REDO

Table of Contents
Introduction

I. Definition of accounting and its purpose in complex operating environment………………………………………2

1.1 Accounting definition………………………………………………………………………………………………3

1.2 Purpose of accounting………………………………………………………………………………………………

4

II. The main branches of accounting, career opportunities and job skillsets and
competencies…………………………5

2. The main branches of accounting and career opportunities……………………………………………………….…

6

2.1 Financial accounting…………………………………………………………………………………………......…

7

2.2 Management accounting………………………………………………………………………………………...

….8

2.3 Auditing……………………………………………………………………………………………………...…….9

2.4 Tax
accounting…………………………………………………………………………………………………….10

2.5 Forensic accounting……………………………………………………………………………………………….11

2.6 Financial
management…………………………………………………………………………………………….12

III. A critical evaluation of the role of accounting in informing decision making to meet organizational, stakeholders
and social needs within complex operating
environments…………………………………………………………….13

3.1 Role of accounting to meet

organizational………………………………………………………………………...14

3.2 Role of accounting to meet

stakeholders………………………………………………………………………….15

3.3 Role of accounting to meet social

needs…………………………………………………………………………...16
IV. Accounting systems and the role of technology in modern-day accounting………………………………………
17

4.1 Accounting systems……………………………………………………………………………………………….18

4.2 The role of technology in modern-day

accounting………………………………………………………………...19

V. Issue of ethics, regulation and compliance and the extent to which they are constraints or threat to the
organization…………………………………………………………………………………………………………...20

Conclusion……………………………………………………………………………………………………………21

References…………………………………………………………………………………………………………….22

Overview about budget……………………………………………………………………………………………….23

1.1 Budget definition…………………………………………………………………………………………………

24

1.2 The role of budget…………………………………………………………………………………………………

25

1.3 Advantages and disadvantages of budgeting………………………………………………………………………

26

1.4 Summary of budgeting process……………………………………………………………………………………

27

Attachment……………………………………………………………………………………………………………28

Prepare the cash budget from the given data…………………………………………………………………………29

Scenarios analysis…………………………………………………………………………………………………….30

List of figures

Figure 1. KPMG logo………………………………………………………………………………………………….2

Figure 2. The main branches of accounting……………………………………………………………………………5

Figure 3. Financial Accounting…………………………………………………………………………………………

7

Figure 4. Auditing………………………………………………………………………………………………………
9

Figure 5. Financial management………………………………………………………………………………………

12

Figure 6. Role of modern technology in accounting………………………………………………………….………19

Figure 7. Ethicals of accounting………………………………………………………………………………………
20

Figure 8. Summary of Budgeting

process……………………………………………………………………………..27

THE ROLE OF ACCOUNTING IN AN ORGANIZATION

Introduction

Figure 1. KPMG logo

KPMG is a multinational financial and economic professional services company

headquartered in Amstelveen, the Netherlands. KPMG has a network of companies in
154 countries around the world, with more than 200 thousand employees. KPMG
provides three independent professional services: audit, tax, and consulting services.
Almost every member firm of KPMG provides services to serve the needs of business,
government, public agencies, and non-profit organizations through audit and assurance
activities of the companies. member companies, capital markets. KPMG is committed to
quality and service excellence in all that it does.
It can be said that in the current context of the economy in general and the business
industry in particular, which is changing and becoming increasingly dynamic especially
the accounting industry as it always acts as a guideline, helping organizations overcome
difficulties as well as making appropriate decisions and effective business policies to help
the organization grow. This blog will analyze and evaluate the role of accounting in
organizations.
I. Definition of accounting and its purpose in complex operating
environments
1.1 Accounting definition
These days, accounting encompasses much more than just bookkeeping; it also entails
financial problem solving, strategic planning, and general evaluation of business
operations. Despite the fact that the term accounting has many different meanings, the
American Accounting Association (1966) defined it as the process of locating, analyzing,
and sharing financial data in order to support decision-making. The primary accounting
tasks of identifying, computing, recording, classifying, summarizing, analyzing,
interpreting, and communicating are the main emphasis of this definition. However,
accounting is often believed to be the measurement and dissemination of pertinent
economic data to decision makers according to Watts and Zimmerman (1986).

Accounting is typically the division that handles gathering, logging, processing,

managing, and supplying financial and economic data for a business. includes tasks
including budget management, risk assessment, financial data analysis, revenue and
expense management, and financial reporting.

1.2 Purpose of accounting

The purpose of corporate accounting is to ensure the stability of a business's financial
operations, while ensuring business operations are consistent with the organization's
policies. Financial information will be used to make management decisions, financial
forecasts and ensure compliance with legal regulations related to tax and finance as well
as prevent legal and financial risks can happen. Furthermore, this department also
undertakes the calculation, statistics, processing, and communication of financial
information that affects the interests of the organization as well as recording the history of
business transaction events, then present it to managers and stakeholders. Accounting is
performed with the aim of providing reliable, accurate and timely financial information to
various stakeholders of an organization. It allows them to analyze business results,
determine the company's financial situation and solvency.

