Finance for Managers: Financial Recording, Reporting & Analysis

This report provides a comparative analysis of financial and managerial accounting, highlighting their purpose, requirements, users, guidelines, frequency, external review, focus, and scope. It discusses the budgetary control process, including its overview, importance for management, and advantages and disadvantages. Key aspects covered are effective communication and coordination, planning, cash flow forecasts, and evaluation for controlling budgets. The report also touches on zero-based budgeting and incremental budgeting methods. It emphasizes the role of budgetary control in performance measurement and standard costing, while also acknowledging its limitations due to reliance on estimates and potential high implementation costs. Desklib provides access to similar solved assignments.

FINANCE FOR
MANAGERS
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

financial and managerial
accounting:
Basis of Comparison Financial accounting Managerial
Accounting
Purpose Communicating
financial position
Decision-making
Requirement Compulsory Optional
Users External stakeholders
like investors, creditors,
public, community and
government
Internal stakeholders
like managers, owners
and employees
Guidelines IFRS None
Frequency Quarterly, half-yearly or
annually
As required
External review Regulators and auditors None
Focus Previous transactions Information for assisting
in future decisions
(Weetman 2013)
Scope Organisation wide Narrow each product,
segment when required
Difference on useful
ratios
To ascertain profit or
loss on actual basis for
evaluating the financial
condition of an
organisation.
Assessment of
performance is
department-wise,
section-wise as well as
organisation-wise

Budgetary control
process:
Overview of the process:
•For undertaking effective decisions and coordinating the same of
the different departments , as per capital, is termed as budget, as
every organisation has limited budget.
• Various types of budgets could be observed in business like
purchase budget, sales budget, cash budget, advertising budget
and development budget. These budgets could be controlled in a
number of ways.
• Effective communication and coordination between authorities
and departments could control budgets.
• Effective planning is another measure enabling the managers to
control budgets.
• Cash flow forecasts are beneficial as well for controlling budgets,
as it helps in identifying whether an organisation needs to borrow,
the amount of borrowings and loan repayments.
• Budget could be controlled with the help of evaluation, as it
becomes possible for the managers to compare the budgeted
performance with the actual performance.
• The absence of budgetary plan makes the functioning of
business organisations extremely difficult.

Budgetary control
process (Continued):
Importance of budgets for management:
• Since management is reliant on budget, every department has
own budget.
• Among them, zero-based budgeting could control budget, since it
is a budgeting method, in which justification of the expenses
needs to be made for new periods.
• The base starts from the scratch and all organisational functions
are analysed for their costs and needs.
• After this, budgeting is formulated based on the future needs
irrespective of the previous year budget.
• Another process is incremental budgeting, in which fixed
overhead expenses are estimated by adding or deducting a pre-
determined percentage from historical costs.

Budgetary control
process (Continued):
Advantages and disadvantages of the budgetary control
system:
• The system gives a benchmark for gauging and analysing the
individual and departmental performance.
• The deviations to management are revealed after comparison is
made with the actual figure.
• It forms effective conditions for adoption of standard costing
system in an organisation.
• Budgets might not be true, since they are based on estimates.
• Automatic execution of budgeting is not possible due to false
sense of security that everything is included in the budgets.
• The initiation and enforcement of the system might be expensive
(Whittington 2017).

REFERENCES:
 Weetman, P., 2013. Financial and
Management Accounting: An
Introduction, 6th edition. Pearson
Education Ltd.
 Whittington, G., 2017. Book review: The
End of Accounting and the Path Forward
for Investors and Managers.