Financial Accounting and Budgetary Planning for OLC Eatery

The report explains about the key areas of the firm OLC Eatery i.e., income statements, cash budget, objectives, moral obligations and activities associated to the firm which operates worldwide. In the part 2, financial statements are prepared and with the help of financial statements, financial ratios are calculated to make comparisons and provide recommendations on it.

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Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.The accounting objectives and scope in complex operating environment:..............................3
2. An assessment of the accounting function's role in decision making and meeting stakeholder
and societal needs and expectations:...........................................................................................5
3.There are some branches of accounts as well as job skill sets and expertise given:................6
4.How modern accounting is associated with the accounting system and technology:..............7
5.The extent to which moral standards, regulation, and compliance are limitation or threats to
the business:.................................................................................................................................7
PART 2............................................................................................................................................8
1. For meeting the accounting principles and standards, financial statements are prepared:......8
2, Interpretation and computation of financial ratios:.................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial accounting is one of the most important aspects for every business or firm which
provides assistance in maintaining records of every transaction occur in any business and
maintaining budgets for future transactions. And also helps in analysing the activities which
yield profit to the firm and which are not (van Hoek, 2019). The report explains about the key
areas of the firm OLC Eatery i.e., income statements, cash budget, objectives, moral obligations
and activities associated to the firm which operates worldwide. And the mentioned report
discussed about the benefits and drawbacks of budgetary planning and budgets for a business
organisation and how it can be utilised for the growth and stability of the firm. And after
discussing about the problems, corrective actions are identified for effective decision making and
their impacts on the complex environment with the use of limited resources. In the part 2,
financial statements are prepared and with the help of financial statements, financial ratios are
calculated to make comparisons and provide recommendations on it.
TASK 1
1.The accounting objectives and scope in complex operating environment:
Accounting is a broad term in itself which is explained by different scholars on the topics
related to it. It is an art to record, evaluate, summarise and classify in a remarkable manner and
which is in terms of funds, transactions and activities occur in a particular period of time.
Nowadays, accounting is the need of an hour which is important not only for companies but also
in other organisations such as schools, colleges, libraries, departments, etc. The corporation
determines the expense structure. Global monetary precise guidelines have produced a standard
arrangement in any case. The expenses that a corporation incurs are influenced by the activities it
engages in. As a result, the spending patterns of OLC Eatery are impacted by its operations. OLC
Eatery recognises the following expense groups: direct purchase, product development,
advertising, incidental, and administration (Schuster, Heinemann and Cleary, 2021). Every
action taken during the production process is accounted for in the project cost. It's also not
impossible to keep track of the price of making elements. Consumables and operational costs are
divided into two categories by OLC Eatery which are operational and commodities costs. The
functions of OLC Eatery are predicted. The fiscal inflow study depicts how money has flowed in
and out of the company with respected time. Forecasts have influenced decision-making

processes as well. Parts from the company's numerous components are included in the
allocations. Asset forecasting methods helps in verifying that a company's actions are backed up
by adequate funds. Forecasting can help supervisors decipher the flow of finances (LoPalo,
2019). They could be able to make money both inside and outside the building. This includes
revenue from operations as well as funding from other parties. Although OLC Eatery has a large
cash reserve, it must prepare before in case if sales and spending patterns change.
In the complex environment, accounting come up with some objectives also:
(i) Helpful in maintaining systematic records of various organisations:
(ii) Helpful in determining the net effect of the firm’s operations that is evaluating the
status of firm
(iii) Analysing the financial position in the complex environment
(iv) Generate investment by providing accounting records of the company to interested
investors.
Accounting has a wider scope in the complex environment which is outlined as follows:
Accounting is concerned with financial activities and events that result in a change in the
business firm's resources (or wealth) position. As and when such transactions occur, they must
first be detected. It's not tough because you'll have documentation in the shape of a bill or a
receipt (called vouchers) (Greenberg, Dand Hibbert, 2020). Identification of a transaction is
simple with the aid of these invoices and receipts. When you buy anything, you receive a bill,
and when you pay for it, you get a receipt.
If not done in the past, these transactions must be quantified or stated in monetary terms.
Because the statement of evidence presents the transaction in monetary terms, this difficulty is
impossible to emerge. For example, if ten books are acquired at a cost of Rs. 20 each, a bill for
Rs. 200 is produced. However, if an event cannot be described in monetary terms, it is not
considered an accounting event.
Many transactions will be recorded and classified, resulting in a large amount of financial data.
As a result, it is required to consolidate such data on a regular basis (at least once a year) in a
substantial and relevant manner. The synopsis takes the form of a profit and loss account, which
shows how much money was earned or lost, and a balance sheet, which shows how much money
was made or lost.

