University Finance: Managing Budgets and Financial Plans Report

This report provides a comprehensive analysis of budgeting and financial planning practices within the context of a business, specifically Big Red Bicycles Pty Ltd. It begins by outlining the importance of budgeting for achieving financial goals, including revenue enhancement and cost control. The report identifies key issues such as excessive advertising costs and higher-than-expected wages, proposing strategies for improvement like reducing advertising budgets and controlling labor costs through skilled recruitment and training programs. It emphasizes the application of accounting principles, such as the money measurement and cost concepts, and their relevance in budget preparation and issue identification. The report also delves into relevant legislations and ATO requirements, including payroll reporting, monthly organizational activity statements, and financial year reporting. It then explores various techniques for managing budgets, highlighting the importance of market trend information, error recognition, and resource estimation. The report includes contingency plans to address potential risks, such as variances between budgeted and actual profits, and discrepancies in commission structures. It further discusses financial policies, including the use of spreadsheets for tracking expenses and the implementation of reimbursement policies. The report also presents a training plan to enhance employee skills in areas such as spreadsheet application, expense tracking, and sales operations. Finally, the report includes a variance report for the fiscal year 2011/2012, comparing the master budget with actual figures to identify areas of deviation and assess the effectiveness of financial planning and management strategies.

Running head: MANAGE BUDGETS AND FINANCIAL PLANS
Manage Budgets and Financial Plans
Name of the Student:
Name of the University:
Author’s Note

1
MANAGE BUDGETS AND FINANCIAL PLANS
Table of Contents
Assessment Task 1.....................................................................................................................2
Budgeting Practices and Negotiating Changes......................................................................2
Identification of Issues and Negotiating Changes..................................................................2
Basic Accounting Principles..................................................................................................3
Relevant Legislations and ATO Requirements......................................................................4
Techniques for Managing Budgets........................................................................................5
Contingency plan...................................................................................................................5
Assessment 2..............................................................................................................................7
Financial Policies of the business..........................................................................................7
Training plan..........................................................................................................................8
Assessment 3..............................................................................................................................9
Implementing contingency plan...............................................................................................13
Activity 1..............................................................................................................................14
Activity 2..............................................................................................................................15
Activity 3..............................................................................................................................15
Activity 4..............................................................................................................................16
Management Accounting and Planning Principle................................................................17
Reflections................................................................................................................................18
Reference..................................................................................................................................20

2
MANAGE BUDGETS AND FINANCIAL PLANS
Assessment Task 1
Budgeting Practices and Negotiating Changes
The practice of budgeting is closely followed in a business for the purpose of
effectively listing the financial goals of the business and ensuring that the same are achieved.
Budgets allow a business to estimate the costs and revenue which is associated with a
business and it can also be used for allocation of resources and evaluation of performance of
the business1. It is also to be noted that the tool is also used for the purpose of formulating
financial plans for a business. In this case the business of Big Red Bicycles is considered
which is aiming to achieve a net profit before tax of $1,000,000. In order to achieve this goal,
the management needs to control the expenses and at the same time also enhance the revenue
which is generated by the business.
The analysis of the budget shows that the business is focusing more on advertisement
and promotion so that more awareness can be achieved. Further, a major portion of the
expenses is due to the wages which needs to be controlled in order to achieve the objective of
the business.
Identification of Issues and Negotiating Changes
One of the main changes which is required to be made by the management is related
to reducing the budget for advertisement so that the total costs of operations can be improved.
The company mainly engages in production of bicycles which is quite a regular good and
therefore such extensive advertisement is not required. The management of the company
needs to control such expenses in order to enhance the profits of the business2. In order to
control the expenses, proper quality measures can be introduced and unnecessary costs can be
avoided. Big Red Bicycle Pty Ltd needs to maintain a good relation with retailers, so that the
1 Lauth, T.P., 2014. Zero‐Base Budgeting Redux in Georgia: Efficiency or Ideology?. Public Budgeting &
Finance, 34(1), pp.1-17.
2 Needles, B.E., Powers, M. and Crosson, S.V., 2013. Principles of accounting. Cengage Learning.

