Accounting for Managers: Financial Analysis and Business Plan Report

This report provides a comprehensive analysis of accounting for managers, focusing on the creation and interpretation of financial statements within the context of a business plan for an architectural services firm in Brisbane, Australia. It covers the legal form of the business, suitable financial sources, and the preparation of projected balance sheets and income statements. The report emphasizes the role of accounting in providing crucial financial information to stakeholders, both internal and external, enabling informed decision-making. It also delves into the importance of financial statement analysis, detailing various methods like horizontal, vertical, and ratio analysis, to assess business performance and make strategic decisions. Finally, the report examines the impact of accounting information on management decisions, particularly regarding profit allocation and shareholder value, offering a practical perspective on financial management within the architectural services industry.

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Accounting for Managers

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Table of Contents
1. Business Plan...............................................................................................................................3
2. Legal Form for business..............................................................................................................3
3. Financial Sources.........................................................................................................................4
4. Preparation of Financial Statement..............................................................................................5
Projected Balance Sheet...............................................................................................................5
Projected Income Statement.........................................................................................................7
5. Role of Accounting......................................................................................................................9
6. Importance of Financial Statements Analysis...........................................................................11
7. Management Decisions..............................................................................................................12
References:....................................................................................................................................13

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1. Business Plan
The new business plan is based on to provide architectural services to the different clients or
customers across Brisbane, Australia. The demand for the apartments designed on architectural
basis has been rapidly increased in recent years due to the desire or wants of people to live closer
proximity where they will be able to play, socialise as well as work. The rapid increase of
population in this region has certainly fuelled more oppturnities for this type of business plans. In
addition, demand for urban apartments has also been increased which is also supported by
government in infrastructure development that certainly attracts more number of architects to
start their new business operations. Classic Architects is the proposed name for this new business
(Collier, 2015). This will provide advanced architectural services to design practical and creative
solutions for development of urban apartments which mainly focuses on niche market across the
region. The business will be sole proprietorship in legal form as its owner is one of renowned
architect in region with vast experience and design capabilities mainly specialised to develop
urban apartments based on new designs. In staring two years, business will be operated from
apartment which has been designed by owner. This will definitely provide designing talent of
owner as tangible proof and helps him to promote his business. The sources like e-mails, phones,
or face to face meetings can be used to interact with different clients and mainly deals in the
infrastructure industry to provide best architectural design solutions to clients or customers.
2. Legal Form for business
Sole proprietorship will be the best suitable legal form of ownership for the business operations
of Classic Architects. This is an easy and cost efficient legal form of business to start. This will
also require minimal legal requirements to start new business which help to reduce extra

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administrative expenses. Owner has the flexibility to make his decisions and helps to control
overall business operations (Hartley, 2014). Owner is also able to transfer business to other
person without any legal considerations. This form also allows owner to retain all 100% profits
for their business. This form has fewer paper work as well as legal restrictions. There is no need
to maintain financial statements in sole proprietorship and owner also not require paying extra
taxes to the government.
3. Financial Sources
There are various sources of finance available to finance capital within new business operations.
This includes options like personal capital, retained profits, asset sales, leases, and trade credit as
well as bank loans.
Personal capital:
The owners or sole trader can invest their own savings in order to expand their business
operations (Dhamija, 2015). The Sole traders are confident enough for future perspectives of
business operations and always prepare to invest some additional savings in order to enhance
their overall business operations. This financial source also reduces burden related to interest
payments over the sole traders or owners and at the same time, also able to retain or maintain full
control on their overall business operations.
Retained earnings:
The profits which are not distributed as the dividends but retained to enhance the business
operations are termed as retained earnings or profits. A business profitable by nature always
generates positive value for net income (DRURY, 2013). The Sole traders can use retained