II. The main branches of accounting, career opportunities, and job

skillsets and competencies
2. The main branches of accounting and career opportunities
Accounting is divided into many branches, each of which aims to handle various kinds of
accounting data. Financial accounting, management accounting, auditing, tax accounting,
legal accounting, and financial management are its six primary accounting disciplines.
Every industry has unique job prospects, duties, and skill requirements.
Figure 2. The main branches of accounting
2.1 Financial Accounting

Figure 3. Financial Accounting

Financial accounting is the specialty of reporting, statistics, and documenting the past
business transactions of companies and organizations. This results in the creation of
financial reports that give managers and other relevant parties the essential financial
information and trustworthy information about the company's operating performance and
business situation. In order to facilitate analysts' exploration of the organization's
investment potential, all financial reports must adhere to GAAP (generally accepted
accounting principles) to guarantee their completeness and consistency.

For those with a solid grasp of finance and accounting principles, financial accounting
offers a wide range of employment prospects. Examples of these positions include tax
accountant, cost manager, finance manager... Financial accountants are the most common
workers in the field of financial accounting, and their responsibilities include cash
control, cashier's duties, preparing daily accounts, and delivering accounting information
to other departments. To become a financial accountant, one must possess strong
accounting ethics, strong numerical abilities, teamwork, and the ability to solve problems
in order to integrate with other components of an organization.

2.2 Management Accounting

In order to carry out its managerial functions of planning, controlling, and decision-
making in an effective and efficient manner, management accounting, according to
Maheshwari, Maheshwari, and Maheshwari (2021), "is concerned with collecting data
from both internal user as well as external sources and communication of relevant
information to the management, after processing, analyzing and interpreting those."
Management accounting is helpful for internal users, like as managers or shareholders,
for planning, controlling, and decision-making, in contrast to financial accounting, which
is more focused on external users. Cost bookkeeping is a crucial subfield in management
accounting. In order to determine the cost of a certain item or activity, it is a mechanical
operation that involves recording financial transactions and categorizing them in the
financial records. Budgeting, performance evaluation, and forecasting are tools used by
management accounting to give precise insights into an organization's operations and to
aid in decision-making.

Management accounting is the analysis and provision of financial data to managers to

support their decision-making and planning. It is possible to argue that management
accounting is selective in that it only gives management access to crucial data that has
been gathered from various sources, and that data is then used to guide choices that are
made. Possessing strong management accounting expertise can lead to numerous career
options in areas like cost analysis, pricing, and cost controllers…
2.3 Auditing

Figure 4. Auditing

The speciality of auditing is in charge of examining and confirming the openness of a

company's financial records as well as making sure the financial reports are accurate and
completely compliant with the principles. Stakeholders are also reassured by audits that
their transparency is trustworthy.

Internal auditors are in charge of assessing and enhancing the efficiency of governance,
control, and risk management procedures. Giving an unbiased evaluation of the
organization's operations, financial report, and regulatory compliance is their job as
workers of an entity. "Internal auditors conduct a wide range of activities on behalf of the
organization, such as financial statement audits, reviewing the organization's compliance
with legal obligations, examining an operation's compliance with organizational policies,
evaluating operational efficiency, and detecting and pursuing fraud within the firm."
According to Hall (2010).

The independence of external auditors is total. Their main duty is to offer a fair and
unbiased assessment of the organization's financial reporting's correctness. In order to
guarantee the accuracy and openness of financial data, external auditors adhere to
auditing standards and procedures and hold public accounting certification. Their
evaluations contribute to giving stakeholders and shareholders confidence about the
organization's financial stability and adherence to accounting rules.

To succeed in their position, auditors require a blend of technical, analytical, and

interpersonal abilities. Proficiency in accounting principles, auditing standards, and
pertinent software are examples of technical talents. For the purpose of assessing
financial data, finding disparities, and reaching well-informed conclusions, analytical
abilities are crucial. Furthermore, in order to communicate with clients effectively,
present results, and prepare reports that are clear and comprehensive, auditors need to be
very skilled communicators.

2.4 Tax accounting

One of the most intricate and specialized areas of accounting is tax accounting.
Preparing, analyzing, and submitting financial data in order to abide with tax laws is
known as tax accounting. Ensuring that a business complies with all tax rules and
regulations, as well as accurately calculating and reporting the company's taxable income,
are the main objectives of tax accounting. Compiling tax returns, figuring out tax
obligations, and monitoring tax expenditures and deductions are just a few of the tasks
involved in tax accounting. Furthermore, tax accountants frequently counsel and support
businesses in reducing their tax liability through strategic planning and adherence to legal
requirements.

Gaining a solid understanding of tax accounting will help you pursue a career as a tax
accountant, where your duties will include figuring out how much tax both individuals
and corporations must pay. Numerical aptitude, problem-solving abilities, and customer
service skills are prerequisites for tax accountants, particularly for independent tax
accounting services. In order to interact with clients, governmental organizations, and
other stakeholders and offer advice on tax compliance and strategy, tax accountants must
possess strong communication skills.

2.5 Forensic accounting

Investigations into financial manipulation, fraud, and accounting scandals are the area of
expertise for forensic accountants. This calls for extremely thorough financial data
investigation and analysis, including the creation of spreadsheet-based reports, data
collection through audits and interviews, and the documentation of reports based on the
data that are then presented in court. Proficiency in communication, time management,
analysis, and work ethics are all necessary for forensic accounting. As a result, there are
numerous job alternatives available to you if you choose to become a forensic or auditor.