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MANAGE BUDGETS AND FINANCIAL PLANS
distribution of the products can be done freely. The expenses which is incurred by the Big
Red Bicycle Pty Ltd needs to be minimized which would also ensure that the cash outflows
for the business is kept at a minimum. The business also has sponsorship for which huge
amount of cash outflow is shown and therefore, it can be said that such expenses can be
reduced by the business.
The variable costs of the business which includes wages and salaries are shown to be
slightly higher and therefore the same can be controlled by the business. In order to achieve
this, the management needs to recruit skilled employees and labors according to their skills so
that a level of productivity can be maintained. If the efficiency level of the employees can be
enhanced than labour costs can be reduced significantly. The management of the company
needs to initiate training programs in order to enhance the efficiency level of the staff
members.
Basic Accounting Principles
The accounting concepts and principles are important for formulating an accounting
report so that proper information is included and quality of disclosures can be maintained. In
the case of Big Red Bicycle Pty Ltd, the accounting concepts and principles which are
applicable are Money Measurement Concept and Cost Concept. The concept which is stated
is considered to be important for the purpose of preparing the budget and also for identifying
the issues3. In the money measurement concept, all the transactions which are related to
money are recorded here. The business can appropriately measure the cash outflows of a
business with the help of this concept. It is the responsibility for the Senior Accountant, Pat
Roberts to monitor the cash inflows and outflows of the business. This would help the
management of the company to control the costs which is related to advertisement as well
wages and salaries of the business.
3 Schläfke, M., Silvi, R. and Möller, K., 2013. A framework for business analytics in performance
management. International Journal of Productivity and Performance Management.

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MANAGE BUDGETS AND FINANCIAL PLANS
As per the cost concept, the management needs to measure the assets on the basis of
original costs of the business. The business needs to identify the assets such as machineries
which are used for the manufacture bicycles and therefore the cost concept is considered to
be important4. The management needs to ensure that proper monitoring of the activities needs
to be done so that the activities of the business can be executed efficiently. The management
would be benefitting greatly by following this concept and the same also helps in controlling
the costs of the business.
Relevant Legislations and ATO Requirements
The Australian Tax Office implements the tax regulations and ensures that the same
are adhered to by businesses while conducting their operations. In addition to this, ATO also
makes changes to the law as and when required for effective tax compliance5. Some of the
important regulations which are administered by ATO are superannuation, payroll, income
taxes regulations.
The requirements which is needed for the reporting includes:
 Payroll reporting
 Monthly organizational activity statements
 Financial year reporting
In case of payroll reporting, one of the major requirements is to lodge report in respect
with Australian Tax Office (ATO) with the application of Single Touch Payroll Software.
There is also a need for proper reporting of transactions and appropriate maintenance of the
same so that it complies with the new process of reporting.
In case of monthly organizational activity statements, the concerned entity needs to
submit report which comprises of activities of the business that can be of monthly, quarterly
4 Renz, D. O. (2016). The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.
5 Pettigrew, A.M., 2014. The politics of organizational decision-making. Routledge

5
MANAGE BUDGETS AND FINANCIAL PLANS
or annually.
In case of financial year reporting, entities are required to prepare financial report for
estimating the taxes from 1St July to 30Th June. This will help the organization in lodging the
income tax return for that period. This is important for maintaining transparency in the
operations of the business.
Techniques for Managing Budgets
The purpose of formulating a budget is to formulate a guideline for managing the
revenue and expenses associated with the business. It is one of the valuable tools which can
play a vital role in planning process and also for implementing a plan. The key principles
which should adhere to while preparing a budget are:
 It should be prepared considering the most recent market trend information for
accuracy.
 It must be capable of recognizing errors in transactions.
 The changes which are made in an organization should be detectable.
 It should give a correct estimation of the resources which the business.
Contingency plan
Contingency plan 1
Contingency Plan
Company name: Big Red Bicycle Pty Ltd
Person developing the plan: Sales Manager of Sales Centre A
Name: John Marks
Position Sales Manager
Risk identified: Variance among the budgeted profit and actual profit by 20%