2. An assessment of the accounting function's role in decision making and meeting stakeholder
and societal needs and expectations:
Helps firms in providing helping hand to their work and managing their internal strength.
As a contrary budgeting process is expected to counter and consider fully functioning expenses
as well as costs. For its activities, OLC Eatery would be able to set aside a certain or definite sum
of funds. The fiscal distribution assessment reflects in what manner funds would be available
over the globe to the company. In addition, forecasting has a related effect on the operational
activities and functions such as decision-making process. The payment covers various
departments among the organisations various areas (Follett and Henderson, 2020). Capability
and capacity is a technique which would be helpful in assuring that the operation related regions
of a company are backed up by sufficient and adequate funds. Examination would also help
management in determining where financing would be coming from. Businesses might obtain
funds from both external and internal sources as well. This would consider and include both
profit from financing and activity from external sources. Eatery has sufficient money and funds
at one place but it must plan ahead taking into account the possibility of fluctuation observed in
the coming future in case of sales and expenses as well. Moreover, planning income would help
to assess the financial performance of a company, which would provide guidance in a better way
to function in a productive and quick manner. Developing a plan is not a simple and easy process
rather it demands dealing with larger companies like OLC eatery that would be demanding a
higher level of dependability. On the other hand, irregularity might affect the decision making as
well. Estimation in figures might possess a change in the result of other factors and globalisation
as well. As a result, raw item costs would rise and that would charge the business more than
expected (Ekinci, Serban and Duman, 2021). During the budgeting process, OLC eatery is
observed to struggle more before making any firm or struct judgements. The technique
concentrates on the end towards the fiscal time frame of regulatory necessities or requirements.
The choice made and carried out for another monetary year in such a time span will not ensure
that there will be any difference or variation. Since the management is observed to be reluctant,
adjustments in revenue and spending have resulted to be more complex and difficult as well. Any
administrative decision-making system would get hampered by temporal constraints.
Management would be more dependent on a limited length of time for ensuring that the business

would function in a smoother manner. As a result, development of plans would consume more
time. The manner and in ways which cost allocation is changing from one task to another due to
the firm's many and various pricing strategies or categories, effective planning by management is
demanded and required as well. Some transfers might exceed budgeted expenses as well whereas
others might stall due to a lack in funds.
3.There are some branches of accounts as well as job skill sets and expertise given:
Accounting branches measure, process, and convey financial and non-financial data that
impacts a company's economic interests and relationships. Accounting branches are used by the
majority of firms and enterprises to measure the outcomes of their economic activities. To gather
and report results to investors, creditors, management, regulators, and tax collectors, accounting
branches employ a variety of approaches (Downes, von Trapp and Jansen, 2018). Accounting
developed to expand its branches and develop expertise in a particular sector of finance as a
result of the growth of global company and the extension of tax laws and regulations.
Technology advancements and the exchange of international currencies have resulted in the
growth of accounting specialisations that focus on a specific economic benefit. In order to track
the workings of company related to funds, accounting branches have a significant role:
a) Maintaining the records of finance department and keep up to date.
b) Branches provide assistance in decision making of the firm
c) They are complied with the laws ang guidelines respective to their field.
d) Helpful in protecting the assets of the business.
e) The branches also help in determining the profit and loss of the firm.
f) With the help of multiple analysis, business health is monitored.
There are different branches involved in the functioning of the accounts:
 Financial accounting
 Managerial accounting
 Cost accounting
 Auditing
 Tax accounting
 Fiduciary accounting
 Project accounting
 Forensic accounting

