Managerial Accounting: Accent Group Limited Budgetary Analysis

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MANAGERIAL ACCOUNTING
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Executive summary
The details consist in relation with the company accent group limited as the proper analysis
evaluated by the company executed to provide the analytical review. Company had prepared
financial statements of its all the subsidiaries, it is reasonably considering to allocate the proper
records and statements on the historical aspects and being require to promote more relatively
aspects in the periodical statements. All the budgetary strategy and details in respect to master
budgets were prepared and all other budgetary details to consider and evaluate each strategy
were included in the master plans. AGL had properly disclosed its plans and policies with
respect to evaluation purpose and thus consider its strategy plans.
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Table of Contents
Executive summary.................................................................................................................2
Introduction............................................................................................................................4
(a) Elements require for preparation of master budget............................................................5
(b) Compare top-down and bottom-up approach to the budget process..................................8
(d) Presentation of budgeted income statement and comparison with the actual statement of
year 2019...............................................................................................................................12
Conclusion.............................................................................................................................13
References.............................................................................................................................14
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Introduction
The details provided in this report are in relation with the company ‘ACCENT GROUP LIMITED’
engaged in the business of retailing and distribution of footwear. Company is also engaging in
endorsing various brands like Merrell, vans, cat, timberland, podium sports, and athlete’s foot
etc. Thus company is dealing under various projects and operating from more than 100 years.
The company was founded in 1981, and headquarter is associated at Melbourne, Australia.
Company provides its services in the areas of New Zealand also. This also provides
opportunities for other sector for carry out their activities and operates under various brands.
Company covers various brands and under that, the brand van is one of the most leading
brands over the world and thus that covers the amount of around $2 billion. Due to the vide
coverage of accent group limited over different curriculums, this attract the investors to invest
and provide their funds under various sectors. Different brands operating under different
countries and operated around more than 150 countries. This creates the credibility and
trustworthiness regarding various brands of company in all over the world.
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(a) Elements require for preparation of master budget
Master budget is a combination or aggregation of various budgets.in which the entity is
operating and which explains the company directions, actions, targets and require to be needed
for a particular period of time. Master budget refers to a planning tool through which the
various activities are requiring to be operated. And thus it would be necessary for effective
analysis of various functions of the budgetary analysis. (Saeed, et. al., 2016)
Master budget consists of various elements that are explained in reference to accent group
limited. Elements are referring to be the following
 Sales budget
 Direct material budget
 Direct labour budget
 Production budget
 Cash budget
 Selling and administrative budget
 Budgeted financial statements
1. Sales budget: Sales budget refers to the budget in which all the sales revenue targets and
units are consider or included. These budgets are preparing for an overview analysis to be
carried out or achieved over a period for future target period. These budgets are preparing for
an analysis; this budget consists its activities with the previous targets. The budget prepares
from the achievements carry out earlier and how much targets require to be achieve over a
target future period (Siyanbola and Tunji, 2013).
2. Direct Material budget: Direct material budget is prepared on the basis of material used in
carry out the activities. This budget provides a proper analysis that a material used for an
evaluation. This budget is very simple for preparing the data as it includes the inputs received
and transferred or consumption. For preparation historical figures are require to be consider
and inflationary rates are coordinated for that.
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3. Production budget: Production budget refers to budget which is prepared for future forecast
production consider over a period of time. Production budget is based on sales budget.as sales
are necessary for any business activity there is a necessary requirement to first evaluate the
sales, and therefore for quantify the sales.it is necessary requirement of production. Therefore,
production budget helps to evaluate and identify the actual target needed to be produce
(Kovaleva et al., 2016).
4. Cash budget: For proper evaluation and analysis of an effective business, it is an essential
requirement to comply with the liquidity requirement. And for consider this evaluation, there is
a necessary requirement to comply with a proper plan and therefore it is necessary that every
entity should necessarily prepare cash budget. It helps in identification of area where the cash
outflows. Cash budget is most common budget as it consists the elements related to cash only.
This helps to proper evaluate the factors to be included and identify over a period of time.
5. Selling and administrative budget: this type of budget is generally not used as a common
budget, as mostly a proper classification is not prepared by the entity. This type of budget
consists of relation with expenses as require to incur by various entities. Entities incur huge
expenses in relation to these expenses require to analyses and allocate to identify the proper
allocation. This budget covers the areas in relation to expenses.