Forensic accountants are responsible for looking into a wide range of accounting-related
situations, including fraud and disputes, in addition to the accounting-related instances of
bankruptcy. They need to be well knowledgeable about financial investigative methods,
auditing standards, and accounting principles. To analyze complex financial data, spot
anomalies, and track down financial activities, analytical abilities are essential. Forensic
accountants also require outstanding communication skills in order to clearly present
their findings in written reports. Their proficiency in collaborating with legal experts and
comprehending the litigation procedure makes them quite beneficial.
2.6 Financial management

Figure 5. Financial management

"Financial management is a financial management process that organizes financial

activities from planning, implementation and control to financial accountability,"
according to Sukenti (2023). Making decisions on the distribution of funds, asset
investments, and maximizing the organization's overall financial health are all part of
financial management. Planning revenue and expenses as well as overseeing an
organization's or person's assets with the goal of achieving goals and objectives is the
focus of financial management. Effective financial management not only boosts earnings
but also helps organizations expand into new markets, making it a crucial role for
business managers. A wider range of knowledge fields are required for financial
management work than for other branches of accounting. For example, financial
managers, such as chief financial officers (CFOs), and financial supporting staff, who are
also qualified accountants, are responsible for analyzing financial data, projecting future
financial needs, and recommending actions to senior management based on their
findings. Financial managers should be numerate, have problem-solving abilities, and be
skilled in negotiation, which is crucial in order to find the funding required to meet the
company's goals.

III. A critical evaluation of the role of accounting in informing decision-

making to meet organizational, stakeholder, and social needs within
complex operating environments

3.1 Role of accounting to meet organization needs

For a business to be successful, accounting is essential because strategic decisions must
be made by analyzing accounting data (Ullah, Khonadakar & Fahim, 2014). The
availability of such information has special importance for business management and is
of public interest with priority in general. Another study conducted in 2017 by Vokshi &
Krasniqi hypothesized that “Qualitative and reliable financial information is a
keyplement in decision-making process.” Accounting often offers financial data that
helps guide choices for satisfying stakeholder, corporate, and societal needs. "The
management decision-making relies on accounting information, including the income
statement and cash flow statement reports recorded," according to an organization's
founding documents. (Gardi, Abdalla Hamza, Al-Kake, 2021; Sabir, Mahmood, Sorgula,
Abdullah). According to Socea (2012), "Accounting information can reveal issues that
are overlooked during normal activities and can provide an independent control," which
explains why accounting is important in decision-making. Accounting data may help
managers of a firm spot trends and take necessary action to control their company's
financial performance since it shows a business's financial health and performance.
Accounting may also assist businesses with tracking and developing their budget, as it is
important to project future income and expenses to make sure they are headed in the right
direction.
More departmental collaboration is necessary for the management to make more strategic
decisions, and accounting helps all areas of the business make informed judgments. To
evaluate the company's financial standing, control cash flow, and decide what
investments to make, the finance department analyzes accounting data. The marketing
department holds a significant position in a company as it plays a vital role in propelling
business expansion, establishing the company's brand, and guaranteeing that its offerings
align with consumer demands. Accounting supports marketing efforts by helping to
determine pricing strategies, analyze return on investment for various marketing
activities, and determine how cost-effective marketing campaigns are. Another important
parts of company is sale department, accounting helps the sales department in analyzing
sales performance, setting sales targets, and evaluating the profitability of different
customer segments and sales channels.

3.2 Role of accounting to meet stakeholder needs

A company's operations and financial performance are of great importance to individuals
or groups known as stakeholders. A few of these stakeholders are the general public,
government organizations, suppliers, customers, workers, creditors, and investors.
Through a variety of financial reports, disclosures, and analyses, accounting plays a
crucial role in meeting these stakeholders' information needs. A few of these stakeholders
are the general public, government organizations, suppliers, customers, workers,
creditors, and investors. Through a variety of financial reports, disclosures, and analyses,
accounting plays a crucial role in meeting these stakeholders' information needs.
Accounting offers crucial financial data to owners and investors, enabling them to
evaluate the health, profitability, and development prospects of the business. because,
according to Eierle and Schultze (2013), "external investors use accounting information
to assess management's performance." Accounting assists shareholders and inventors in
determining a company's capacity to pay debts as well as its profitability and overall
financial stability. The balance sheet, income statement, and cash flow statement are
examples of financial statements that provide accounting information that sheds light on
the company's performance and financial health. In order for investors to make informed
investment decisions, inventors must have access to pertinent, trustworthy, and easily
understood information. Thus, it should be the investor's responsibility to notify the
regulator of their level of satisfaction with the accounting data that has been provided.
(Ara & Zim, 2015). Stakeholders assess the company's capacity for profit-making, risk-
taking, and resource allocation using this data. Accounting also aids investors in assessing
the company's prospects for the future and in making decisions about their investments
based on trustworthy financial information.

Another group of stakeholders who gain from accounting data is employees. "Workers
negotiated wage increases and other fringe benefits to determine the viability of the
business based on data gathered from the managers' report." (Akinlade, 2019).Income
statements and cash flow statements, among other accounting reports, offer valuable
information about a company's financial health and revenue generation potential.
Decisions pertaining to employment, including pay changes and job security, may be
influenced by this information. In addition, accounting disclosures that meet worker
interests in terms of pension plans, stock-based remuneration, and employee benefits
offer accountability and transparency. The public, government organizations, and
regulatory authorities are all interested in accounting data from a company's financial
reporting. Transparency and comparability of financial information are guaranteed by
accounting rules and laws like International Financial Reporting rules (IFRS) and
Generally Accepted Accounting Principles (GAAP).