 Fund accounting
 Government accounting
 International accounting.
4.How modern accounting is associated with the accounting system and technology:
Nowadays, accountants have the choice whether to serve the self or the public good. For
example, the CPAs' Concept of Practitioners Obligation sets moral standards for accountants to
assist them to use their unique judgement. The framework of obligations, the general welfare,
legality, justice, and autonomy, as well as adequate governmental oversight, are all big aspects in
the constitution. In business, market and civilizations, accounting is critical (d'Errico, Grazioli
and Pietrelli, 2018). The knowledge and dependability of the activities are critical for the
advantage of entrepreneurs and other consumers. As a result, accounting principles such as the
Universally Recognized Accounting Standards, which vary by location, and the International
Financial Transparency Laws, which are adopted by the majority of countries, have arisen. These
guidelines and principles are intended to guarantee that business bookkeeping is consistent and
comparable. Despite current restrictions, accounting frauds have affected the reputation of
organisations and auditing professionals in general. To adapt a dynamic marketplace, effective
laws need be created, and they are always feasible if they are backed up by individual ethics. A
moral dimension is required for the creation of accepted standards and conventions, as well as
greater quality and dependable help. Moral norms are regularly faced when completing
accounting activities. In order to mislead their key investors, businesses bribe accountants to
fabricate income reports that contradict the company's true financial status.
5.The extent to which moral standards, regulation, and compliance are limitation or threats to the
business:
Ethical concerns in business cover a wide range of topics that fall within the ethical
guidelines of a company (Dasgupta and Singh, 2018). Promoting behaviour based on honesty
and trust are fundamental ethical challenges in business, but more complicated issues include
accommodating diversity, compassionate decision-making, and compliance and governance that
is compatible with the organization's essential ideals. There is a requirement for developing a
casual understanding of issues may appear to be for managing the ethical concerns in an

organisation. Harassment and discrimination are, without a doubt, the most serious ethical
challenges confronting today's company owners. Employees' online behaviour has become a
factor in their job status due to the growing use of social media (Cook, 2021). The ethics of
terminating or penalising employees for their internet posts is a difficult one to answer. Accurate
bookkeeping techniques are required in every firm. Organizations, particularly publicly listed
firms, are concerned about "cooking the books" and other unethical accounting practises. The
advancements in technology security capacity, which fall under the same umbrella as
nondisclosure agreements, raise privacy issues for both clients and staff. Firms now have the
power to monitor employee activities on their laptops and other corporation devices, and while
electronic monitoring is intended to improve efficiency and productivity, it frequently borders on
invasion of privacy.
PART 2
1. For meeting the accounting principles and standards, financial statements are prepared:
Income Statement
Income Statement
Particulars Amount
Sales 400000
Less: Opening Inventory 32000
Less: Purchases 158000
Add: Closing Inventory 28000
Gross Profit 238000
Rent & Rates 10000
Energy 6000
Wages & Salaries 34000
Bad debt 8000
Provision for doubtful debts 5000
Net Profit 175000
Balance Sheet
Liabilities Amount Assets Amount

Capital 180000 Premises 160000
Less: Drawings -12000 Equipment 150000
Shareholder's Capital 168000 Trade Receivables 45000
Net Profit 175000 Inventory 28000
Trade Payables 46000 Cash at Bank 14000
Accrued Expenses 3000
Provision for Doubtful Debts 5000
397000 397000
Cash budget
Particulars January February March April May June July
Receipts
Opening Balance 8000 16080 -30100 -66050 -116700 -144900 -132540
Sales 66000 44000 49500 44000 55000 66000 44000
Issue of Shares 0 0 2000 0 0 2000 0
Issue of Debentures 0 0 0 0 0 0 0
Total (A) 74000 60080 21400 -22050 -61700 -76900 -88540
Less: Payments
Purchases 48000 80000 81000 90000 75000 48000 80000
Selling & Administration Expenses 2800 3400 1800 1000 2000 2400 2500
Marketing Expenses 5500 4620 3300 2750 4400 3080 2640
Property / Rental Expenses 1620 2160 1350 900 1800 2160 2250
Total (B) 57920 90180 87450 94650 83200 55640 87390
Closing Cash 16080 -30100 -66050 -116700 -144900 -132540 -175930
2, Interpretation and computation of financial ratios:
a) Current ratio = Current assets / Current liabilities
= (350000 – 200000) / 150000
= 1:1