6. Direct labour budget: These type of budget is preparing to identify and calculate the number
of labour hours require to produce the require number of units. Therefore, these types of
budgets are based on production budget as production budget is prepared on the basis of units
produced. And for direct labour budgets, it is necessary require that proper identification for
units produced.so it is a general requirement for preparation of labour budget is that it is
necessarily related to proper analysis of labour hours (Isaac, Lawal and Okoli, 2015).
7. Budgeted financial statements: Under this type of budget, the financial statements are
prepare on the basis of budgetary figure and are recognized to be prepare by considering the
elements require being cover under the strategy approach. This approach considers the overall
analysis and prepares activity needed to cover for future period over a particular period of
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time. This budget provides an overall activity needed to be performing for achieving the
common goal of an entity.
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(b) Compare top-down and bottom-up approach to the budget process.
Budgets can be prepared for both the type of approaches i.e. top down approach or bottom up
approach. In case of top down approach a budget is prepare by the top management in relation
to overall management of the company. And on behalf of that budget, all the departments
related with the entity prepare separate budget for their own departments, this helps the
departments of the organization to create or build a separate criterion for achievements. These
budgets navigate or help in achieving the procedural achievements. These are the targets as
necessary to be reminding from time to time. (Russell, 2015)
Under top down budgeting approach, the executive relates their activity and identify each and
every activity for preparation of the budget. And so if executive take initiatives in preparing the
budget, it helps the lower management to focus on the areas on which targets are provided by
the top executives.
The main advantage of this approach i.e. top down approach is that the lower management
need not require making focuses on activities like preparation of budgets of the separate
departments. As the responsibility is provided to the top executives and thus it helps the lower
management to focus on achieving targets and provides reporting of such achievements.
The main disadvantage in relation to this approach is that in preparation budget under this
strategy the top executives are not able to interact with day to day activities require to carry
out or consider being analyses. So this causes the deficiency recognize to be associate with the
targets to be analyses. (Wohlfart. et. al., 2016)
In case of bottom up budgeting approach, the budgets are requiring to be preparing by the
mangers of the organization. This approach helps in easy interaction of the people with the
organization. In this technique budget are prepared and require to be submitted by the lower
managements to the higher authorities for approval. Proper analytical preparation is presented
by each person to present the budgetary analysis. If budgets are not accepted by top level
authorities, this would be return back for modification, rectification or for revision. And if
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approved it would require to be included in the budget prepare by the authorities after
considering each and every budget prepare by each manager of the department. And thus after
carry out all the activities it would be treated as master budget. (Isidiho and Sabran, 2016)
The basic advantages of this type of approach is that the employees are too much familiar to
such budgets as it involves the participation of even employees, which helps in better
communication, easy exchange of information between the organization and the other
personalities of the organization. So, easy communication helps in analysis of each and every
activity.
Disadvantage covered under this approach is that it is a huge expensive cost approach as it
requires data or analysis from various departments. And for the conclusion of such data it is
necessary to combine or reconcile each and every activity provided by the departments. As
usually if data or details provided by the departments, it usually wholly not related with the
business activities and thus if managers focus only on the departmental aspects, it would
definitely affect the organizational goals to be focuses upon.
Thus both the approaches require providing their analysis as per the effective requirements.
Both the approaches play their own role in respect to preparation of its budgets. In respect to
accent group limited, the company is operating from a long period of time, and operated in
various sectors, therefore the company should have to follow top down approach, as this
approach is require to provide separate tasks to the specific departments of the company. AGL
Should require to provide a proper master budget of the whole entity and so be provided to
separate departments to the entity and thus it helps to proper analyses the departmental
activity on the basis of the budget setting out by the definite targets. (Williams, et. al., 2017)
AGL needs to divide its activity in such manner as helps in achieving its targets and considers
collecting each and every activity which deals with proper analysis. To derive a centralized
factor and for proper allocation top down approach is necessary relevant to provide the defined
targets. So in case of AGL it would be definitely consider to evaluate effectively.
