Understanding aspects of Accounting Principles

In this assignment we will discuss about accounting principles and below are the summaries point:- Accounting: Gathering, processing, and presenting financial data to track business operations and assets. Management Accounting: Analyzing financial information for decision-making and achieving business goals. Management Accounting System: Cost system for tracking production activities and inventory management.

Student Name/ID Number
Unit Number and Title 05: Accounting Principles
Academic Year 2022-23
Unit Tutor
Assignment Title Understanding aspects of Accounting Principles
Issue Date
Submission Date

LO1
ACCOUNTING
Accounting is the orderly gathering, processing, interpreting, and presenting of
financial data. One person in a small business or various teams in a large corporation can
handle bookkeeping. A firm keeps track of its operations through accounting.
Business accounting's objectives include giving you a thorough view of the dynamics
of the organization's operations and information on the state of its assets. Due to their
potential for use in making future projections, these data are required for more than just
factual reporting and tax preparation.
Calculating the reserves of the company's various property assets to preserve its sound
financial state;
Presentation of objective, systematic, and in-person economic data to management on
a regular and up-to-date basis;
Reduction of dangers that can have a bad impact on business operations;
Putting the controlling function into practice (both on the part of the state and on the
part of other external counterparties).
Accounting for internal users is done to provide management with a complete picture
that will aid them in making the best decisions possible. Additionally, the organization's
administration is really interested in sharing information with outside users for monitoring,
analysis, and effective planning. In other words, information for internal users on the
organization's financial performance, financial position, and changes to that position is used
to produce information for external users.
MANAGEMENT ACCOUNTING
The process of maintaining, extracting reporting, and analyzing an organization's
financial data for decision-making is known as management accounting. Based on the study
and interpretation of financial information pertaining to the internal operations of the
organization, management accounting aids managers in developing plans, changing course,
and making knowledgeable decisions. A virtual tool called management accounting assists an
organization's leaders in directing it toward accomplishing its objectives. Accounting for
management involves analyzing, interpreting, and providing management with information. It
aids non-accounting employees in comprehending and comprehending financial information
within an organization.

Business decisions ought to be supported by data and facts. A lot of the day-to-day
transaction information for a business is too little and intricate to be understood at a glance.
In order to provide critical answers, management accounting derives reports and insights
from actual data. Therefore, managerial accounting facilitates decision-making based on
actual accounting facts. Examining historical patterns and the effects of prior choices is also
beneficial.
Management accounting allows you to:
Set and achieve your business goals, see what real results the company has achieved
Predict company profits, prevent cash gaps, plan payments
Find growth points for the company, detail profit and loss and find out where you can
save
Save time getting financial data in any context with automation
Get convenient and understandable business reporting in real time
MANAGEMENT ACCOUNTING SYSTEM:
Cost system. It is used by manufacturers to record production activities and track
inventory movements before it can be used to produce finished goods.
The main purpose of such systems is to use them within the company to make
decisions to reduce costs, compare actual costs with planned ones in order to control, create
strategic and tactical plans for the future, and work in such a way as to get higher profits. . .
An inventory management system is the process of tracking items from purchase to
final sale, and how you approach inventory management for your business.
The main purpose of this system is to ensure sufficient demand for goods or materials
without excess inventory and save money for the business.
Job system is a process of obtaining information about the costs associated with a
particular production or service, which includes an analysis of direct and indirect costs and is
further broken down into labor and overhead costs.
The main goal is to establish the profit and loss incurred on each job and find out
which jobs are more profitable and which are less, controls the actual costs with the estimated
costs to ensure that the costs are not excessive or incorrect.

