Finance Report: Accounting in Context and Budgetary Control Analysis

This report delves into the core concepts of accounting and budgetary control within complex operating environments. It examines the purpose and scope of accounting, its role in decision-making, and its fulfillment of societal expectations and stakeholder needs. The report explores the main branches of accounting, job skill sets, and competencies, as well as the role of technology in modern accounting systems. Ethical considerations, compliance, and regulations are also analyzed. Furthermore, the report includes a cash budget, financial statement development, and the computation of relevant financial ratios such as liquidity, profitability, investment, and asset usage. A critical assessment of business performance is provided, along with the benefits of contemporary accounting software. The report concludes with recommendations based on the financial analysis, emphasizing the importance of accounting and budgeting for business success.

Accounting in Context and Budgetary Control

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK 1............................................................................................................................................4
Purpose and scope of accounting in complex operating environments......................................4
Critical examination of accounting function in decision making and fulfilling societal
expectations/needs and meeting stakeholder..............................................................................4
Main branches of job skill sets and accounting and competencies.............................................5
Accounting system and role of technology in modern day accounting......................................6
Issues of ethics, compliance and regulation and extent to which they are threats or constraints
for the company...........................................................................................................................6
Prepare cash budget.....................................................................................................................7
TASK 2............................................................................................................................................8
Develop year end financial statements, taking into account conventions, accounting principles
and standards...............................................................................................................................8
Compute relevant liquidity, profitability, investment ratios and asset usage.............................9
Critical assessment of performance to business year on year with relation to relevant
benchmarks as well as any limitation to use financial ratios as performance measures...........10
Outlining the benefits and advantages of contemporary accounting software packages with
instance of products in the marketplaces. ................................................................................10
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The report prepared as under takes in account the concept of budgetary and accounting
terminologies as well (Almagtome, 2021). It further explains how the business can make better
use of such terms for ascertaining results which would be useful as well as helpful in attaining
and achieving set goals. It also considers preparation of statements and records such as income
statement, profit and loss account, balance sheet etc. There are many roles being performed and
carried out by competitors in modern times which are important to be examined. Accounting
would be useful in minimizing errors and cutting down costs as well.
TASK 1
Purpose and scope of accounting in complex operating environments.
The main aim of accounting is to prepare report on financial data in context of
performance rendered, financial positioning and related cash flow statement of the company.
This sort of information is then further used for reaching decisions as in what ways the business
can be managed, invested or can lend money to it. It is basically a process which would help in
keeping records, summarising, analysing and at last reporting the data which is more concerned
with the various financial transactions which take place in a firm. Accounting is helpful in
playing a vital role in keeping a track of expenses incurred and income generated, ensuring
statutory compliances and providing investors, government with quantitative financial data that
can be used for carrying out business related decisions (Fischer, Ellman, and Schochet, 2021).
Objectives of accounting in every business are to record transactions in a systematic manner,
sorting and examining them, preparing financial records and transactions, assessment of financial
position and aid in process of decision making with the help of financial based information and
data related to companies. Accounting thus helps to present complex and complicated data in a
way which would prove to be more simple and easier as well. It would help in preparation of
accounts in such a way which will serve the purpose right.
Critical examination of accounting function in decision making and fulfilling societal
expectations/needs and meeting stakeholder.
Importance of Accounting in organisation: It plays a important role in the execution of
the key functions related to management of a company. It further helps in providing financial