3.3 Role of accounting to meet societal needs

Accounting offers the frameworks and instruments for tracking, measuring, and reporting
on these projects, enabling firms to share their social effect with stakeholders. This is one
of the main ways accounting satisfies social demands. Furthermore, non-financial data
including social and environmental factors are now required to be reported on under
accounting rules and criteria. This change is a reflection of the increased understanding of
how crucial it is to take financial success into account in addition to social and
environmental effects. Furthermore, accounting is essential to sustainable finance and
impact investing. When making investment decisions, lenders and investors are
increasingly taking the social and environmental aspects into account. Accounting
frameworks offer direction on how non-financial information should be disclosed,
allowing investors to evaluate an organization's social and environmental performance.
Consequently, companies are incentivized to incorporate social and environmental factors
into their decision-making procedures, fulfilling the societal demand for conscientious
capital allocation and investment.

IV. Accounting systems and the role of technology in modern-day

accounting

4.1 Accounting system

A system of accounting processes with integrated procedures and controls is called an
accounting system. The purpose of an accounting system is to keep track of corporate
transactions, compile them into an aggregated format, and produce reports that decision-
makers may utilize to assess, evaluate, and enhance operations. By Mark (2022). An
accounting system is a collection of integrated controls and procedures for accounting
processes. An accounting system's goals are to keep track of corporate transactions,
aggregate those transactions into reports that decision-makers can use to monitor,
evaluate, and enhance operations. An accurate and transparent picture of a company's
finances is provided by the accounting system, which closely monitors income, expenses,
assets, liabilities, and equity. This vital instrument facilitates resource management,
guarantees adherence to regulations, and furnishes crucial financial data to interested
parties. Accounting systems are also very useful for creating financial reports, which are
a crucial part of managing corporate operations. particularly when a firm needs to decide.
Financial statements could not be prepared because previously each employee had to
manually complete all financial tasks and diary entries. They can now only enter, edit,
and evaluate data using this remote-accessible automated solution. The advancement of
technology has brought about a transformation in the way accounting-related tasks and
report preparation are carried out, moving away from manual labor and toward
computerized methods. Moreover, this shift is bringing about an increasing number of
digital revolutions that impact domains including economy, society, and culture. The
manner that businesses conduct their business will alter when accounting is
acknowledged as an information system, and this will have a significant effect on
accounting.

4.2 The role of technology in modern-day accounting

Faster accounting processing times and better, more accurate reporting have both been
made possible by technology in recent years. In order to manage corporate operations and
to gather, process, and analyze financial data, accounting information systems are now
regarded as critical components by every business unit. As a result of the increased
efficiency, accuracy, and security of accounting procedures brought about by modern
technology, financial reporting and decision-making have improved. According to
Ghasemi, Shafeiepour, Aslani, and Barvayeh (2011), "by increasing the timeliness of
accounting information, computerized accounting systems have also improved the
functionality of accounting departments." First off, computerized accounting systems
contribute to greater functionality. "By improving the timeliness of financial information,
accountants can prepare reports from analyses of operations that give management an
accurate picture of the current state of affairs of the Ministries, or Government Agencies,"
is one way that computers can increase functioning. (Isa, 2017). Furthermore,
customized and aesthetically pleasing reports are provided by sophisticated reporting
technologies, improving communication and comprehension of financial data.
Additionally, technology has improved accounting data security. Sophisticated
authentication techniques lower the possibility of data fraud by protecting critical
financial information. Not to mention, technology has made it easier for accountants,
companies, and clients to collaborate and communicate. Real-time exchange of financial
records is made possible by collaboration platforms and technologies, which promote
effective and seamless communication. In order to guarantee the accuracy of financial
information, this makes it easier for accountants to communicate timely financial
information to managers.

Figure 6. The role of modern technology in accounting

V. Issues of ethics, regulation, and compliance and the extent to which

they are constraints or threats to the organization
According to Kamat (2012), accounting ethics are the ideal standards of conduct that are
limited to dealing with business transactions. These standards apply to both individuals
inside firms and the political systems that oversee these transactions. The moral precepts
and ideals that direct accountants' actions and choices in the course of their work are
referred to as the accounting ethic. An accountant must possess a number of ethical
qualities, such as independence, impartiality, competence, fairness, secrecy, faithfulness,
and responsibility (IFCA, 2006). Respecting these morals is essential to the accounting
profession's legitimacy and dependability. Ethnic problems in accounting can take many
different forms, including a lack of diversity in the field, unintentional bias in financial
reporting and decision-making, and a low percentage of minority-owned companies
receiving accounting services. In order to address ethnic concerns in accounting, the
profession must actively attempt to recognize and reduce any biases that may have an
impact on financial procedures, as well as to ensure that everyone is treated fairly and
equally.

Accounting compliance is the observance of the guidelines, norms, and standards

established by oversight organizations and accounting standards. It entails adhering to
particular protocols and rules to guarantee that financial reports and statements are
created in compliance with relevant legal requirements, accounting standards, and
regulations. In accounting, compliance means keeping up with the right paperwork,
abiding by ethical standards, and accurately documenting and reporting financial
activities. In order to uphold openness, credibility, and to fulfill legal and regulatory
requirements, firms must adhere to accounting standards. But the accounting industry
faces a number of legal and regulatory challenges that require careful consideration and
adherence to moral principles. The requirement to adhere to financial regulations is one
of the most common compliance challenges in accounting. Accounting experts are
required to assure adherence to several regulations and standards, including the
International Financial Reporting Standards (IFRS), as the financial industry is highly
regulated. If these rules are broken, there may be serious legal ramifications, such as
fines, penalties, and reputational harm to the company. Precise financial disclosure is an
additional crucial facet of accounting that is scrutinized by law and regulations. The
preparation of financial statements that accurately depict an organization's financial
situation and performance is the responsibility of accounting experts. In addition to being
against moral principles, lying or filing false reports can have negative legal
repercussions, including lawsuits, fines, and a decline in shareholder confidence.
 Figure 7. Ethicals of accounting

