Management Accounting and Finance for Decision Making

MANAGEMENT
ACCOUNTING AND
FINANCE FOR DECISION
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
QUESTION 1...................................................................................................................................3
1. Critical evaluation of IFRS adoption from perspective of promoting accounting practice
harmonization..............................................................................................................................3
2. Simplified balance sheet with three sub heading....................................................................5
3. Computation of working capital, working capital need and net cash.....................................6
4. Computation of the common size income statement for 2017- 2020.....................................7
5. Analysis of the statements prepared ad critical evaluation of the performance of the
company......................................................................................................................................7
6. Computation of the profitability ratios and analysis of it from perspective of gaining insight
into efficiency.............................................................................................................................8
QUESTION 2...................................................................................................................................9
(1)................................................................................................................................................9
(2)..............................................................................................................................................12
(3)..............................................................................................................................................13
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Management accounting is a practice of depicting the financial position of the business
entity. This report has discussed about the concept of the management accounting and the
financial reputing of the business entity. This report is based on the case study of the Alpha Ltd
Company. This project will discuss about the management accounting concepts the factors or
aspects related to the financial reporting practices. Henceforth, report will emphasis over the
international financial reporting standards associated with the business entity. Balance sheet will
also project under this project. Working capital evaluation will also depict under this project.
Common size income statement will depict under this project. Certain profitability ratios will
also determine to understand the business performance of the organisation. Furthermore, project
will discuss about the ash budget of the company. What are the factors company should adopt
into consideration before making any change in the policy of the business entity. Various aspects
about the budgeting and its practices will be discussed under this project.
QUESTION 1
1. Critical evaluation of IFRS adoption from perspective of promoting accounting practice
harmonization
IFRS that is International Financial Reporting Standard is being defined as the different
set of accounting rules and standards which are used in order to determine the fact that how the
accounting event must be reported (Ameen, Ahmed and Abd Hafez, 2018). These are the
standards which are being used and applicable by all the companies all over the world that is at
international level. The IFRS is aimed to make the financial statements in accordance with the
guidelines being provided by the board and it must consistent and comparable. The adoption to
the IFRS is very important for promoting the accounting practices harmonization. This is
particularly because of the reason that if all the business at the international level will be
complying with same standards then comparison between the different companies belonging to
different country will be helpful. The reason underlying this fact is that when the companies will
be using the same standard then they will be having a common base for the comparison as all the
business are using the same method of accounting. In case there will be difference in the use of
the accounting practices then the comparison of the companies will not be possible. The reason

behind this fact is that when the companies will be having different basis of accounting then
there might be confusion as how to compare the financial statement of two different companies
following different standards.
The major aim of issue in the IFRS is to have transparency within the financial
information of the company. The reason underlying this fact is that when all the companies will
be following same standards and methods of making the financial statements, then there will be
more transparency. The reason underlying this fact is that in all the different companies will be
having same approach of recording the same items then it will be more transparent and
convenient (Rikhardsson and Yigitbasioglu, 2018). For instance if provision of bad debt is to be
made on the net debtors then all the companies complying with the IFRS will be making the
provision for bad debt on the amount of debtors only. In addition to this when the IFRS is being
followed then this results in effective and efficient making of the financial statements will stop
the reason and the line this fact is that the IFRS has issued guidelines for recording every
transaction in the specified manner. Hence when all the different companies and undertake the
use of IFRS standards than this provides a consistency of the financial statements (KÖSE and
AĞDENİZ, 2019). The consistency in the financial statements refers to as the similarity of
making the financial statements in all the different companies belonging to different countries is
same. Hence when there will be consistency within the financial statements then there will be
easier comparability within the financial statements of different companies.
With help of the compliance with international financial reporting standards that is IFRS
there is promotion of accounting practices harmonization. The reason underlying these factors
that when the company's comply with the IFRS then this result in effective accounting practices
harmonization. This is particularly because of the reason that I'm all the companies I'm
complying with IFRS follows the same accounting practices. Hence this results in effective
harmonization of accounting practices as per the IFRS which provides a common base of
comparison for the people. This compliance with IFRS and accounting practices harmonization
is very helpful for them investors. The reason behind this fact is that when an investor decides to
invest within the company then they can easily compare the financial stability and accountability
of the different companies on a common basis. Hence when there is a common basis then the
comparison is very easier and understandable. Moreover this will assist investors in easily
comparing the financial position of different companies. Hence this will help the investor in