FINANCIAL ACCOUNTING:
Journal and its purpose. A journal is a diary in which the financial transactions
associated with the records are recorded to create the financial statements of the business. It
includes all kinds of registries.
The goal is to track transactions and maintain them on a regular basis in the general
ledger, which then feeds the information into financial statements on which business decision
makers depend.
Ledger and its purpose. A general ledger is a book or collection in which account
transactions are recorded as balance sheet and income statement entries that include assets,
liabilities, capital, income, and expenses.
The goal is to record all the transactions of the company and keep track of all
individual events, recording the credits and debits of the accounts and systematizing the data
so that you know the end of the balance sheet after the end of each accounting year.
Trial balance and its purpose. The trial balance is a list of all registers created for
debit and credit accounts so that the total amounts are equal, which ensures the mathematical
correctness of entries in the accounting system.
The purpose of the trial balance is to assist in compiling the balance sheet at the end of
the year, accurately accounting for all transactions at the end of the reporting year, and
identifying errors made when posting the relevant entries.
FINANCIAL STATEMENT AND ITS PURPORSE
Income statement and its purpose. An income statement, also known as a profit and
loss statement, is a financial statement that shows a company's income and expenses for a
period and how the income is converted into net income or net income.
The purpose of preparing an income statement is to show the financial results of a
company for a period.
Balance sheet and its purpose. This is a statement of the assets, liabilities and equity
of an enterprise that details the balance of income and expenses for a period and provides a
brief overview of the company's finances.
The purpose of a balance sheet is to provide business owners with the financial
position of their company and how much assets the business owns, how many liabilities it
owes, and how much capital is invested in the business.
Cash flow statements and their purpose. This is a financial statement that shows how
changes in balance sheets and earnings affect cash and breaks down the analysis into

operating, investing and financing activities. Particular attention is paid to the flow of cash in
and out of the business.
The main goal is to provide a detailed picture of what happened to the cash flow of
businesses during the reporting period and the ability of the organization to operate in the
short or long term depending on how much cash flows in or out of the business.
Budgeting and its purpose. Budgeting is the process of developing, implementing and
implementing budgets. Which determines the current available capital, provides cost
estimates, and forecasts revenue streams. With a budget in mind, businesses can measure
efficiency against costs and ensure that resources are available for initiatives that support
business and growth.
Accounts receivable and its purpose. These are the funds that customers owe your
company for invoiced products or services. The total value of all receivables is shown on the
balance sheet as working capital and includes invoices due from buyers for goods or work
performed for them on credit.
Accounts payable and its purpose. The accounts payable department is responsible
for keeping track of exactly what is owned by vendors, ensuring that payments are properly
approved, and processing payments. Accurate accounts payable information is essential for
an accurate balance sheet.
SKILLS AND COMPETENCIENCES OF ACCOUNTING ROLE

JPMorgan Chase & Co. is the name of the holding company, and the firm serves its
customers and clients under the Chase and JPMorgan brands.
JPMorgan Chase (NYSE: JPM) is one of the oldest US financial institutions. With a history
spanning over 200 years, here is where they are today:
Their influence: We combine our business and policy expertise, sustainable business
practices, data, capital and global presence to advance solutions that drive inclusive economic
growth.
What they do: They are committed to working for the benefit of all communities.
Through continuous investment, business initiatives and philanthropic commitments, we are
committed to helping employees, customers, customers and communities grow and prosper
sustainably – with opportunities for all. Through investments and initiatives to support and
advance the Black, Hispanic, and Latino communities, we make economic opportunity more
equitable and affordable.
Their ideas: They invest in research and ideas that help inform and advance political
solutions that support the path to racial justice.

 P3 (SOLE TRADER)
Peter Traders
Trading, Accounting
For the year ended 31st March, 2021
Particulars Amount
(AED)
Particulars Amount (AED)
Opening stock 20 000 Sales 250 000
Less: Sales return (8 000) 242 000
Purchases 75 000 Closing Stock 25 000
Less: Purchases Return 3 000 72 000
Wages 36 500
To Gross Profit
total 128 000 128 000
267 000 Total 267 000
Profit And Loss Accounting
Particulars Amount (AED) Particulars Amount (AED)
By gross profit b/d 267 000
Interest on bank
deposit
2 000
To fight and carriage 7 500
To salaries 12 000
To repairs 1 200
To trade expenses 4 000
To rent and taxes 24 000
To commission 3 300
To net profit 217 000
269 000 269 000

Peter Trades
Balance sheet
As on 31th March, 2021
Particulars Amount (AED) Particulars Amount (AED)
Bills Payable 6 200 Cash in Hand 5 700
Sundry Creditors 15 000 Bills Receivable 4 000
Capital 170 500 Debtors 55 000
Add: Net Profit
95 100
Plant and Machinery 160 000
Closing Stock 25 000
Less: Drawings
(16 600)
Bank Deposit 20 500
270 200 270 200