data such as percentage of profit over capital, management efficiency in monitoring and
positioning of capital investment (Gao, 2021).
Important for developing plans: Proper planning is mandatory for successful completion
of several activities which are concerned with management. Planning such as planning of funds,
cash, sales, achieving fixed targeted profits and generating revenues which are dependent on
accounting related information and data available with management authorities in a business
enterprise.
Important for maintaining coordination: It performs one of the main functions which
would be useful and helpful in attaining the final goal as well as target of the business with the
help of maintaining coordination among several activities in various departments. It would also
help the management in performing adjustments in purchasing and selling between operational
activities, expenses associated with income and sales with debt receivable as well to a larger
extent.
Helpful in preparation of budgets: It is counted as an essential element for running a
business enterprise. Accounting would be providing the historical data which would be
contributing in preparation of budgets. It further contributes to understand what amount can be
used for carrying out future based plans and what shall be kept aside.
Important medium of communication: Accounting further plays a necessary role as a
medium to communicate huge data available from several departments, management plans of
action in different departments. It is considered one of the best way through whivh one can
render required information such as timing of purchase, expense related to purchase and sales
price as well in the management department. It further would also help one to understand and
assess where the business stands in the market (Magnan, and Parbonetti, 2018).
Main branches of job skill sets and accounting and competencies.
There are many branches which are counted and included in the accounting such as:
 Financial accounting: It is a sort of accounting branch which would help in keeping day
to day transaction. These transactions would take in account the expense and income of
the organisation. The framework of transaction are being recorded in the form of
financial records in the form of commercial enterprise which would include income
statement, balance sheet and trial balance. It would also play a important role in
examining the position of the firm which would help in assessing decision making.

 Managerial accounting: It is the operational activity which would render full information
of the internal business related structure. It would work under the rules and regulations of
finance related activities by able to maintain the accounting standards. By able to follow
such steps the business is able to generate required profits and business forecasting which
would include planning, organising and controlling as well.
Accounting system and role of technology in modern day accounting.
Accounting is a specific department of business world which would cover the whole transaction
of the organisation. Such transaction would take in account the income being generated and
expenses such as account payable and receivable as well.
Role of technology in accounting system:
Less time consuming: Accounting is the process which contain more information of company
transaction. This process would be more lengthy and time consumed which would effect the
accountant performance. In the current time technology also would a accountant a relief due to
helping in completion of work on a time to time basis (Martins, and Sa, 2018).
Easy in controlling and alteration: The influence of technology in accounting system are helpful
for the business and for mainly accountants. It would further increase the productivity and
efficiency of the accountant which helps them to record the transaction in a easier in few times
and also is helpful in modification of transaction taking lesser time.
Issues of ethics, compliance and regulation and extent to which they are threats or constraints for
the company.
The term “Ethics” basically stands for determining the variation or difference between what is
wrong and what is right. At times it is true to be said that ethics is a conditional phrase which
would differ from person to person. Another element of accounting is regulation which would be
helpful for maintaining the rules and regulation of a company. By running business through
several ways and by the use of some ethics and regulations the market areas and tapping of
customers can be increased. Establishing honesty and trust would help to gain engagement from
consumers and would help to gain more leads from the environment. There are many issues
being faced and come across by accountants such as :
 sins related to omission: There might be times when there would be mistake made by the
person facilitating and carrying out accounts which are necessary for every person for the

assessment and prediction of related growth and success of the business (McCarthy,
Kusaila, and Grasso, 2019).
 Pressure in manipulation of figure: The company is required to have no alteration or
modification in figures being recorded by the accountant at the time of recording
otherwise it might lead to false results which would hamper the growth of businesses in
long run.
Prepare cash budget.

TASK 2
Develop year end financial statements, taking into account conventions, accounting principles
and standards.
Income Statement
Particulars Amount
Sales 400000
Less: Opening Inventory 32000
Less: Purchases 158000
Add: Closing Inventory 28000
Gross Profit 238000
Rent & Rates 10000
Energy 6000
Wages & Salaries 34000
Bad debt 8000
Provision for doubtful debts 5000
Net Profit 175000
Balance Sheet
Liabilities Amount Assets Amount
Capital 180000 Premises 160000
Less: Drawings -12000 Equipment 150000
Shareholder's Capital 168000 Trade Receivables 45000
Net Profit 175000 Inventory 28000
Trade Payable 46000 Cash at Bank 14000
Accrued Expenses 3000
Provision for Doubtful
Debts 5000
397000 397000

