Management Accounting (ACT502) Assignment Solution, Semester 2, 2019

This document presents a comprehensive solution to a Management Accounting assignment, ACT502. It includes a detailed budgeted statement of cost of goods sold, a multiple-step income statement, a retained earnings statement, and a balance sheet for Comfort Furniture Pty Ltd. The solution also features a budgeted cash balance calculation and addresses the benefits of budgeting within an organization, emphasizing its role in resource allocation and financial control. Furthermore, the assignment analyzes the reasons for potential discrepancies between quarterly budget reports, considering factors like errors, changing business conditions, and unmet expectations. The solution provides a complete overview of the assignment, offering insights into financial planning, analysis, and reporting.

Running Head: MANAGEMENT ACCOUNTING 0
Management Accounting
(Student Name)

MANAGEMENT ACCOUNTING 1
Table of Contents
Question 1........................................................................................................................................2
Part 1)...........................................................................................................................................2
Budgeted Statement of Cash of Good Sold.................................................................................2
Part 2)...........................................................................................................................................2
Budgeted Multiple step Income Statement..................................................................................2
Part 3) Budgeted Retained Earnings Statements..........................................................................3
Part 4) Budgeted Balance Sheet...................................................................................................3
5) Budgeted Cash Balance...........................................................................................................4
Question 2........................................................................................................................................5
Part A...........................................................................................................................................5
Part B............................................................................................................................................6
References........................................................................................................................................8

MANAGEMENT ACCOUNTING 2
Question 1
Part 1) Budgeted Statement of Cash of Good Sold
Comfort Furniture Pty
Ltd
Budgeted Cost of Goods
Sold
For the Year Ending 31
December, 2017
Particular
Amo
unt
Total
Amount
Opening Finished Goods
Inventory 24000
Manufactured Cost of
Goods
Direct Material 6250

MANAGEMENT ACCOUNTING 3
0
Direct Labour
5090
0
Manufacturing Overhead
4860
0 162000
Cost of Goods Available for
Sales 186000
Closing Finished Goods
Inventory 45000
Cost of Goods Sold 141000
Part 2) Budgeted Multiple step Income Statement
Comfort Furniture Pty
Ltd
Budgeted Income
Statement
For the Year Ending 31
December, 2017

MANAGEMENT ACCOUNTING 4
Sales Revenue 256000
Cost of Goods Sold 141000
Gross Profit 115000
Selling and Administrative
Expenses 75000
Income from Operation 40000
Interest Expenses 3500
Income before Income
Taxes 36500
Income Tax Expenses 14600
Net Income 21900
Part 3) Budgeted Retained Earnings Statements
Particular Amount
Retained Earnings 25000

MANAGEMENT ACCOUNTING 5
Add: Net Income (Loss) 21900
46900
Less: Divided 8000
Retained Earnings at the
end 38900
Part 4) Budgeted Balance
Sheet
Comfort Furniture Pty
Ltd
Budgeted Balance Sheet
For the Year Ending 31
December, 2017
Particular Amount Amount
Assets
Current Assets

MANAGEMENT ACCOUNTING 6
Cash 5880
Accounts Receivables
(76800*40%) 30720
Finished Goods Inventory 45000
Total Current Assets 81600
Fixed Assets
Equipment (40,000 + 9000) 49000
Less: Depreciation
(10000+4000) 14000
Total Fixed Assets 35000
Total Assets 116600
Liabilities and
Stockholders’ Equity
Current Liabilities
Account Payable
(17000*50%[phone]

MANAGEMENT ACCOUNTING 7
Income Tax Payable 5000
Total Current Liabilities 20700
Notes Payable (25000-8000) 17000
Total Liabilities 37700
Stockholder Equity
Common Stock 40000
Retained Earnings 38900
Total Stockholder Equity 78900
Total Liabilities and
Stockholders’ Equity 116600
5) Budgeted Cash Balance
Comfort Furniture Pty
Ltd
Budgeted Balance Sheet