Conclusion
In summary, accounting is critical to the functioning of the entire organizational structure
as well as linked businesses. In addition, it affects society as a whole. The organization's
development will be impacted by all of its statistics and analysis, and because of the
knowledge it provides, the organization's stakeholders will be better able to discuss and
adopt rules and policies. a fair book. Those who are passionate about accounting
currently have a lot of options and benefits, but as standards, business tactics, and
technology change, accountants face a lot of new issues and challenges. For everyone to
be able to achieve industry standard standards, they must therefore possess all necessary
knowledge and abilities.

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Memo
Memorandum
To: Key Account Manager

From: Nguyen Trong Quoc Anh (Josh) – a Graduate Trainee in the Accounting
Department of KPMG (UK SME).

Date: December 4th, 2023

Subject: Prepare a 12-month cash budget

Through this memo, I want to present how to create a budget as well as how to use the
budget to allocate resources effectively, support effective control and decision making.

From the above information, I create a cash budget from the data the organization
provided. Next, I create 12-month cash budgets of the individual scenarios using variance
analysis. Finally, I compared and analysed the situations and made recommendations and
decisions to deploy resources effectively.

I hope you will read this memorandum and give your opinions and comments.
Thank you,

Nguyen Trong Quoc Anh

[email protected]

0901976274
Overview about budget

1.1 Budget definition

An organization must be well-prepared with plans about future operating expenditures if
it is to function efficiently and sustainably over the long run. Budgeting is the process of
estimating revenue and expenses over a given future time. A simple budget is a financial
plan, and it often takes a year. Any company entity must budget in order to function.

1.2 The role of budgeting

An organization will have a very unclear future vision and won't know where to go or
what to do in order to succeed if it just focuses on running its business in the here and
now without making plans or goals for the future. At this point, the budget serves to set
objectives for the company, forecast all operations, and assist in calculating the costs
necessary for the company to reach those objectives. Budgeting also plays a planning and
calculation role in ensuring that the company runs debt-free and can meet its long-term
financial objectives. In order to achieve the objectives it sets, the budget also has to
manage cash flow. When an organization doesn't have a budget, it becomes vulnerable to
unforeseen circumstances that it is unable to handle, perhaps resulting in financial losses,
debt, or even bankruptcy.

1.3 Advantage and disadvantage of budgeting

Advantages of Budgeting:
With the knowledge provided above, we can also understand some of the benefits of
planning. We'll talk about the benefits of planning in more depth below.

1. Performance Standards: For various time periods and sub-periods, budgets set
performance standards. Managers can see irregularities and act quickly to remedy them
by periodically comparing actual performance to these standards.
2. Planning Facilitation: Budgets provide department leaders with a time and money
allocation; they form the basis of precise and well-defined plans. Budgets are based on
actions that are deserving of review and modification and are therefore flexible. This
maximizes the use of available resources by guaranteeing that objectives are met within
predetermined parameters. Furthermore, by restricting the tasks assigned to managers at
different levels, budgets encourage delegation. By assigning regular work to lower-level
managers, this enables higher-level managers to concentrate on strategic thinking.

3. Motivation and Job happiness: By actively participating in budget preparation,

operating managers improve their overall work efficiency as well as their motivation and
job happiness.

4. Future Prediction: Budgets help predict how future changes may affect the company's
operations. This makes it possible for companies to adapt their policies and procedures to
changes in the environment.

5. Enhances control: Budgets are a tool for gauging departmental and individual
performance in relation to pre-established benchmarks. They offer a way to recognize and
deal with differences between actual performance and expectations. In order to overcome
these aberrations and determine the causes of them, managers can take corrective action
and stop them from happening again in the future. In organizational tasks, this promotes a
feeling of control and direction.

6. Supports financial planning: By projecting the amount of money needed, locating

possible funding sources, and setting goals and procedures, budgets are essential for
financial activity planning. This strategic strategy maximizes the use of funds and adds to
the company's overall profitability.

Disadvantages of Budgeting:
1. The Constraints of Budgeting: There are a lot of limitations associated with budgets.
These limitations include overspending, rigidity, future-focused thinking, impeding
innovation and change, placing too much focus on predetermined goals, and depending
too heavily on previous performance.

2. Challenges of Budgeting: There are several difficulties unique to budgeting. Among

these difficulties include excessive expenditure, rigidity, future-focused thinking,
impediments to creativity and change, an excessive focus on predetermined objectives,
and reliance on previous performance.

3. Limitations in Budgeting: There are certain restrictions associated with budgeting.

These restrictions include excessive spending, rigidity, future-focused thinking, impeding
innovation and change, placing too much focus on predetermined objectives, and
depending too heavily on previous performance.

4. Drawbacks of Budgeting: Budgets have several disadvantages. The following are some
of these disadvantages: excessive spending, rigidity, future-focused thinking, impediment
to creativity and change, excessive focus on predetermined objectives, and reliance on
previous performance.
1.4 Summary of Budgeting process.

Figure 8. Summary of Budgeting process.

Here is a set of fundamental budgetary steps. I'll provide you step-by-step instructions on
how to draft a business budget in the following section.