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MANAGE BUDGETS AND FINANCIAL PLANS
Strategies/activities to minimise the risk By when By whom
Implementation of Innovative practices for generating
competitive advantage over the competitors which can
enhance the sales
10th January Sales Manager
Expanding the scope of the business in the overseas market so
that it will have a secondary market to generate sales.
28th February Production
Manager
Contingency plan 2
Contingency Plan
Company name: Big Red Bicycle Pty Ltd
Person developing the plan: Sales Manager of Sales Centre A
Name: John Marks
Position: Sales Manager
Risk identified: Discrepancies in commission with the Budgeted Figure.
Strategies/activities to minimise the risk By when By whom
Implementing the commission based on progressive charge that
will also provide rewards based on the performance
28th
December
Operational
Manager
Motivating the employees with new commission system for
motivating the employees
10th January Top level
Management
and CEO

7
MANAGE BUDGETS AND FINANCIAL PLANS
Assessment 2
The senior executives of the company would be informing the sales executives
regarding the targets which are presented in the budget. In such an instance, the employee
would be clear regarding the sales target and aims of the business. In addition to this, the
budget should also portray the expenses which is anticipated and on the basis of the same
appropriate changes needs to be incorporated. Further, it was clear from the budget that 2nd
quarter’s sales are more as compared to other 3 quarters. It is found that the allocated wages
to each of the sales centres is $ 1,00,000 under budget. Similarly the other costs which is
related to the business is also shown to be on the rise which is a matter of concern for the
management and appropriate steps needs to be taken in this regard. The management of Big
Red Bicycles Ltd needs to take steps for ensuring that costs are reduced for enhancing the
profits of the business.
Financial Policies of the business
In order to achieve success and the goals of the business, the senior officials of Big
Red Bicycles Ltd needs to formulate strategies so that proper utilization is done for all the
resources and cost is managed to the best of interest6. The business would be utilizing excel
spread sheets and software programs for tracking expenses and recording the same. As per
the given case study individual bill will be selected for petty cash handling. Further, the bills
are required to be maintained in spreadsheet for keeping track for which there will be
training. In addition to this, the business also has a reimbursement policy for employees so
that they can recover any amount which is spent for the benefit of the company. The expenses
6 Morgan, D., Robinson, K. S., Strachota, D., & Hough, J. A. (2017). The Budget Cycle: Characteristics and
Consequences. In Budgeting for Local Governments and Communities (pp. 135-164). Routledge.

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MANAGE BUDGETS AND FINANCIAL PLANS
which are genuine in nature are applicable for reimbursement. In addition to this, the
company also takes its petty cash and tracking of expenses policy quite seriously so that
adequate cash flow can be maintained. The petty cash needs to be maintained properly by a
person who can be held accountable for the same. The petty cash provides appropriate funds
in the hand of management so that they can meet some urgent obligation which might come
up. The business also aims to make use of spreadsheet for managing the expenses and also
for properly recording the same. It is also to be noted that maintenance of petty cash ledger
should be maintained by two or more person so that if person falls sick, the recording process
is not hampered in any manner7. The petty cash which is maintained by the business is used
for reimbursement for the employees in regards to some expenses undertaken.
Training plan
# Skills/
knowledge to
be developed
Training
method
Resources
Required
Timeframe Review
date and
by whom?Start Finish
1 Application of
Spreadsheet
and use of
formulas
Training will be
provided through
practical use of
spreadsheet with
required formula
and functions
Computer
Software
2nd Quarter Operations
Manager.
2 Tracking the
company’s
Expenses
Spreadsheet
application will
be used for
tracking and
maintaining the
details of
business
expenses.
Further, budgets
will be used for
comparing the
actual expenses
with the
budgeted one.
Budgeting
Techniques and
MS Excel
Software
2nd Quarter Senior
Accountan
t and
Operation
Manager
of
company.
3 General Apart from General 1st Quarter Human
7 Morden, T. (2016). Principles of strategic management. Routledge