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Various other advantages of bottom up budgeting are refers to as this technique increases the
motivation as the classification of budget define the ownership of the budget. As this technique
consider the budgets factors from the employees. Therefore it will be treated to be familiar
with the department and must consist of better information. Under bottom up approach the
communication process between departments are treated to be better communication
between the departments and hence consider as being advantages of bottom up approach. It is
the main aspect that senior most management will determine the strategy and works by proper
concentration over the strategy. If the managers perform their responsibility in a well-defined
manner, it will increase the effective understanding and a defined commitment strategy of
management.
The other disadvantages in relation to the bottom up approach are referred to be follow as this
approach provides bad decisions if the management or managers are in experienced or consists
of lack of knowledge. Under this strategy budgets are received from different employees of
departments and therefore it is a very time consuming activity. And so the budget preparation
strategy is being very slow and through that disputes may arise.
If the senior most members are not satisfied with the budgets received from the employees,
the budgets may be resent for proper acknowledgement and hence it would be referred as loss
of control over budget. Sometimes management set the targets in such manner that are
reflected as the easy targets, to be achieved due to the inability of management to focuses
upon and hence also treated as the disadvantages of the approach.
Both approaches plays important role in respect to their strategically analysis as the both
provides its own aspect with the nature of requirements .thus both the approaches reflects the
performance of activities as per the requisite.
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(c) On the basis of annual report, preparation of income statements for the year 2018-2019.
in 000's
Amount in $ Amount in $
Particulars 2018 2019
Revenue 703181 773499
Other income 2 2
Total (A) 703183 773501
Expenses
Finished goods used 292100 315468
Changes in inventory of finished goods 13390 14461
Employee benefit expenses 145508 148418
Depreciation 24133 24616
written off assets 65 66
Rental expense 81644 83277
Advertising and promotional expenses 24425 24914
Travel expenses 5962 6081
Warehousing expenses 22107 22549
other expenses 28350 28917
finance costs 4581 4673
Total (B) 642265 673440
Profit before income tax expenses 60918 100062
Details are provided in respect to the accent group limited as the budget consists of reporting
in relation with the year 2018 and 2019. On the basis of annual report of year 2018, the report
is adjusted as per the details required. These figures are adjusted as per the inflation rate or
general requirements. (Williams, Denny and Bristow, 2017)
Amounts evaluated are being adjusted with the inflationary rates as disclosure in relation with
the requirements. Sales and other revenues are increased with the percentage of 10%. Cost of
goods sold and other items related with the cost are requiring to be growing with a rate of 8%.
And all the other expenses in relation with AGL are requiring to be considering with an increase
of 2%. These expenses are to be proper evaluated and consider and to be proper recorded so
that, the effective disclosure can be recorded. It is necessarily to be consider that an effective
schedule requires to be prepare for proper allocation of the resources.
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(d) Presentation of budgeted income statement and comparison with the actual
statement of year 2019
Details in 000's
Amount in $ Amount in $ Differences in $
Particular 2019 2018 Comparison
Revenue 773499 703181 70318
Other income 2 2 0
Total (A) 773501 703183 70318
Expenses
Finished goods used 315468 292100 23368
Changes in inventory of finished goods 14461 13390 1071
Employee benefit expenses 148418 145508 2910
Depreciation 24616 24133 483
written off assets 66 65 1
Rental expense 83277 81644 1633
Advertising and promotional expenses 24914 24425 489
Travel expenses 6081 5962 119
Warehousing expenses 22549 22107 442
other expenses 28917 28350 567
finance costs 4673 4581 92
Total (B) 673440 642265 31175
Profit before income tax expenses 100062 60918 39144
The figures provided in the above list are compared with the actual figures of the year 2018.
The difference arise from the comparison reflects the positive amount generated to accent
group limited. The outcome arises reflects the beneficial amount generated to the organization.
Therefore, entity is in correct direction of generating proper revenues, this would cover the
proper aspects of earning revenues and create growth and it will be in the favours of the
organization. (Paradisioti, 2018)
A comparison is necessary for an effective evaluation of the proper framework require to be
needed. It is necessary for effective evaluation of outflow of resources and to obtain a future
activity that need to evolve resources to identify the basic structure of function. The periodicity
contains in the table in relation to year 2019 and it cover the budgeted figures that contains the
targeted activity consider over the time period. The major aspect is to analyses the needed
profit statements and entity is able to achieve the proper aspects.
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