Compute relevant liquidity, profitability, investment ratios and asset usage.
Current Ratio: Current assets / Current Liabilities
= Stock + Sundry debtor + BR + Cash at bank / Sundry creditors + bills payables
= 200,000 + 100,000 + 10,000 + 40,000 / 100,000 + 50,000
= 350,000 / 150,000
Current ratio = 2.3 : 1
Interpretation: The ideal ratio of current ratio is 2:1. Company's current ratio is observed to be
2.3:1 thus company is examined to be performing well and the business is functioning effectively
and efficiently.
Quick Ratio: Quick assets / Current liability
= Sundry debtor + BR + Cash at bank / Sundry creditors + bills payables
= 100,000 + 10,000 + 40,000 / 100,000 + 50,000
= 150,000 / 150,000
Quick Ratio = 1 : 1
Interpretation: The ideal ratio in such cases is 1:1 and the result recorded is also 1:1. Company
further is demanded to manage the positioning and try to improvise the results rendered.
Debt equity ratio: Debt / equity
= Debenture / Share Capital
= 420,000 / 200,000
Debt equity ratio = 2.1: 1
Interpretation: ABC limited debt equity ratio is noticed to be not that good which is 2:1.
Company is observed to be mainly depending on the long term based borrowings which is not
beneficial for the organisation financial structure.
Proprietary Ratio: Proprietors Fund or Shareholders Fund / Total Assets
= (Share Capital + Reserve & Surplus + profit & loss / Total Assets) * 100
= (200,000 + 40,000 + 40,000 / 840,000) * 100

= (280,000 / 840,000) * 100
Proprietary Ratio = 33.33 %
Interpretation: The reason behind more dependency on long term borrowings of the business it
can come across many finance related issues and problems keeping future conditions in mind.
Proprietary ratio is depicted to be lower and the business must work over it.
Recommendations
From the above computed financial analysis of ratio, it can be suggested that the
performance examination can be explained as a procedure of evaluating and studying the
positioning of the business and respective persons. It is a very crucial process for a company to
achieve their future objectives without any unwanted wastage of resources. The short term
position of the organisation ABC limited is good but when observed in long term positioning of
the company it is mainly depending over long term financing which is thus very riskier in
context of business. According to the ratios being computed company's current asset are resulting
to be more than twice with current liabilities. Quick ratio of the business is on ideal position that
shows that enterprise is able to work and function efficiently and effectively by maintaining a
balance between current liabilities and assets.
CONCLUSION
From the above prepared report it can be asserted that preparation of budgets and
examination of accounts as well as records prepared would be helpful in the long run. It can be
said that budgeting and accounting plays a vital role in the smooth running and functioning of the
business. It is important for every company to understand the importance of analysis of cash
budget, financial records being developed by the organisation. It also computes related liquidity
and profitability of the business which would further serve as a guide in finding where the firm is
lacking and lagging behind and how they can cope up from it.

REFERENCES
Books and Journals
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Fischer, D., Ellman, O. and Schochet, S., 2021. The Decline of Substance over Form in
Accounting. Accounting, Economics, and Law: A Convivium.
Gao, H., 2021, September. Research on the Construction and Hierarchical Design of Enterprise
Internal Accounting Control Objectives Based on Cloud Computing. In 2021 4th International
Conference on Information Systems and Computer Aided Education (pp. 70-73).
Magnan, M. and Parbonetti, A., 2018. Fair value accounting: A standard-setting perspective.
In The Routledge Companion to Fair Value in Accounting (pp. 41-55). Routledge.
Martins, A. and Sa, C., 2018. The computation of taxable income when accounting numbers are
not reliable: a note on presumptions. International Journal of Law and Management.
McCarthy, M., Kusaila, M. and Grasso, L., 2019. Intermediate accounting and auditing: Does
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Sargiacomo, M and et.al. 2018. The Origins of Accounting Culture: The Venetian Connection.
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Vijaya Kumar, C., 2018. Public Financial Accounting and Auditing: Principles and Practices.
In Public Budgeting in India (pp. 185-202). Springer, New Delhi.