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MANAGE BUDGETS AND FINANCIAL PLANS
training for
new
recruitment
induction
training they will
be provided
training required
based on the
posts for which
they have been
recruited
resources of
company.
Resource
Manager
of
company.
4
Sales
operations
Handling sales
records and
developing
communication
skills
Ledger sales
records ledger
for maintaining
sales and
vocational
training
1st Quarter Sales
Manager
of
company
5 Motivational
training and
Induction
training
Surveys and
presentations
will be used
Past
performance
and positioning
of the entity’s
business under
market surveys,
graphs, records
and charts.
1st Quarter CEO and
Managing
Director of
entity.
Assessment 3
Big Red Bicycle Pty Ltd
variance Report for the Year 2011/2012
Master Budget FY 2011/2012 Actual FY 2011/2012
Variance FY
2011/2012
Q1 Q2 Q3 Q4
Ful
l
Yea
r
Q1 Q2 Q3 Q4
Ful
l
Yea
r
Var
ian
ce
Var
ian
ce
%
Favo
urabl
e or
unfav
oura
ble
REV
ENU
E
Sales
7,5
0,0
00
7,5
0,0
00
7,5
0,0
00
7,5
0,0
00
30,
00,
000
6,0
0,0
00
9,0
0,0
00
8,0
0,0
00
6,0
0,0
00
29,
00,
000
1,00
,000 3%
Unfav
ourabl
e
Com
missio
ns
(2%
sales)
15,
000
15,
000
15,
000
15,
000
60,
000
12,
000
18,
000
16,
000
12,
000
58,
000 2,00
0 3%
Favou
rable
Direct 50, 50, 50, 50, 2,0 53, 53, 53, 53, 2,1 - -7% Unfav

10
MANAGE BUDGETS AND FINANCIAL PLANS
wages
fixed 000 000 000 000 0,0
00 625 625 625 625 4,5
00
14,5
00
ourabl
e
Cost
of
Goods
Sold
1,0
0,0
00
1,0
0,0
00
1,0
0,0
00
1,0
0,0
00
4,0
0,0
00
95,
000
95,
000
95,
000
95,
000
3,8
0,0
00 20,0
00 5%
Favou
rable
Gross
Profit
5,8
5,0
00
5,8
5,0
00
5,8
5,0
00
5,8
5,0
00
23,
40,
000
4,3
9,3
75
7,3
3,3
75
6,3
5,3
75
4,3
9,3
75
22,
47,
500
92,5
00 4%
Unfav
ourabl
e
EXPE
NSES
General & Administrative
Expenses
Accou
nting
fees
5,0
00
5,0
00
5,0
00
5,0
00
20,
000
5,5
00
5,5
00
5,5
00
5,5
00
22,
000
-
2,00
0
-
10
%
Favou
rable
Legal
fees
1,2
50
1,2
50
1,2
50
1,2
50
5,0
00
1,1
25
1,1
25
1,1
25
1,1
25
4,5
00 500
10
%
Favou
rable
Bank
charge
s
150 150 150 150 600 175 175 175 175 700 -
100
-
17
%
Favou
rable
Office
suppli
es
1,2
50
1,2
50
1,2
50
1,2
50
5,0
00
1,0
00
1,0
00
1,0
00
1,0
00
4,0
00 1,00
0
20
%
Favou
rable
Postag
e &
printin
g
100 100 100 100 400 125 125 125 125 500 -
100
-
25
%
Favou
rable
Dues
&
subscr
iption
s
125 125 125 125 500 150 150 150 150 600
-
100
-
20
%
Favou
rable
Telep
hone
2,5
00
2,5
00
2,5
00
2,5
00
10,
000
2,8
00
2,8
00
2,8
00
2,8
00
11,
200
-
120
0
-
12
%
Favou
rable
Repair
s
&mai
ntenan
ce
12,
500
12,
500
12,
500
12,
500
50,
000
11,
250
11,
250
11,
250
11,
250
45,
000 500
0
10
%
Favou
rable
Payrol
l tax
6,2
50
6,2
50
6,2
50
6,2
50
25,
000
6,2
50
6,2
50
6,2
50
6,2
50
25,
000 0 0%
Favou
rable
Marketing Expenses
Adver
tising
50,
000
50,
000
50,
000
50,
000
2,0
0,0
00
52,
000
52,
000
52,
000
52,
000
2,0
8,0
00
-
800
0 -4%
Favou
rable