 P3 (PARTNERSHIP)
M/S Ajay and Vijay
Trading account
For the year ended March 31 2020
Particulars (Dr) Amount (AED) Particulars (Cr) Amount (AED)
Opening Stock 18 000 Sales 85 000
Purchases 46 700 Closing Stock 31 100
Carriage 3 200
Wages 9 900
11 300Add: Outstanding
Wages 1 400
Gross Profit c/d 36 800
116 000 116 000
Profit and loss accounting
For the year ended March, 2020
Particulars (Dr) Amount (AED) Particulars (Cr) Amount (AED)
Commission 4 600 Gross Profit b/d 36 800
Salaries 10 500
11 300
Commission received
1 800
Add: Outstanding
salaries 800
Add: Accrued
Commission 1 200
3 000
Postage and telegram 3 600
Insurance 1 200
700Less: Prepaid
Insurance (500)
Depreciation on Plant
Machinery
4 070
Bad – Debts 400

1 900Add: Further Bad –
Debts 1 500
Net Profit
Ajay (50%) 13 630
Vijay (50%)
39 800 39 800
Balance Sheet
As on March 31 2020
Particulars Amount (AED) Particulars Amount (AED)
Capital Accounting Investment 13 500
Ajay 60 000
66 815
Furniture 18 000
Add: Net Profit 6 815 Plan and Machinery
40 700
36 630Vijay 35 000
41 815
Less: Depreciation
(4 070)
Add: Net Profit 6 815 Closing Stock 31 000
Debtors 28 000
26 500Sundry Creditors 25 000 Less: Further Bad-
Debts (1 500)
Bills Payable 6 000 Bills Receivable 5 000
Outstanding Expenses 1 400 Prepaid Rent 7 000
Outstanding Wages 800 Accrued Commission 1 200
Prepaid Insurance 500
Cash in Hand 2 500
141 830 141 830
 P3 (NOT-FOR-PROFIT)

Youngsters Health Club
Income and Expenditure Account
For the year ending 31th December, 2020
Particulars Amount (AED) Particulars Amount (AED)
Subscription 16 000 Rent 3 600
Entrance fee 200 Stationary 450
Donation 2 500 Loss of almirah 1 000
Salary 4 800
Expenses on
competition
2 800
Miscellaneous
expense
650
Excess income over
expenditure
5 400
18 700 18 700
 M2 (PARTNERSHIP)

M/S ROMA & MONA
Trading Account
For the year ended 31th March, 2019
Particular Dr Amount (AED) Particular Cr Amount (AED)
Opening stock 52 000 Sales 320 000
326 000Purchases 176 000 Add: Additional
Sales 6 000
Wages 22 000 Closing Stock 80 000
Add: Outstanding
Wages 4 000
Gross Profit
(Balancing Figure)
152 000
406 000 406 000
Profit and Loss Account
For the year ended 31th March, 2019
Particulars (Dr) Amount (AED) Particulars (Cr) Amount (AED)
Bad-Debts 3 000
9 300
Gross Profit 152 000
Add: Further Bad-Debts
4 000
Rent Received 9 600
Add: New Reserve for
Doubtful Debts 4 300
Discount Received 3 600
Less: Old Reserve for
Doubtful Debts (2 000)
Reserve for Discount
on Creditors
2 520
Reserve for Discount on
Debtors
1 634
Salaries 28 000
31 066Add: Outstanding Salaries
3 066

Depreciation on Motor
vehicle
2 500
Rent 16 000 19 200
Add: Outstanding Rent 3 200
Office Expenses 5 000
Discount Allowed 2 500
Provident Fund Contribution 5 500
Net Profit
Roma 45 510 91 020
Mona 45510
167 720 167 720
Balance Sheet
As on 31th March, 2019
Particulars
(Labilities)
Amount (AED) Particulars (Assets) Amount (AED)
Capital of Roma
50 000 95 510
Fixed Assets
Add: Net Profit
45 510
Motor Vehicles
50 000
Capital of Mona
50 000
95 510 Less: 5%
depreciation (2 500)
47 500
Add: Net Profit
45 510
Premises 78 000
Current Liabilities Current Assets
Creditors 84 000
81 480
Closing Stock 80 000
Less: Reserve for
Discount on
Creditors (2 520)
Debtor 84 000
80 066
Outstanding Salaries 3 066 Add: Additional
6 000
Outstanding Wages 4 000 Less: Further Bad-
Debts (4 000)

Outstanding Rent 3 200 Less: Reserve for
Doubtful Debts
(4 300)
Interest on Provident
Fund Investment
2 800 Less: Reserve for
Discount on Debtors
(1 624)
Provident Fund 50 000 Provident Fund
Investment
50 000
335 566 335 566
 M2 (NOT FOR PROFIT)
HELP SOCIETY

