Insight into Budgeting Process: Analysis of Master Budget and Income Statement for Ansell Limited

HI5017 Managerial Accounting
Trimester 3 2018
Individual Assignment
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Executive Summary
The underlying report is being prepared for developing an insight into the budgeting
process sued by business companies. It has been depicted with the report that master budget is
very important for determining the needs of individual department. Top-down and bottom-up
approach are the two major methods used by business companies to develop budget. Bottom-
up approach is regarded to be most suitable for business companies as it involve participation
from all employee level. In addition to this, the report provides a comparison of the budgeted
income statement with the actual income statement for the prepared for the selected
company, Ansell Limited. It has been depicted with the comparison that there are variations in
the amount of revenue to be realized as stated by the budgeted income statement and the
actual income statement.
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Contents
Executive Summary....................................................................................................................... 2
Introduction................................................................................................................................... 4
Part A: Elements of Master Budget............................................................................................... 4
Part B: Discussion & Comparison of the top-down and bottom-up approach to the budgeting
process and selecting the moist suitable for the company............................................................6
Part C: Budgeted income statement through using financial data of year 2018 of company
Ansell Limited................................................................................................................................ 7
Part D: Presentation of actual income statement of year 2018 and budgeted income statement
to make comparison and provide the opinion on the changes....................................................10
Conclusion................................................................................................................................... 11
References................................................................................................................................... 12
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Introduction
The process of creating budgets can be regarded as very important for a company to
develop accurate spending plans. This would help in ensuring that a business always has
enough money for meeting its varying financial needs and requirements. It enables a company
to plan for its future financial needs and thus achieving its financial and operational goals. The
most significant benefit of budgeting for the business owners is that it helps in reducing costs
and increasing returns on investment. In this context the present report is being developed for
explaining the importance of developing budgets for business companies. This is carried out by
providing explanation of the different elements of the master budget and providing a discussion
and comparison of its top-down and bottom-up approach and recommending the bets suitable
approach for the selected company. The company selected for the purpose is an ASX listed
entity, that is, Ansell Limited. The report access the financial information from the annual
report of the selected company for developing its budgeted income statement with the use of
some projected targets to be achieved. The budgeted income statements are being compared
with the actual income statement for providing a comparison of the data and discussing the
changes identified.
Part A: Elements of Master Budget
Master budget can be regarded as the integration of all the various types of budgets
that are developed by different functional areas of a company. The budget is mainly presented
in monthly or quarterly format and may include explanation of text for describing the various
elements of the budget. It is usually referred to as central planning tool that is used by the
management in providing direction to carry out the different operational activities of a
company. The budget is largely used for projecting the income nod expenses of a company so
as to assist the management in taking long-term decisions relating to their overall growth and
development in the future context. The master budget created assists the individual
departments of a company to develop reports for achieving their goals (Meredith and Mantel,
2009). As such, the major elements of the master budget can be discussed as follows:
Income and Expense Budget
Income is regarded to be a major component of a master budget that provides a
depiction of the sales, dividends, royalties and capital gains earned by a company. The other
main components of a master budget are expenses that help the management in assessing the
areas of expenses that should be controlled for maximizing company profitability. The
production or overhead costs assesses with the use of this account will help the management in
identifying the variable expenses that can be eliminated (Blocher, 2009).
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