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earnings for expansion as well as growth of their business operations instead to draw larger
amount of money.
Bank loans:
The amount of capital borrowed from banks for a specified period under an agreement of
repayment of sum in predefined time is termed as the bank loans. The amount of repayment is
always depends on loan duration, its size as well as interest rates (Braun et al, 2014). Due to this,
business will be guaranteed capital for specific period. There is no need to share profits with
banks as already paying interests.
4. Preparation of Financial Statement
Financial statements for the business are essential for proof reading of external stakeholders and
internal stakeholder as well so that they can get informed with the financial performance of
business. At the same time, it also helps to take supportive decision for the expansion and
development of business. Along with this, banks also require the financial statement to evaluate
the performance of business as it is enough or not in the situation of repayment and collecting the
loan amount (Debarshi, 2011). The business plan is projected to deliver the architectural services
to the clients of Brisbane, Australia so; there is requirement of finance to meet the operational
expenses and taping the growth for the business. Financial statement includes the format to
present the income, asset, expense and liabilities are balance sheet, income statements and cash
flow statement that reveal the entire information attached to the business.
Projected Balance Sheet

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Balance Sheet For Architectural Services
Particular Amount AUS$
Current Asset
Cash 50000
Petty Cash 10000
Inventories 15000
Pre-Paid Expenses 35000
Fixed Asset
Leasehold 50000
Property and Land 70000
Renovations and Improvement 7000
Furniture 10000
Vehicle 10000
Equipment and Tools 15000
Computer Equipment 16000
Stationary 8000
Others 3000
Total Asset 299000
Current /Short Term Liabilities
Credit Card Payable 10000
Account Payable 23000
Interest Payable 3000

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Wages 22000
Income Tax 8000
Long Term Liabilities
Loans 0
Total Liabilities 66000
Net Asset 233000
From the above prepared project balance sheet for the architecture service business, it is
predicted that the business would have the current liabilities as AUS$66000. Along with this, the
asset is depicted as AUS$299000 from the establishment of business in Brisbane, Australia. The
balance sheet for projected business the net asset is assumed as AUS$233000 that would be
feasible for the projected business to have with the business.
Projected Income Statement
Architectural service providing business is presented with the statement of income in year as
follows
Projected Income Statement for Architectural Service
Particular Amount (AUS$)
Sales $415,000
less cost of goods sold $80,000
Others $0
Gross profit/net sales $335,000
Expenses

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Accountant fees $2,000
Advertising & marketing $10,000
Bank fees & charges $1,500
Bank interest $3,000
Credit card fees $2,500
Utilities (electricity, gas, water) $1,500
Telephone $2,000
Lease/loan payments $24,000
Rent & rates $25,000
Motor vehicle expenses $3,000
Repairs & maintenance $3,500
Stationery & printing $1,800
Insurance $2,500
Income tax $4,500
Wages $10,000
More… $5,000
Total Expenses $101,800
NET Profit $233,200
On the above cited profit and loss account statement for the purpose of showing with the
requirement approval of loans for business. The statement shows that the business is expected to
generate the net profit of AUS$233200 in a year by delivering the architectural service.

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The above presented financial information would be useful for the banks to assess the
requirements of capital for the business to establish in effective manner and support to business
development.
5. Role of Accounting
The accounting plays significant role within the business as provide adequate financial and
accounting information to different external as well as internal stakeholders which enables them
to take efficient decisions in order to enhance overall growth and expansion of business
operations (Weil et al, 2013). Accounting information is provided to different users like
managers, investors and owners that enable them to effectively analyse and evaluate the financial
performance of the business. Accountants are the person responsible for the preparation of
effective accounting information and provided to different stakeholders that enable them to take
financial decisions in order to enhance the business.
Management accounting and financial accounting are two important aspects of accounting. The
main objective of management accounting is to provide accurate, timely, relevant information to
top management is standard format that will enable them to take adequate financial decisions.
Internal stakeholders play significant role in accounting information of management accounting
(Smith, 2017). The main objective of financial accounting is to provide accounting information
to different groups or individuals both outside and inside organizations in order to enable them to
analyse financial performance of business. The financial reports in financial accounting are
summarised using balance sheet, cash flow statement as well as income statements that enable
the stakeholder to analyse the current financial position of the business.

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(Source: Bamber and Parry, 2014)
Further, there are various steps in the accounting process. The process starts with collection and
analysis of financial documents. Then, journals and ledger accounts are posted with financial
entries (Bamber and Parry, 2014). After that preparation of trail balance and entries are adjusted.
The, preparation of trial balance in adjusted manner is takes place with financial statements are
also prepared. Further, closing entries are prepared in ledger accounts and accordingly
adjustments are done in the closing entries of trial balance.