INCOME & EXPENDITURE ACCOUNT
YEAR ENDED DECEMBER 32, 2020
Expenditure (Dr) Amount (AED) Income (Cr) Amount (AED)
Entrance Fee 600 Balance b/d 8 400
Depreciation expense 1 280 Donation for Budling
fund
25 000
Drugs and Incidental
charges
9 600 Government Grant 30 000
Expenses of Motor
Vans
6 400 Interest accrued bit
not received
600
Laundry changes 5 200 Interest Received 2 400
Publicity Expenses 4 000 Subscription 7 800
Purchase of vans 28 000 Subscription
outstanding
1 500
Rent 6 000 Balance c/d 3 000
Salaries 12 000
Salary outstanding 1 200
To Surplus 4 420
78 700 78 700
P4
Now I will use organization that I choice – JPMorgan Chase & CO

JPMorgan Chase & Co. is a Delaware-incorporated, New York City-based
international financial services business. By market capitalization, it is the biggest bank in the
US and the biggest bank globally.
Income Statement
Balance Sheet

I WILL DO CALCULATION FOR 2 YEARS, FOR 2021 AND 2022
PROFIBALITY RATIOS
 Net Profit Ratio = Net Profit/Revenue
2021 = 48 334 000/121 685 000 = 40%
2022 = 37 676 000/ 128 641 000= 29%
In 2021 it was 40% and by 2022 this percentage has decreased by 11%, which
amounted to 29%. This negatively affects net profit, lowering the net profit margin for the
company.
 Gross Profit Ratio = Gross Profit/Revenue
JPMorgan Chase gross profit for the quarter ending December 31, 2022
was $34.547B, a 18.08% increase year-over-year.
JPMorgan Chase gross profit for the twelve months ending December 31, 2022
was $128.695B, a 5.79% increase year-over-year.

JPMorgan Chase annual gross profit for 2022 was $128.695B, a 5.79% increase from
2021.
 Return on investment = Net Income/Total Equities
2021= 48 334 000/294 127 000=16%
2022 = 37 676 000/292 332 000 =12,8%
JPMorgan RIO for the quarter ending December 31, 2022 was $34.547B, a 18.08%
increase year-over-year.
JPMorgan Chase gross profit for the twelve months ending December 31, 2022
was $128.695B, a 5.79% increase year-over-year.
JPMorgan Chase annual gross profit for 2022 was $128.695B, a 5.79% increase from
2021.
LIGUIDITY RATIOS
 Current Ratio = Current Assets/ Current Liabilities
2021 = 3 743 567 000/3 449 440 000 = 1,09%
2022= 3 665 743 000/3 373 411 000 = 1,08%
 Acid Test Ratio - This is not applicated, because it is a bank
 Working Capital Ratio = Current Assets/ Current Labilities
2021 = 3 743 567 000/3 449 440 000 = 1,09%
2022= 3 665 743 000/3 373 411 000 = 1,09%
EFFIENCY RATIO
 Account receivable Turnover = Net Credit Sales/Average Accounts
 Account Receivable Turnover in day
JPMorgan Chase annual change in accounts receivable for 2022 was $-4.428B, a
81.44% decline from 2021. JPMorgan Chase annual change in accounts receivable for 2021
was $-23.852B, a 164.26% increase from 2020. (www.macrotrends.net, n.d.)
 Inventory Turnover and Inventory Turnover in day are not applicated, because
it is a bank
A bank's balance sheet is different from that of a typical company. You won't find
inventory, accounts receivable, or accounts payable. Instead, under assets, you'll see mostly
loans and investments, and on the liabilities side, you'll see deposits and borrowings.
 Fixed Asset Turnover = Total Revenue/ Fixed Asset

2021 = 121 685 000/ 27 020 000 = 4.5%
2022 = 128 641 000/ 27 734 000 =4.6%
INVESTMENT RATIO
 Debt to Equity = Total Liabilities/ Total Equities
2021 = 3 449 440 000/294 127 000 = 11,7%
2022 = 3 373 411 000/292 332 000 = 11,5%
 Return on equity = Net Profit/Total Equity
2021 = 48 334 000/294 127 000 = 16,4%
2022 = 37 676 000/ 292 332 000 = 12,8%
P6
Cash Budget
April May June
Cash and Bank 15 000 26 700 35 700