Attachment:
Raw Data:

a. As of December 31 (the end of the prior year the company’s general ledger showed the
following account balances):
The founding company, a start-up business, is in need of master budget for the coming year.
The following data have been assembled to assist in preparing the master budget:
a. As of December 31 (the end of the prior year the company’s general ledger showed the following account balances:

Debit (£) Credit (£)

Cash £18,000
Accounts receivable £16,200
Inventory £48,800
Buildings and equipment (net) £91,000

b. Actual sales for December and budgeted sales for the following months are as follows:

You need to give the information on what you want to sell, budgeted quantity and price.
Quantity (in unit) In £
December/N-1 12,750 £121,125
January/N 9,510 £90,345
February/N 9,100 £86,450
March/N 9,050 £85,975
April/N 8,660 £82,270
May/N 8,780 £83,410
June/N 9,250 £87,875
July/N 9,190 £87,305
August/N 9,280 £88,160
September/N 9,220 £87,590
October/N 9,480 £90,060
November/N 9,580 £91,010
December/N 13,150 £124,925
January/N+1 9,880 £93,860

c. Sales are 80% for cash and 20% for credit. All payments on credit sales are collected in
the month following the sale. The accounts receivable on December 31 are a result of
December credit sales.

d. The company’s gross margin is 60% of sales. (In other words, cost of goods sold is
40% of sales.)

e. Monthly expenses are budgeted: £35,000 per month including: rental cost: £8,000;
marketing expenses: £4,000; salary: £12,000; depreciation (non-cash expenses) £10,000
and other expense: £1000.

f. Each month’s ending inventory should equal 20% of the following month’s cost of
goods sold.

g. One-half of a month’s inventory purchases are paid for in the month of purchase; the
other half is paid in the following month.
h. In February, the company purchased a new computer for £3,700 cash.

i. During March, the company outsourced an advertisement project for £1,580 cash.

j. In January, the company purchased a TV for £2,000 cash.

k. During July, the company purchases an A/C for £1,000 cash.

l. During August and September, the company outsources a company for the maintenance
service for £2,100 cash.

m. During May, the company outsourced a company for an advertisement project for
£4,500 cash.

n. Management wants to maintain a minimum cash balance of £16,000. The company has
an agreement with a local bank that allows the company to borrow in increments of
£1,000 at the beginning of each month.

Assumption:
Prepare the cash budget from the given data

Step 1: Prepare the schedule of expected cash collection

1. Schedule of expected cash collections

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sale volume 9510 9100 9050 8660 8780 9250 9190 9280 9220 9480 9580 13150
price £9.5 £9.5 £9.5 £9.5 £9.5 £9.5 £9.5 £9.5 £9.5 £9.5 £9.5 £9.5
Sales £90,345.0 £86,450.0 £85,975.0 £82,270.0 £83,410.0 £87,875.0 £87,305.0 £88,160.0 £87,590.0 £90,060.0 £91,010.0 £124,925.0
Cash sales £72,276.0 £69,160.0 £68,780.0 £65,816.0 £66,728.0 £70,300.0 £69,844.0 £70,528.0 £70,072.0 £72,048.0 £72,808.0 £99,940.0

Sale volume and Sales from raw data in sentence a

Formula: Sales / Sale volume = Price

My assumption in sentence c, sales are 80% for cash and 20% on credit. So, the formulas
are:

Sales * 80% = Cash sales

Sales * 20% = Credit sales

Cash sales + Credit sales = Total cash collection

Step 2: Prepare the schedule of merchandise purchases budget
2a. Merchandise purchases budget:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan N+1
Budgeted cost of goods sold £36,138.00 £34,580.00 £34,390.00 £32,908.00 £33,364.00 £35,150.00 £34,922.00 £35,264.00 £35,036.00 £36,024.00 £36,404.00 £49,970.00 £37,544.00
Add desired ending inventory £6,916.00 £6,878.00 £6,581.60 £6,672.80 £7,030.00 £6,984.40 £7,052.80 £7,007.20 £7,204.80 £7,280.80 £9,994.00 £7,508.80
Total needs £43,054.00 £41,458.00 £40,971.60 £39,580.80 £40,394.00 £42,134.40 £41,974.80 £42,271.20 £42,240.80 £43,304.80 £46,398.00 £57,478.80 £37,544.00
Less beginning inventory £48,800.00 £12,662.00 £6,878.00 £6,581.60 £6,672.80 £7,030.00 £6,984.40 £7,052.80 £7,007.20 £7,204.80 £7,280.80 £9,994.00 £7,508.80
Required purchases £28,796.00 £34,093.60 £32,999.20 £33,721.20 £35,104.40 £34,990.40 £35,218.40 £35,233.60 £36,100.00 £39,117.20 £47,484.80 £30,035.20

Cash disbursement for purchase £24,000.00 £14,398.00 £31,444.80 £33,546.40 £33,360.20 £34,412.80 £35,047.40 £35,104.40 £35,226.00 £35,666.80 £37,608.60 £43,301.00

Sentences d and f state that each month's ending inventory is equal to twenty percent of
the subsequent month's cost of goods sold. We should determine the required
merchandise purchases budget each month based on the total amount needed, which is
determined by adding the desired ending inventory to the budgeted cost of goods sold
(COGS).
Budgeted cost of goods sold in month: 40% * sales money in month.
Add desired ending inventory: 20% * COGS of the following month.
=> Total needs = Budgeted COGS + Add desired ending inventory
Next, determine the number of purchases that are required each month by subtracting the
beginning inventory from the total need.
The beginning inventory of January will equal the ending inventory of December of last
year, which is £48,800 since the beginning inventory of a month is equal to the ending
inventory of the previous month.
Total need – Less beginning inventory = Required purchase
* Cash disbursement for purchases will be explained how to calculate in the next step.
Step 3: Make a schedule of the expected cash outflows for the purchases
of merchandise