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6. Importance of Financial Statements Analysis
Financial statement analysis is crucial for the business to present the performance of business in
a particular time period with the internal and external purpose. Statement analysis leads to the
taking productive decisions for the business to take into a competitive advantages business
through defeating the market rivals (Wahlen, et. al, 2014). On the other hand, it is important for
the external stakeholders and general public to draw the real picture of business among the
people so that they can evaluate the business performance and move towards the business for
investment purpose if financial statement shown the turbulent financial data. So, it is evidenced
that the analysis of financial statement is useful the business manager to confer the real picture of
business and take correct action to enhance it relevant manner (Fridson, et. al, 2011).
There are many types through which the financial statement can be analyzed to draw the
conclusive measure for business decision making. The following types helps the managers to
evaluate the statements analysis are as external analysis, horizontal analysis, vertical analysis,
internal analysis, ratio analysis and trend analysis (Loughran, 2011).
Where, horizontal analysis referred to the comparison of financial statement of business with
different financial years to assess the performance of business as it would be helpful to detect the
financial measures how they are changing. It is also important to found out the reasons behind
the performance of business. With this, vertical analysis is also useful for the business though
which the financial ratios are calculated with different time duration. Further, internal analysis is
also crucial to provide the financial measures to the management about the performance of
business as it is performing well or not and it helps the management to take the effective
decisions for the betterment of business. External assessment is also crucial for the external

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stakeholder those are unable to access the internal information they can measure the financial
performance of business and can take productive decisions (Gilbertson, et. al, 2013). Ratio and
trend analysis is also creates the decision making strategy for management through detaining the
information from the ratio comparison as profit, leverage and capital gains.
7. Management Decisions
The major aim of the business is to earn the profit from the business but it not ends with this,
here it is also necessary to take important decision regarding the profit as it should be kept with
the business as retained earnings or business should distribute it among the shareholders
(Gilbertson, et. al, 2013). Over the scope of architectural business it would generate significant
profit from the business activities in Brisbane, Australia. Over the decision of internal
management in concern to the sharing of profit or retaining with business, management would
not kept the entire profit earned in a year with the banks. It is also evident the distribution of
profit among the shareholders is a value adding strategy of the business to attract and return back
the satisfactory reason to being attached with the business, so business would also distributes the
profit to shareholder for preposition of brand business in market (Burrow and Kleindl, 2017). If
business generates net profit as AUS$300000 than it would distribute the profit to preferences
shareholder and equity shareholder in relation to their investment. On the other hand, it some
portion of profit would also keep with business to meet the issues as contingency and top
management conflicts.

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References:
Bamber, M. and Parry, S. (2014) Accounting and Finance for Managers: A Decision-making
Approach.UK: Kogan Page Publishers.
Braun, K., Tietz, W., Harrison, W., Bamber, L. and Horngren, C. (2014) Managerial
accounting.UK: Pearson.
Burrow, J. and Kleindl, B. (2017) Business Management. USA: Cengage Learning.
Clifford C. and Warner, R. (2017) Form a Partnership: The Complete Legal Guide. USA: Nolo.
Collier, P. (2015) Accounting for managers: Interpreting accounting information for decision
making.USA: John Wiley & Sons.
Debarshi, B. (2011) Management Accounting. India: Pearson Education.
Dhamija, S. (2015) Financial Accounting for Managers, 2/e. India: Pearson Education.
DRURY, C. (2013) Management and cost accounting.USA: Springer.
Fridson, M. and Alvarez, F. (2011) Financial Statement Analysis: A Practitioner's Guide. USA:
John Wiley and Sons.
Gilbertson, C., Lehman, M. and Gentene, D. (2013) Century 21 Accounting: Multicolumn
Journal, Introductory Course, Chapters 1-17. USA: Cengage Learning.
Hartley, W. (2014) An introduction to business accounting for managers.UK: Elsevier.
Loughran, M. (2011) Financial Accounting For Dummies. USA: John Wiley and Sons.
Smith, M. (2017) Research methods in accounting.USA: Sage.
Wahlen, J., Baginski, S. and Bradshaw, M. (2014) Financial Reporting, Financial Statement
Analysis and Valuation. USA: Cengage Learning.