Interpretation: The current Ratio can be used to measure the organization's cash flow condition.
For every organisation, the optimum current ratio is 2: 1, which suggests that existing assets
should be twofold the current liabilities. According to the computed ratio, current assets are
worth £ 350000 and current liabilities are worth £ 150000. Furthermore, the ratio is 2.33: 1,
which is extremely excellent for the firm and indicates that the organization's liquidity situation
is solid and justifiable in the upcoming future.
b) Quick ratio = (Current assets – Inventory) / Current liabilities
= (350000 – 200000) / 150000
= 1:1
Evaluation: Quick ratio represents the capacity of the company to pay all its outstanding
liabilities with the help of its liquid assets and analyse if the firm can pay off its current debts
without trading its long-term assets. The formula for finding out the quick ratio is deducting the
inventories from current assets and divide remaining assets by current liabilities. The value of
current assets, stock and current liabilities are taken from the financial statements of the firm.
c) Inventory to working capital = Inventory / Working capital
= (200000 / 200000)
=1:1
Analysis: The ratio here suggests that the stock is the part of working capital and with the effect
of it, it shows how much stock is available in relation to all the working capital. Inventory is
needed to fulfil the everyday activities of the firm. In the company, it maintains an appropriate
ratio with relation to the working capital of the firm.
d) Debt to equity ratio = Debt / Equity
= 570000 / 200000
= 2.85: 1
Results: This ratio helps in evaluating the total debt of the firm with relation to the original
invested amount by the possessor and also the revenues generated by them. The perfect ratio for
debt-to-equity ratio is 1.5: 1. But in the above calculations, the company have a ratio of 2.1:1 for
its debt and equity, which indicates the better condition of the firm with less liabilities to pay the
loans. It helps in increasing the productivity of the enterprise and assist them in maintaining the
balance with financial responsibilities of the firm.

Financial performance evaluated with the comparison of financial ratios:
To analyse the financial performance of an organisation, it is mandatory to check the solvency,
efficiency and profitability of the business. By doing an analysis of the above calculated
financial ratios, it is easy to ascertain the condition of the business. The current liabilities of the
firm is £ 150000 and current assets is £ 350000. This predicts the liquidity position of the
company which indicates a good balance of current assets and liabilities (Choi, 2020). It is well
known that to carry out everyday transactions, it is necessary to maintain a balance of cash and
liquid assets for the growth of the firm. The stock of the is £ 200000, which is whole of the
working capital. The aggregate amount of debt is £ 420000, which is greater than its equity. As a
result, the corporation should strive to reduce its debt as a percentage of its equity capital. The
firm has maintained a good efficiency, as seen by the financial ratios, that it can remain in the
working industry for the foreseeable future with only minor changes to its monetary policy.
The following are some of the benefits of current accounting software packages:
Optimized commercial enterprise activities include: Accounting software enables companies to
work smarter rather than harder. They can shorten their processing time by putting off guidance
computations until later in the day. This helps students to keep their books current without
littering their desk (Brück, Ludwig and Schwering, 2018).
 They may also streamline their operations by eliminating the need for many programmes
and seeing everything on a single screen.
 Accuracy has improved: Keeping track of their business organization's growth
necessitates keeping an accurate pricing range file. Accounting software can assist firms
in simplifying accounting processes that are prone to mistakes. When you input data,
trade funds, or alter assets, many apps may do calculations automatically. It can also do
analyses while lowering the coccurence of errors, and if the organisation wishes to verify
your file for flaws before completing reviews, it can quickly find and repair them. Some
people have noting abilities, which allow them to take notes for later use.
Why Lower operating costs: Outsourcing bookkeeping is only used by a limited number of
companies. The majority of companies employ this technique to retain their budget and all
related office work in-house, allowing them to devote more time to their core activities. The cost
savings is, however, one of the many benefits of outsourcing. The organisation may save money

on outsourcing while retaining high-quality accounting reports by deploying software that
interfaces with the business. Additionally, businesses may save money on printing and paper
while minimising their carbon footprint by employing cloud-based or on-premise software
(Becker and Englisch, 2020).
 . More information on how much an accounting software programmer costs may be
found here.
Recommendations:
From the evaluation of above financial records, it can be assumed that the corporation is
working well in their market area with good balance in liquidity. It is only need to focus on the
equity position as more debt results in loss of profitability which is not good for the organisation.
CONCLUSION
The report prepared as under helps to understand the importance of management in a
competitive environment and also the essence and necessity of it to be adapted in a related
environment. It further serves as a guide in the eye of law for explaining what is being done and
what functions are being carried out in a related environment and how it would be helpful for
coming years as well. It would explain what business can adapt in case of measures for making
the firm reach its desired heights and maintain the profitability and sustainability in the
environment which would serve as a useful tool in near future keeping future conditions in mind.

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