This is a schedule of expected cash disbursements for merchandise purchases. The

calculation steps of this table are as follows:

Sentence g states that the remaining half of a month's inventory purchases are paid for in
the month following the first half. The following calculation formula is obtained using
the budget table for product purchases in step 2 and the general ledger data for the
business in sentence a:

One-half month’s inventory purchases in a month: 50% * Required purchased in a month

The other half: 50% * Required purchases in the following month

=> One-half month’s inventory purchases in a month + The other half

= Total cash disbursements for purchases

Since we have to settle accounts payable from December of the previous year, we also
need to calculate the entire expected disbursement from the accounts payable of
December of the previous year and half of the amount that will be spent on products.
products in January this year. The following months are calculated according to the above
formula.
Step 4: Make a schedule of expected cash disbursements for selling and
administrative expenses
3. Schedule of expected cash disbursements for selling and administrative expenses

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Salaries and wages £12,000 £12,000 £12,000 £12,000 £12,000 £12,000 £12,000 £12,000 £12,000 £12,000 £12,000 £12,000
Marketing expense £4,000 £4,000 £4,000 £4,000 £4,000 £4,000 £4,000 £4,000 £4,000 £4,000 £4,000 £4,000
An Advertisement project 1 £1,580
An Advertisement project 2 £4,500
Rental cost £8,000 £8,000 £8,000 £8,000 £8,000 £8,000 £8,000 £8,000 £8,000 £8,000 £8,000 £8,000
Depreciation £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000
Other expense £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000 £1,000
Maintenance service £2,100
Machine
A television £2,000
A New computer £3,700
An A/C £1,000
Total expenses £37,000 £38,700 £36,580 £35,000 £39,500 £35,000 £36,000 £37,100 £35,000 £35,000 £35,000 £35,000
Non-cash expenses £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000 £10,000

To calculate the expected cash disbursements for selling and administrative expenses, we
will combine the monthly expenses listed in sentence e and the costs arising from
purchasing additional equipment (h, j, k) and hiring advertising projects (i, l).

=> Total expense = Salaries and wages + Marketing expense + Rental costs +
Depreciation + Other expense + Maintenance service + Machine.

=> Total cash disbursements for selling and administrative expenses = Total expenses -
Non-cash expenses.
Step 5: Cash Budget
4. Cash budget

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash balance, beginning £18,000 £55,476 £99,607 £127,652 £152,117 £172,439 £200,008 £226,379 £252,164 £279,642 £308,541 £336,753
Add cash collections £88,476 £87,229 £86,070 £83,011 £83,182 £86,982 £87,419 £87,989 £87,704 £89,566 £90,820 £118,142
Total cash available £106,476 £142,705 £185,677 £210,663 £235,299 £259,421 £287,427 £314,368 £339,868 £369,208 £399,361 £454,895
Less cash disbursements
Merchandise purchases £24,000 £14,398 £31,445 £33,546 £33,360 £34,413 £35,047 £35,104 £35,226 £35,667 £37,609 £43,301
Selling and administrative expenses £27,000 £28,700 £26,580 £25,000 £29,500 £25,000 £26,000 £27,100 £25,000 £25,000 £25,000 £25,000

Total cash disbursements £51,000 £43,098 £58,025 £58,546 £62,860 £59,413 £61,047 £62,204 £60,226 £60,667 £62,609 £68,301
Excess (deficiency) of cash £55,476 £99,607 £127,652 £152,117 £172,439 £200,008 £226,379 £252,164 £279,642 £308,541 £336,753 £386,594
Financing
Borrowing
Repayments
Interest

Fill the values from previous tables into this table

Total cash disbursements = Merchandise purchases + Selling and administrative expenses

Excess of cash = Total cash available – Total cash disbursements.

=>Cash balance = Excess of cash = Financing.

Scenarios Analysis
Scenario 1: lowering costs by 20%, which results in a 10% monthly increase in sales
volume.

Create budgets like the steps above. According to scenario 1, there are changes in the
budgets as follows:

+ price of table 1 (Schedule of expected cash collections) reduced by 20%.

Formula: Cost = ex cost * 80% (100%-20%)

+ Sales volume of table 1 increased by 10%.

Formula: Sale volume = quantity (raw data) * 110% (100% + 10%)

The tables of scenario 1 have the following changes:

