Financial Accounting Analysis of Busu Pty Ltd: Intermediate Report

This report provides a comprehensive analysis of the financial accounting practices of Busu Pty Ltd, a company based in Papua New Guinea. The report addresses two key issues faced by the company's management: the challenges in determining accurate costs and the need for an effective financial management system. It delves into the importance of a formal product costing system, the impact of economic factors on cost valuation, and the significance of internal financial management. The analysis includes recommendations for strengthening the company's management system, attracting potential shareholders, and improving financial reporting. The report also discusses the high-low method for understanding cost function behavior and the importance of obtaining relevant financial information. The conclusion emphasizes the need for the company to adopt strategies that enhance its internal management and financial practices to ensure long-term success. The report also provides several recommendations for Busu Pty Ltd to improve its financial performance, including strengthening its overall management system, attracting potential shareholders, and evaluating the financial aspects of the firm.

Running head: INTERMEDIATE FINANCIAL ACCOUNTING
INTERMEDIATE FINANCIAL ACCOUNTING
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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
In Response to Issue A...........................................................................................................2
In Response to Issue 2............................................................................................................4
Conclusion..................................................................................................................................5
Recommendations......................................................................................................................5
References..................................................................................................................................7

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Introduction
The assignment deals with the chosen company Busu Pty Ltd. Which was actually
commenced by the Neil Red Williams and Jack Soso basically in the town of Goroka which
is actually located in the eastern highland’s province of Papua New Guinea. As an employer
Business Consultancy Firm and further report, it to the business development assistance. On
the other hand, it is needed to provide assistance to the Red and Jack regarding the success of
the venture in terms of profitability. According to this there are two issues which are
highlighted by Red and Jack while managing the business prospects of the firm.
Discussion
In Response to Issue A
Jack and Red were facing significant issues regarding the exact cost which is actually
required by the business. In such a situation it is needed .to have a clear look at the flow in
the working capital of the company. The costing system must be critically analyzed by the
upper level management of the company and in that case certain strategies must be adopted
by the company (Duska et al. 2018).
In the company there must be a costing department which will actually take care of
the costing related problems which further means that where the company needs to pay most
of accumulating the cost of material. At the time of purchase, it is needed to have significant
negotiation skills regarding the purchase of material (Cochrane and John H. 2017) Effective
and tough negotiation will have the company to purchase the material of the firm on a
cheaper cost.

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Also, in case of preparation of the financial statement of the firm it is needed to have
financial team or department within the management system of the company in order to
manage the financial manipulation which actually takes place within the internal management
system of the company.
A.
It is significant for the business to have the formal product costing system which
means that the cost of the product will be valued in terms of the market value of the product
and accordingly the cost is determined. If the cost of the product is valued above the market
price then it is the responsibility if the company to understand the variance and the reason
behind it. The economic factors in that case must be identified by the company and
accordingly it is needed to have a clear understand regarding the management system of the
company in such situation which is actually presented in the sustainability report of the
company.
The cost which is actually incurred while producing the goods and services of the
company must be included during the valuation of cost of the product. It is also important for
the firm to have a clear understanding regarding the price settled of same product by the
competitive firm and according its is needed by Busu Pty Ltd. In order to adopt business
strategy for competing with the other company in the same business line it is required to
perform the analysis for the purpose of witnessing the key strength and weakness of the firm.
B.
It is actually important for the firm to have an internal financial management system
of the company rather than providing the daily transaction report to the external accountants
and banks for the purpose of preparing financial reports of the company. The company in this

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case must accordingly hire the skillful and knowledgeable aspirants for the purpose of
managing the financial and the internal audit factors of the company. By the process of
providing the proper training it will quite be easier for the company to enhance much more
profitability rather than investing so much on the external accountants and firms (Gitman et
al. 2015).
If the company have an effective financial department then the company will be able
to grow based on the long-term aspects of the firm. The cost will be incurred by the company
will be minimal and later in the future when the employees in the financial department of the
company will be effective, it will be easier for the company to generate more return in the
business (Arcand, Jean Louis, Enrico Berkes and Ugo Panizza 2015). Apart from the overall
financial performance of the company will also increase in a systematic manner.
In Response to Issue 2
The cost of the products actually behaves based on the economic aspects or condition
which creates impact at the time of manufacturing the product of the company into finished
product. Further the behavior of the cost puts significant impact on the financial aspects of
the firm.
A.
The significant method which must be adopted by the company in order to understand
the cost function behavior is the high low method of cost function. Based on the level of
production activity it is needed to understand the past cost which was incurred by the
company. Based on that a critical evaluation regarding the same must be done by the
company so that necessary steps regarding manipulating the cost of the firm can be
implemented within the business.

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B.
Relevant and meaningful information’s must be obtained by the company so that the
accordingly the transaction will be passed on in that case (Fracassi and Cesare 2016). There
are various constraints while collecting the relevant information’s like the stress in collecting
data along with the lack of coverage regarding the quality information’s which is actually
required by the company.
Conclusion
From the above discussion it can be concluded that the above critical aspects must be
presented on the report to the BDA. In case of the Busu Pty Ltd (Libby and Robert 2017). It
is found that the CEO of this company is constantly struggling with the major issues which
are the constant change in the cost behavior and ineffective financial management system of
the company. If the internal management system of the company is effective then it will quite
be possible for the firm to get rid of the major problems which is faced by the company.
Recommendations
 In order to strengthen the overall management system of the company it is needed
for the CEO of Busu Pty Ltd. to adopt some of the strategies which will
automatically enhance the internal management system of the firm.

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 It is also important for the company to garb the attention of the potential
shareholders of the firm. In that case it is needed to fix the financial management
system of the company by hiring the potential aspirants (Härdle et al. 2017).
 Accordingly, the shareholders of the company will be interest to show interest in the
business by investing in the business. Later on it will be the responsibility of the
financial management team to prepare the financial reports at the end of each year
and accordingly presenting it to the upper level management of the firm for the
purpose of analyzing and decision making.
 The costing and along with the financial aspects of the firm must be evaluated and
analyzed by the upper level management in order to forecast along with that
understand the potential risk and threats associated with the business of Busu Pty Ltd
(Kaplan, Robert and Anthony 2015).

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References
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Economic Growth 20, no. 2 (2015): 105-148.
Cochrane, John H. "Macro-finance." Review of Finance 21, no. 3 (2017): 945-985.
Duska, Ronald F., Brenda Shay Duska, and Kenneth Wm Kury. Accounting ethics. Wiley-
Blackwell, 2018.
Fracassi, Cesare. "Corporate finance policies and social networks." Management Science 63,
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Gitman, Lawrence J., Roger Juchau, and Jack Flanagan. Principles of managerial finance.
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Härdle, Wolfgang Karl, Cathy Yi-Hsuan Chen, and Ludger Overbeck, eds. Applied
quantitative finance. Vol. 2. Springer, 2017.
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Wiley & Sons, 2019.

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Libby, Robert. "Accounting and human information processing." In The Routledge
Companion to Behavioural Accounting Research, pp. 42-54. Routledge, 2017.
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