11
MANAGE BUDGETS AND FINANCIAL PLANS
Employment Expenses
Super
annuat
ion
11,
250
11,
250
11,
250
11,
250
45,
000
11,
250
11,
250
11,
250
11,
250
45,
000 0 0%
Favou
rable
Wage
s &
salarie
s
1,2
5,0
00
1,2
5,0
00
1,2
5,0
00
1,2
5,0
00
5,0
0,0
00
1,2
5,0
00
1,2
5,0
00
1,2
5,0
00
1,2
5,0
00
5,0
0,0
00 0 0%
Favou
rable
Staff
ameni
ties
5,0
00
5,0
00
5,0
00
5,0
00
20,
000
5,7
50
5,7
50
5,7
50
5,7
50
23,
000
-
300
0
-
15
%
Favou
rable
Occup
ancy
Costs
Electri
city
10,
000
10,
000
10,
000
10,
000
40,
000
9,5
00
9,5
00
9,5
00
9,5
00
38,
000
200
0 5%
Favou
rable
Insura
nce
25,
000
25,
000
25,
000
25,
000
1,0
0,0
00
25,
000
25,
000
25,
000
25,
000
1,0
0,0
00 0 0%
Favou
rable
Rates 25,
000
25,
000
25,
000
25,
000
1,0
0,0
00
25,
000
25,
000
25,
000
25,
000
1,0
0,0
00 0 0%
Favou
rable
Rent 50,
000
50,
000
50,
000
50,
000
2,0
0,0
00
50,
000
50,
000
50,
000
50,
000
2,0
0,0
00 0 0%
Favou
rable
Water 7,5
00
7,5
00
7,5
00
7,5
00
30,
000
8,7
50
8,7
50
8,7
50
8,7
50
35,
000
-
500
0
-
17
%
Favou
rable
Waste
remov
al
12,
500
12,
500
12,
500
12,
500
50,
000
15,
000
15,
000
15,
000
15,
000
60,
000
-
100
00
-
20
%
Favou
rable
TOTA
L
EXPE
NSES
3,5
0,3
75
3,5
0,3
75
3,5
0,3
75
3,5
0,3
75
14,
01,
500
3,5
5,6
25
3,5
5,6
25
3,5
5,6
25
3,5
5,6
25
14,
22,
500
-
210
00 -1%
Favou
rable
NET
PROF
IT
(BEF
ORE
INTE
REST
&
TAX)
2,3
4,6
25
2,3
4,6
25
2,3
4,6
25
2,3
4,6
25
9,3
8,5
00
83,
750
3,7
7,7
50
2,7
9,7
50
83,
750
8,2
5,0
00
113
500
12
%
Unfav
ourabl
e
Incom
e Tax
Expen
se
(25%
58,
656
58,
656
58,
656
58,
656
2,3
4,6
25
20,
938
94,
438
69,
938
20,
938
2,0
6,2
50
283
75
12
%
Favou
rable

