Management Accountant - Nisa Retail Ltd

Management Accountant

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
PART B...........................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In the rising competition level in the corporate world, companies are subjected with
various financial turbulence i.e. sudden rises in the cost driven by high rate of inflation,
increasing cost of borrowing, monetary requirements to purchase new technology and others.
Nisa Retail Ltd is a small sized independent retailer based on UK and operating through its
convenience stores as well as small-sized supermarkets. This assignment lay emphasizes upon
different kinds of budgetary tools that Nisa Retail Ltd can choose to design their own budget.
Apart from this, in order to combat the situation of financial turbulence, the study will assess
various management accounting tools like key performance indicators, financial governance and
others. Using such techniques, an establishment can overcome financial problems and gain long-
term success.
PART A
To: Line manager
From: Management Accounting Officer
Date: 16th March 2018
Subject: Budgeting, types of budget and various budgetary methods
Introduction
The report aims to inform about the meaning and significance of budgeting for the future
growth and success. It will also provide a clear explanation of various budgeting methods along
with their implications on the business performance.
Meaning of budgeting
Budget is referred to a financial statement that provides estimation of revenues and
spending for a specified period of time. A budgetary statement predicts the financial position of
the company for the prospective period. It is used by companies as an internal managerial tool
that facilitates executives, departmental heads and others in exerting sound control over daily
operations and keeps cost under the strict control and supervision so as to attain budgetary goals.
It also helps in performance assessment and measurement because budget sets a benchmark for
the evaluation of actual performance and takes preventing measures.
Explanation of different types of budgets
1

In the practical corporate scenario, there are number of budgets designed by the
companies incorporating varied goals. Some of the important tools that Nisa Retail Ltd needs to
prepare are explained underneath:
Cash budget: It is a budget that informs managers about the future cash incoming and
outgoing during a specific period. The budget accumulates three important sections that include
cash receipts, its disbursement and net cash surplus or deficit (Miller, 2018). In context to Nisa
Retail Ltd, this budget is helpful to determine its cash income from customers while spending
plan covers expense on material purchase, labor and other operational spending. Excess of cash
inflows over outflow is called net cash balance. It helps firm in advance planning for managing
sufficient cash money in the business for liquid availability.
Sales Budget: This budget, as its name, present estimation about expected sales revenue
and known as backbone of the entity. The budget helps in determining the sales quantity, selling
price and discounts that will be offer to customers and inform Nisa’s managers about net sales
revenue.
Production budget: It is designed considering sales targets and stocking level that needs
to be maintained. It covers cost for the resources requirement of material, labor and other direct
overheads to produce required quantity of units to meet the forecasted demand (Arnold and Artz,
2015).
Capital expenditure budget: It predicts the expected investment in the long-lived capital
project such as purchasing fixed assets like equipment, machinery, plant, developing new
product and expanding existing product line. This budget creation helps to make excellent
financial plan so as to satisfy financing requirement for the investment projects.
Explanation of alternative budgeting methods, their merits and limitations
Developing budget is of key importance for the Nisa Retail Ltd that helps to assure
financial success. Budgetary planning help firm keeping strong control over the spending and
manage sufficient liquid availability. Various budgeting method by which firm can prepare
budget are explained here as under:
Zero-based budgeting: It is a popular budgeting method which examines every cost to
assess their requirement and necessity in the business (Lauth, 2014). The method justifies every
component incorporated in the budget and avoids spending on unnecessary activities.
Merits:
2