 £446,154.0
Less cash disbursements
Merchandise purchases £32,485.5 £31,815.0 £30,645.0 £30,676.5 £32,697.0 £38,799.0
Selling and
administrative £20,080.0 £26,680.0 £20,080.0 £20,080.0 £20,080.0 £22,080.0
Total cash disbursements £52,565.5 £58,495.0 £50,725.0 £50,756.5 £52,777.0 £60,879.0
Excess (deficiency) of
cash £247,099.0 £269,014.5 £293,858.0 £320,686.0 £344,175.0 £385,275.0
Financing
Borrowing
Repayments
Interest
Total financing
Ending cash balance £247,099.0 £269,014.5 £293,858.0 £320,686.0 £344,175.0 £385,275.0
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2.3. The role that budgets play in the effective planning and control of resources in
an organization
2.3.1. The benefits of budgets, budgetary planning, and control for an organization.
A budget is a plan of profits and costs that has been predetermined via way of means of
agencies, people, and agencies. Budget is an crucial concept for each macroeconomics and
microeconomics. Entire agencies and people particularly will significantly enjoy the green
use of money.
Budgets serve 3 foremost goals, inclusive of presenting data approximately projected
sales and costs for forecasting. The budget of the State in widespread and establishments
particularly are significantly stricken by the rational finances allocation. In addition, pre-
calculation will permit us to decide funding property and predicted coins flows.
distribution way. Second, to aid clean monetary operations, the Budget is likewise taken
into consideration a assignment fund. Budgets additionally offer an possibility to
coordinate activities for a display of spirit. High attempt and crew obligation withinside
the enterprise. From the pinnacle to the lowest of the agency, many elements could be
worried withinside the making plans or control manner. This will provide people the
possibility to alternate and learn.
Since budgeting is the manner of assessing and predicting the destiny monetary fitness
of an agency, finances making plans is essential. This enterprise challenge may be a
company, an progressive idea or an funding approach, etc. In a company, forecasting and
budgeting are very crucial. Budgeting agencies have higher manipulate over their spending
and live on track. Therefore, agencies will expand the precise execution approach to fulfill
the objectives.
2.3.2. The limitation of budgets, budgetary planning, and control for an organization.
Budget control is very important in influencing performance, so the management of
organizations should put more effort to make employees understand its importance to
improve performance. It also recommends that organizations develop more formal
practices in developing budgetary controls. Many organizations have minimal formal
37

budget controls in their organization, so they need to develop a clear policy on budget
control processes.
Despite the blessings of helping to the powerful overall performance for business
enterprise, there are a few disadvantage of Budgetary Control System. Budgets are seemed
as inflexible files that reason operational rigidity, that is harmful. Budget estimates have a
propensity to be inflexible or final due to the fact they're the quantitative expression of all
applicable data. However, in a complicated environment, an business enterprise is liable to
a number of unsure inner and outside elements. The finances need to be bendy sufficient to
account for ongoing adjustments in inner and outside elements affecting the finances's
purpose. Budgets are constructed on a sequence of estimates primarily based totally at the
situations that existed or are anticipated on the time the finances is created. If situations
change, the plan should be revised. Its implementation is prohibitively luxurious for small
agencies. Aside from the price of putting in and working a budgetary manipulate machine,
which necessitates the hiring of specialised employees and different prices. The budgeting
machine's mechanism wastes treasured assets and expenses an excessive amount of time
and money.
Budgeting can not take the placement of control however it's far most effective an tool
of control. Budgeting isn't always a control position, however as an alternative an tool of
control. Budget is without a doubt a control device that should be used successfully so as
for control to benefit. Mahasweta B (2019) suggested the use of budgetary manipulate
machine should possibly reason conflicts amongst managers as every attempts to take
credit score for assembly finances targets, consisting of the KPI race. Furthermore, easy
finances practise will now no longer make certain right finances implementation. Morale
may also conflict if it isn't always nicely implemented. The set up and operation of a
budgetary manipulate machine is an luxurious affair as it necessitates the hiring of
specialised employees in addition to different prices that small agencies may also locate
hard to afford.
2.4. An outline of a range of budgetary control solutions
Budget control is very important in influencing performance, so the management of
organizations should put more effort to make employees understand its importance to
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improve performance. It also recommends that organizations develop more formal
practices in the development of budgetary controls. Many organizations have minimal
formal budget controls in their organization, so they need to develop a clear policy on
budget control processes. Therefore, a range of budget control solutions, with justification,
to support organizational decision-making and ensure efficient and effective deployment of
resources include: force to revise budgetary standards as circumstances change in a manner
that warrants adjustment in operating procedures. The next step is to make sure that those
responsible for preparing and controlling the budget do not abuse their privileges. They are
not allowed to use the power given to victimizing individual employees or departments.
And finally, try to involve employees at each level in budget preparation. This will
eliminate or at least minimize information gathering related to budget preparation as well
as budget coordination and implementation issues.
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CONCLUSION
Finally, this guide demonstrates the important role and duty of accounting principles in
achieving company objectives. Cash budget preparation, budgeting advantages and
limitations, budget planning and management for an organization are some of the key
tasks. Analysis of variance was used to show the effect of many separate scenarios. The
tables show the projected cash collection schedule, the merchandise purchase budget, the
projected cash disbursement schedule for merchandise purchases, the expected cash
disbursement schedule for selling and administrative expenses, and the bank cash book for
each situation. By standardizing the language and procedures that accountants must use,
these regulations make it easier to review financial data. Furthermore, the reader can
discover and understand the importance of capital in accounting.
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