Management Accounting and Finance for Decision Making

Management Accounting and
Finance for Decision Making
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Table of Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1..................................................................................................................................3
1. Evaluation of international financial reporting standards (IFRS) adoption from perspective
of promoting accounting practice harmonization........................................................................3
2. Simplified balance sheet..........................................................................................................5
3) Working capital, working capital need and net cash...............................................................5
4. Common size income statement..............................................................................................6
5. Analysing both the above statements......................................................................................7
6) Profitability ratio.....................................................................................................................7
QUESTION 2..................................................................................................................................9
(1) Preparation of Alpha’s Ltd cash budgets for the month October, November and
December of the current year......................................................................................................9
(2) Other factors which must be undertaken at time of management of proposal.....................11
(3) Impact of economic environment over corporate reliance on budgets................................12
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17
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INTRODUCTION
Management accounting is process of identifying, measuring, analysing and interpreting
financial information by manager in order to take short and long term decision for growth and
development of organisation. So, the main purpose of management accounting is to provide
assistance to company in its planning, organising, directing and controlling resources so that end
objective can be achieved in limited time frame. Moreover, every organisation requires sufficient
amount of finance to meets all its expenses or associated cost for smooth operation of business in
external environment. This report is segregated into two parts, PART A is“International financial
analysis: Honey Badger Plc, PART B is “Strategic management accounting: Alpha Ltd.”
QUESTION 1
1. Evaluation of international financial reporting standards (IFRS) adoption from
perspective of promoting accounting practice harmonization
International accounting standard Board has issued international financial reporting
standards with objectives to increase transparency of financial information of company. It set
common rules or standard so that transparency, consistency can be maintained in preparation of
financial information. Thus the financial information can be easily compared from one company
to another; even for those company that have their operation in another country. In another
words, this standard has contributed in maintaining reliability and validity of financial
information so that interest stakeholders can easily trust and take correct decision (Kieso,
Weygandt and Warfield, 2020). The international financial reporting standards clearly state the
way company needs to maintain, report, define any transaction and any other events that have
direct financial impact. So, this standard is major made with objectives to make use of common
language, method and techniques needs to present necessary information of organisation.
The adaptation of international financial reporting standards, will results in promoting
accounting harmonization as all companies are making use of similar method to make their
account or record necessary financial information. In addition to this, accounting harmonization
is a process of enhancing accounting compatibility through fixing limit and degree of variation.
Investors are also laying emphasising on account harmonization, that is financial information
should not only be intelligent but can be easily compared (Tsalavoutas, Tsoligkas and Evans,
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2020). So, the international financial reporting standards has contributed in making investors
happy and satisfied by deciding specific procedure that all company has to abide while making
their respective accounts. Likewise, the component of financial statement as per international
financial reporting standards is Balance sheet which clearly represents the overall performance of
organisation during the year. This is an statement which is prepared by company at the end of
year that represent total assets and liabilities. So, all companies needs to prepare a balance sheet
to provide investors about total Assets and liability of firm at particular points of time.
Profit and loss statement is another component of financial statement as per international
financial reporting standards which represent actual profit or loss of company. It comprise
detailed related to all loss that company have incurred as well as revenue generated from
different sources. So, this component of financial statement made as per international financial
reporting standards provide ease in comparison thereby promoting accounting practice
harmonization (Kouki, 2018). The standard has reduce the difference of reporting process to
maximum extend across worldwide so that financial information can be easily compared
between two companies. Thereby, actual position of organisation in external environment can be
find, in terms of its profitability and market share in comparison with others.
Moreover, the international financial reporting standards provide high quality,
internationally recognised set of accounting standard which needs to be followed by company to
represent their financial information to others so that they can easily trust the same. There are
many reason which clearly state why international financial reporting standards adaption will
promote accounting harmonization. Such as it contribute in maintaining transparency so that
information can be easily internationally compared and standard quality is maintained which
helps investor in taking right decision (Pawsey, 2017). Secondly, it strengthens accountability
that the information present in the account is correct and any type of manipulation has been
significantly avoided. Moreover, the standard has also tried to reduce information gap between
investors and company through improving the quality of management of account for benefits of
organisation. So, it can be stated accountability of information has helped in effective
comparison of financial information of one company from another. Thirdly, the standard lead in
economic efficiency that is contribute investors in understanding, identifying associated risk as
well as opportunities across worldwide so that they can get maximum return of money invested.
In another words, trusted accounting language used by business will lead in lower cost of capital
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