12
MANAGE BUDGETS AND FINANCIAL PLANS
Net)
NET
PROF
IT
AFTE
R
TAX
1,7
5,9
69
1,7
5,9
69
1,7
5,9
69
1,7
5,9
69
7,0
3,8
75
62,
813
2,8
3,3
13
2,0
9,8
13
62,
813
6,1
8,7
50
851
25
12
%
Unfav
ourabl
e
The variance report formulated by the management reveals that gross profit of the
company is not appropriate as per the budget which is set. In the same way, net profit too is
unfavorable. Hence, the management is required to make out some plans for minimizing this
gap as 10% variance was expected by business. Further, the unfavourable variance in net
profit by 12% will have an adverse impact on the company’s ability to meet obligations.
Modified contingency plan
Contingency plan
Contingency Plan
Company name: Big Red Bicycle Pty Ltd
Person developing the plan:
Name :
Position: Managing Director
Risk identified: Profit variance with actual is more than 10%
Strategies/activities to minimize the risk By when By whom
Identification of profit variances by reviewing the income and
expenses and shortfalls in profit over 10%.
Q2 Operations
Manager
Implementing sales training Q2 Sales
Manager
Implement the incentives program. Q2 Operation

13
MANAGE BUDGETS AND FINANCIAL PLANS
Manager
Reduce the overtime. Q2 Managing
Director
Implementing contingency plan
Risk identified: Reduction in Net profit
Activity Monitoring activity and
date
Person/s
Proper review of the variances identified. Completion of report:
Q2.
Operation
Manager
Identification of the issues which the
management faces.
Management report: Q2. Operation
Manager
Email to employees for warning
regarding risks associated to jobs.
Monitoring of the
variation report results:
Q4.
Sales Manager
Email for announcing increasing of the
commission from 2% to 2.5%.
Monitoring of the
variation report results:
Q3.
Sales Manager
Assessment 4

14
MANAGE BUDGETS AND FINANCIAL PLANS
Activity 1
Particulars Formula Days
Average Debtors Day [Trade Debtors/(Total Sales x 50%)] x 365
days 91.25
Average Creditors Day [Trade Creditors/Total Purchase] x 365 days 97.33
Average Stock Turnover Days [{(Op. Inventory + Cl. Inventory)/2}/Cost of
Goods Sold] x 365
57.63
The suggestions which can be provided for making improving in any process of the company
are as follows –
 The inventory turnover rate needs to be improved for the business of Big Red Bicycle
so it can be available for sale in a short span.
 Management shall conduct meeting with company’s creditors for getting more
favorable repayment terms based on the company’s liquidity position
 Collection method from debtors shall be proper to ensure adequate cash balance. The
debtor management policy for the business needs to be amended for ensuring
efficiency is maintained.
The sources which can be cited for gathering the required information are as follows –
 Income Statement
 Books of accounts including ledgers and journals
 Statements showing the company’s financial performances
Activity 2
Particulars Amount
Selling Price p.u. A $500
Variable Cost per unit B $250

15
MANAGE BUDGETS AND FINANCIAL PLANS
Contribution Margin C=A-B $250
Fixed Expenses D $12,80,000
Target Profit E $10,00,000
Target Sales Volume (in units) F=(D+E)/C 9120
Particulars Amount
Fixed Expenses A $12,80,000
Target Profit B $10,00,000
Current Manufacturing Capacity C 8000
Contribution Margin p.u. D=(A+B)/C $285
Selling Price per unit E $500
Variable Cost per unit F=D-E $215
Activity 3
For satisfying the maintenance requirement of GST records as per ATO (Australian
tax office), the company is required to maintain the records related to GST for minimum 5
years period.
July August September
Budgeted cash receipts
incurring GST:
Cash sales 20,000 10,000 10,000
Cash revenue (besides sales) 0 0 0
Cash receipts from sale of assets
(not stock) 0 0 0
Total receipts for GST 20,000 10,000 10,000
Budgeted non-cash receipts
incurring GST:
Debtors sales 1,80,000 2,30,000 1,50,000
Total non-cash receipts: 1,80,000 2,30,000 1,50,000