MANAGEMENT ACCOUNTING 8
For the Year Ending 31
December, 2017
Cash Budget
Cash Balance at the
beginning 7500
Cash Collection from 4th
quarter sale (256000-
76500*40%) 225280
Accounts receivable (excess
a/c payable) 73500
Total cash inflow 306280
Less: Cash Outflow
Cost of sales after
depreciation (237000-
(17000*50%)-4000) 224500
Interest Expenses 3500
Tax Expenses (14600-5000) 9600
Payment against notes 8000

MANAGEMENT ACCOUNTING 9
Cash Divided 8000
Purchase of Equipment 9000
Accounts Payable 37800
Total Cash Outflow 300400
Ending Cash Balance 5880
Question 2
Part A
Budgeting is one of the effective tools that are adopted by the organization to analyze the actual
inflow and outflow of the company. It pays an essential role in the organization in the effective
utilization of the available resources in order to achieve overall the objective of a company. It is

MANAGEMENT ACCOUNTING 10
one of the most elementary as well as a basic tool that is used by the organization (Almazan,
Chen and Titman, 2017). Therefore, in the competitive world, the budges pay a crucial role in the
company’s survives as well as their growth. It is majorly performed to control the cost as well as
maximizing the revenue of the company. Moreover, it also supports the company to prepare
itself for the upcoming future as well as funding requirements (Becker et al., 2016). There are
certain benefits of the budgeting that are explained in the below points:
 It compels as well as motivates the management of the company to make an early with
the timely study of its issues. It also generates a sense of caution with some care as well
as adequate study among the managers before the decisions are made by them.
 It also helps in providing valuable means of controlling the income or revenue with some
expenditure that occurs while running the business (Bower, 2017).
 It provides a tool through which the managerial policies, as well as goals, are periodically
evaluated, tested as well as established the guidelines for the whole company.
 It helps in directing the capital as well as other resources into the most profitable
channels.
 It also enables the management of the company to decentralize the responsibility without
losing control over the operation of the company. It represents the weakness,
inefficiencies, deviations in the company very frequently that can be checked to attain the
targeted goal of the company in an effective and efficient manner.
 It also provides the norms basis or the yardstick for measuring the performance of the
department as well as other individuals that are working in the company. The individual
managers can also able to evaluate their own decision as well as achievements that help
in taking the suitable steps to enhance their performance in an effective as well as
efficient manner (Epstein, 2018).
 It helps in encouraging the productivity of the competition by providing them incentives
to perform in an effective manner. It also gives some sense of purpose to each individual
in the organization. Al such positive factors lead to a higher output as well as enhance the
productivity of the employee to a certain extent.
 It helps in providing the system as well as a disciplined approach to the solution of the
issues in the company.

MANAGEMENT ACCOUNTING 11
 The use of budgeting in a company also helps in developing an attitude of cost-
consciousness that provokes to use the resources in an effective manner as well as create
an environment of profit mindedness throughout the company. It majorly focuses on how
much should be spent to attain the targeted goal.
 It also forces the management to think about the reason of existence of the company in
the business as well as its essential assumptions about the business environment. A
periodic re-evaluation of such issue may also result in altered assumptions that may also,
in turn, alter the manner in which the management of the company decides to operate the
business in an effective as well as in an effective manner (Nguyen, Weigel and Hiebl,
2018).
Therefore, from the above points, it can be said that budgeting plays a vital role in the growth as
well as the development of the company. It will help the Comfort Furniture to analyze its profit
as well as overall operation in an effective manner that will help them to take initiative action if
required to a certain extent.
Part B
A quarter report budget reports are one of the budgets that are prepared to compare the progress
of the business from year to year. The budget report of the first quarter of the current year is
compared with the budget report of the first quarter of the previous year to check the trend that is
positive or negative of the company performance. In the case when the company faces an issue
or struggle from one year to the next year as well as the address such issues prior to the second
quarter budget. Therefore, in the case the organization had forgotten to update certain events in
the first quarter then can able to revise it. Therefore, the result of the company second-quarter
budget report may vary from the budgeted report of the first quarter (Wildavsky, 2018).
Therefore, the budget report of comfort furniture for the second quarter differs from the first
quarter due to other following reasons that is explained in the below points:
 Errors: errors by the maker of the budgets. The error may be considered due to occurring
of some mistakes in the calculation or using the wrong assumptions while preparing the