Balance
Cash inflow
Cash Sales (20%) 18 000 17 000 16 000
Cash Collection from
Debtors
66 000 70 000 66 000
Total Cash Inflow 99 000 113 700 117 700
Cash Outflow
Cash Purchases
(10%)
5 000 4 500 3 500
Payment to Creditors 37 800 45 000 40 500
Wages 23 000 22 000 19 000
Rent 500 500 500
Expenses 5 500 6 500 5 000
Total Cash Outflow 71 800 78 500 69 000
Closing Balance 27 200 35 700 48 700
APRIL:
 Cash Sales
90 000*20% = 18 000
 Cash Collection from Debtors
March: 75 000*80% = 60 000
April: 90 000*80% = 72 000
Half is collected in month of April: 60 000*50% = 30 000
Half is collected in month of April: 72 000*50% = 36 000
Total Collection from Debtors = 66 000
 Cash Purchases
50 000*10% = 5 000
 Credit Purchases payment
March Credit Purchases Payment in the month of April: 42 000*90% = 37 800
 Wages
March half Wages paid in April: 22 000*50% = 11 000

April half Wages paid in April: 24 000*50% = 12 000
= 23 000
MAY
 Cash Sales
85 000*20% = 17 000
 Cash Collection from Debtors
April: 90 000* 80% = 72 000
May: 85 000*80% = 68 000
Half is collected in month of April: 72 000*50% = 36 000
Half is collected in month of May: 68 000*50% = 34 000
Total Collection from Debtors = 70 000
 Cash Purchases
45 000*10% = 4 500
 Credit Purchases Payment
March Credit Purchases Payment in the month of April: 42 00*90% = 37 800
 Wages
March half wages paid in April: 22000*50% = 11 000
April Half wages Paid in April: 24000*50% = 12 000
= 23 000
JUNE
 Cash Sales
80 000*20% = 16 000
 Cash Collection from Debtors
May: 85 000*80% = 68 000
June: 80 000*80% = 64 000
Half is collected in month of June: 68 000*50% = 34 000
Half is collected in month of April: 64 000*50% = 32 000
Total Collection form Debtors = 66 000
 Cash Purchases
35 000*10% = 3 500
 Credit Purchases Payment

May Credit Purchases Payment in the month of June: 45 000*90% = 40 500
 Wages
May Half wages Paid in June: 20 000*50% = 10 000
June Half wages Paid in June: 18 000*50% = 9 000
= 19 000
P7
BENEFITS AND LIMITATIONS OF FIXED BUDGET

A fixed budget is a financial document that remains unchanged throughout an entire
fiscal period, regardless of any unforeseen or unplanned events. In contrast, flexible or
variable budgets fluctuate from time to time based on fluctuations in spending. The
advantages of a fixed budget are greater stability, increased savings, and simplified future
planning, while the disadvantage is less flexibility.
A fixed budget prevents an individual or business owner from adjusting the budget in
response to a changing circumstance, such as the loss of a job or a decline in profits. This
makes it particularly difficult to respond to the types of unexpected changes that typically
occur in business and in life. Due to this, the majority of large conglomerates favor flexible
budgeting over fixed budgeting. (Smart Capital Mind, n.d.)
BENEFIRS AND LIMITATIONS OF ZERRO-BASE BUDGET
Zero-base budgeting helps a business allocate resources efficiently (by department)
because it disregards historical budget figures in favor of actual numbers; A zero base budget
compensates for weaknesses in incremental budgeting for budget inflation.; Communication
and coordination By involving employees in the decision-making process, zero-based
budgeting promotes improved departmental coordination and communication, as well as
employee motivation; Eliminating all redundant or unproductive activities, this strategy leads
to the identification of optimal opportunities and more cost-effective methods of conducting
business.
The basis of zero-based budgeting is churning labor force. This concept's budget is
planned and drafted from scratch, requiring the participation of a large number of employees.
There may be insufficient human resources and time in many departments; This zero-base
budgeting method requires more time for annual execution than the step-by-step budgeting
method, which is significantly simpler; Deficit in Experience: Providing explanations for
each item and cost is problematic and management training is required. (ClearTax, 2019)
BENEFITS AND LIMITATIONS OF ROLLING BUDGET
Planning and Control: A rolling budget allows for more precise planning and control.
Consequently, it reduces budgetary uncertainty. Rolling budgets are short-term, not long-term
plans. This allows management to predict the company's future sales and profitability;
Adapting to alteration: A budget covering 12 months can be considered a long-term budget.
This is because of technological advancements. Technology evolves at a rapid rate. This may
prompt the organization to adopt new technologies. The budget must also be revised in light
of assumptions; Spend wisely: Managers have a tendency to spend more money, even when it