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Total budgeted receipts
incurring GST 2,00,000 2,40,000 1,60,000
Budgeted cash payments
incurring GST
Cash purchases of stock 0 0 0
Cash expenses 4,300 5,200 5,250
Total cash receipts incurring
GST 4,300 5,200 5,250
Budgeted credit payments
incurring GST
Credit purchases of stock
incurring GST 25,000 30,000 25,000
Credit purchases of assets
(besides stock) 4,300 5,200 5,250
Total cash payments incurring
GST 29,300 35,200 30,250
Total budgeted cash payments
incurring GST 33,600 40,400 35,500
GST cash budget calculations
a) Cash receipts 2000 1000 1000
b) Cash payments 430 520 525
c) GST liability 1570 480 475
Activity 4
Recommendations for providing strict debtor policies with management’s
implementation policies are as follows –
Activity Monitoring activity and date Person/s
The sale teams needs to inform
the other departments regarding
the change in the activities.
Quarter 1, week 1
Completion and Reviewing of the
Policy in week 4 of Quarter 1
Operation Manager
Revising credit policy and
assuring that the credit sales are
made only to the regular
Quarter 1 week 1 Revision of
Sales strategy.
Sales Team
Managers

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customers or clients with the bulk
orders
Discount will be provided in case
of earlier collection of payment
from the debtors
Quarter 2 week 1. Analysis of the
Strategy and Further
incorporation of the discount
facility.
Sales manager
Management Accounting and Planning Principle
The basic accounting principles refer to the principles which are followed by a
business for the purpose of formulating the annual report of a business and also for
appropriately presenting the financial information of a business. There are different principles
followed by a business for appropriate presentation of the financial statement such as accrual
principle, going concern principle, consistency principle, cost principles and several other
principles. These principles help the management of the company to appropriately helps in
providing full disclosures regarding the financial performance of the business.
Cash flows refer to the flow of cash in a business which is generally from undertaking
a transaction. The cash flows which normally take place are cash inflows and outflows
depending on the nature of activity which is undertaken by the business. The cash flow of a
business is appropriately presented in the cash flow statement which forms a part of the
financial statements of a business.
Ledgers and financial statements are statements on which financial information are
presented. The ledger accounts are prepared for appropriately posting of transactions and
bringing out the final balance which can then posted in the financial statements for
demonstrating the financial performance of the business during the period. The ledger
accounts are considered to be important as the same are often referred to in case any

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discrepancies occur in the annual performance of the business.
Profit and Loss statement are formulated by the management for portraying the
income and expenses which is associated with a business. The profit and loss statement
shows the profits or losses which is made by the business during the period considering the
level of operations of the business.
Reflections
The management of the company needs to exercise control while managing the
operations of the business in order to ensure that the activities which are undertaken are
consistent with the goals which are established by the business. In my opinion that, control is
an important feature as the same can help the management to reduce the costs and thereby
also enhance the profits of the business in the process.
The information which is available to the senior management needs to be relevant and
timely so that the same can be incorporated in the financial statements and the same can be
adhered to while taking major decisions relating to the business. The relevance of the
information is important as the same needs to be material for taking appropriate decisions for
the business.
In a business, the accounting system needs to match the nature of operations of the
business as this will be promoting efficiency and also generate appropriate reports suiting the
needs of the business. I believe a business should also select the accounting system on the
basis of the inherent benefits which are specific to the business and the cost factor also needs
to be taken into consideration.
The accounting system needs to be flexible so that any amendments in the plans of the
management can be incorporated appropriately in the system. This would ensure that
efficiency is maintained in the financial reporting framework of the business. In case a

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accounting system is rigid than it won’t be able to meet innovative requirements of the
business and this would also bring about efficiency in the reporting process of the business.
The cost benefit factor for an accounting system also needs to be taken into
consideration as the benefits of a system should outweigh the costs of the system. The system
should be compatible and consistent with the operations of the business and should also help
in generating appropriate reports for the business considering long term sustainability
reporting requirements.

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Reference
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Budgeting & Finance, 34(1), pp.1-17.
Morden, T. (2016). Principles of strategic management. Routledge.
Morgan, D., Robinson, K. S., Strachota, D., & Hough, J. A. (2017). The Budget Cycle:
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Needles, B.E., Powers, M. and Crosson, S.V., 2013. Principles of accounting. Cengage
Learning.
Pettigrew, A.M., 2014. The politics of organizational decision-making. Routledge.
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