is not required. In contrast, a subordinate manager may be required to invest in identified
opportunities. It serves as a guide for spending money wisely.
This requires additional effort, time, and resources. Employees devote many hours to
budget preparation; Employees can become demoralized if they perceive that budget targets
are constantly changing. Spending a great deal of time preparing a budget can demoralize
employees; Uneven Update: The biggest drawback of rolling budgets is that they are not
updated throughout the entire period. Only the increment period is updated. In contrast, the
incremental period may contain new assumptions. These assumptions are not accounted for
in the budget's original proposal. (https://www.facebook.com/boradsanjay, 2018)
BENEFITS AND LIMITATIONS OF INCREMENTAL BUDGET
Incremental budgeting does not require complex calculations or in-depth analysis by
finance or accounting professionals. This type of budgeting, however, requires only a few
assumptions. Stability: Incremental budgets work well for businesses with primarily static
expenditures because this method of budgeting ensures funding stability over longer time
periods. Consistency: Because incremental budgeting relies on data from the prior period, it
ensures that your total budget remains constant over time.
Supplemental budgets are adjusted annually based on department needs, so it is not
uncommon for departments to spend as much of their budget as possible in order to receive
more funding in the following fiscal year. When new budgets are based on the numbers and
line items of previous budgets, there is little room for funding innovative ideas. Custom
campaigns are discarded due to a lack of funds to invest in innovation. One of the primary
assumptions underlying incremental budgets is that your company's operations will remain
largely unchanged (i.e., they experience continuous stability). (www.mosaic.tech, n.d.)
BENEFITS AND LIMITATIONS OF MASTER BUDGET
Master budgets collects all the smaller budgets and compiles them into one
overarching budget. The benefit of this kind of budget is that it gives an overview of the
company’s budget and reveals how much the company is earning and spending as a whole. It
also has the advantage of having the ability to identify problems and plan ahead.
The limitations are the lack of specificity as you wouldn't be able to determine how
much does departments are spending on a monthly basis as the amount will be added to all
the other departments spending as one sum. Another disadvantage is that it is difficult to
update or read and understand. (The Advantages of Bottom-Up Budgeting, 2022)
BENEFITS AND LIMITATIONS OF FLEXIBLE BUDGET

A variable budget provides organizations with a more precise view of their budgets in
the event of fluctuating costs and profit margins. Possibility to increase earnings: Variable
budgets, unlike static budgets, adapt to increased sales. Consequently, as a company's
revenue increases, it may be in a better position to decide where to improve marketing
initiatives or other activities. Economy in budgeting: With a variable budget, it is simpler to
modify a budget that has not yet been finalized in terms of income or other variables.
Complicated Tax Calculation: The difficulty in estimating an organization's tax
liability is a disadvantage of variable budgets. In order to avoid accruing interest, many
organizations transfer cash to the tax authorities on a quarterly basis as opposed to at the end
of the year. When a company cannot predict its future earnings, it may be difficult for it to set
aside sufficient funds to cover its tax obligations. Because variable budgets contain numerous
estimates, budget preparation can be more difficult and time-consuming than for a static
budget. A fixed budget requires elementary mathematics, whereas a variable budget
necessitates algebra. (Ocean Financial Centre, Singapore 2023)
BENEFITS AND LIMITATIONS OF PLANING ANG CONTROLING
Budgetary control and planning is the comparison of diverse action revenues and
expenditures to budgeted amounts. The advantages are that it maximizes profits To
accomplish this objective through proper planning and coordination of various functions. The
operations of various departments and industries are effectively coordinated. All efforts are
combined to achieve the organization's common objective. The variances between planned
and actual performance will permit the identification of weak spots. The budgetary control
plays an important role in reducing production costs in order to increase sales.
The limitations are the unpredictability of the future, as the forecasts may not always
be accurate. Revision of the budget is required. Budgetary control depends on coordination
between departments; therefore, a lack of coordination between departments leads to poor
performance. Budgetary Control may cause functional departmental conflicts. Budgetary
System is dependent on the support of top management, as its collapse would result from a
lack of support. (Sona, 2022)
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