1. Schedule of expected cash collections
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan N+1
Sale volume £10.461,00 £10.010,00 £9.955,00 £9.526,00 £9.658,00 £10.175,00 £10.109,00 £10.208,00 £10.142,00 £10.428,00 £10.538,00 £14.465,00 £10.868,00
price £7,60 £7,60 £7,60 £7,60 £7,60 £7,60 £7,60 £7,60 £7,60 £7,60 £7,60 £7,60 £7,60
Sales £79.503,60 £76.076,00 £75.658,00 £72.397,60 £73.400,80 £77.330,00 £76.828,40 £77.580,80 £77.079,20 £79.252,80 £80.088,80 £109.934,00 £82.596,80
Cash sales £63.602,88 £60.860,80 £60.526,40 £57.918,08 £58.720,64 £61.864,00 £61.462,72 £62.064,64 £61.663,36 £63.402,24 £64.071,04 £87.947,20 £66.077,44
Credit sales £15.900,72 £15.215,20 £15.131,60 £14.479,52 £14.680,16 £15.466,00 £15.365,68 £15.516,16 £15.415,84 £15.850,56 £16.017,76 £21.986,80 £16.519,36
Total cash collection £79.802,88 £76.761,52 £75.741,60 £73.049,68 £73.200,16 £76.544,16 £76.928,72 £77.430,32 £77.179,52 £78.818,08 £79.921,60 £103.964,96 £88.064,24
2a. Merchandise purchases budget:
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan N+1
Budgeted cost of goods sold £31.801,44 £30.430,40 £30.263,20 £28.959,04 £29.360,32 £30.932,00 £30.731,36 £31.032,32 £30.831,68 £31.701,12 £32.035,52 £43.973,60 £33.038,72
Add desired ending inventory 6086,08 6052,64 5791,808 5872,064 6186,4 6146,272 6206,464 6166,336 6340,224 6407,104 8794,72 6607,744
Total needs 37887,52 36483,04 36055,008 34831,104 35546,72 37078,272 36937,824 37198,656 37171,904 38108,224 40830,24 50581,344 £33.038,72
Less beginning inventory 48800 16998,56 6052,64 5791,808 5872,064 6186,4 6146,272 6206,464 6166,336 6340,224 6407,104 8794,72 £6.607,74
Required purchases 19484,48 30002,368 29039,296 29674,656 30891,872 30791,552 30992,192 31005,568 31768 34423,136 41786,624 £26.430,98

Cash disbursement for purchase 24000 14398 31444,8 33546,4 33360,2 34412,8 35047,4 35104,4 35226 35666,8 37608,6 43301

Total 24000 33882,48 61447,168 62585,696 63034,856 65304,672 65838,952 66096,592 66231,568 67434,8 72031,736 85087,624 £26.430,98
2b. Schedule of expected cash disbursements for merchandise purchases
Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec
December purchases £24.000,00
January purchases - -
February purchases £9.742,24 £9.742,24
March purchases £15.001,18 £15.001,18
April purchases £14.519,65 £14.519,65
May purchases £14.837,33 £14.837,33
June purchases £15.445,94 £15.445,94
July purchases £15.395,78 £15.395,78
August purchases £15.496,10 £15.496,10
September purchases £15.502,78 £15.502,78
October purchases £15.884,00 £15.884,00
November purchases £17.211,57 £17.211,57
December purchases £20.893,31
Total cash disbursements purchases £24.000,00 £9.742,24 £24.743,42 £29.520,83 £29.356,98 £30.283,26 £30.841,71 £30.891,87 £30.998,88 £31.386,78 £33.095,57 £38.104,88
3. Schedule of expected cash disbursements for selling and administrative expenses
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Salaries and wages £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00
Marketing expense £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00
An Advertisement project 1 £1.580,00
An Advertisement project 2 £4.500,00
Rental cost £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00
Depreciation £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00
Other expense £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00
Maintenance service £2.100,00
Machine
A television £2.000,00
A New computer £3.700,00
An A/C £1.000,00
Total expenses £37.000,00 £38.700,00 £36.580,00 £35.000,00 £39.500,00 £35.000,00 £36.000,00 £37.100,00 £35.000,00 £35.000,00 £35.000,00 £35.000,00
Non-cash expenses £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00

Total cash disbursements for selling and

£27.000,00
administrative
£28.700,00
expenses£26.580,00 £25.000,00 £29.500,00 £25.000,00 £26.000,00 £27.100,00 £25.000,00 £25.000,00 £25.000,00 £25.000,00
4. Cash budget
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash balance, beginning £18.000,00 £46.802,88 £80.466,40 £98.183,20 £112.686,48 £123.026,44 £140.157,80 £156.039,12 £171.265,04 £188.218,56 £206.369,84 £223.682,84
Add cash collections £79.802,88 £76.761,52 £75.741,60 £73.049,68 £73.200,16 £76.544,16 £76.928,72 £77.430,32 £77.179,52 £78.818,08 £79.921,60 £103.964,96
Total cash available £97.802,88 £123.564,40 £156.208,00 £171.232,88 £185.886,64 £199.570,60 £217.086,52 £233.469,44 £248.444,56 £267.036,64 £286.291,44 £327.647,80
Less cash disbursements
Merchandise purchases £24.000,00 £14.398,00 £31.444,80 £33.546,40 £33.360,20 £34.412,80 £35.047,40 £35.104,40 £35.226,00 £35.666,80 £37.608,60 £43.301,00
Selling and administrative expenses£27.000,00 £28.700,00 £26.580,00 £25.000,00 £29.500,00 £25.000,00 £26.000,00 £27.100,00 £25.000,00 £25.000,00 £25.000,00 £25.000,00

Total cash disbursements £51.000,00 £43.098,00 £58.024,80 £58.546,40 £62.860,20 £59.412,80 £61.047,40 £62.204,40 £60.226,00 £60.666,80 £62.608,60 £68.301,00
Excess (deficiency) of cash £46.802,88 £80.466,40 £98.183,20 £112.686,48 £123.026,44 £140.157,80 £156.039,12 £171.265,04 £188.218,56 £206.369,84 £223.682,84 £259.346,80
Financing
Borrowing
Repayments
Interest
Cash balance, ending £46.802,88 £80.466,40 £98.183,20 £112.686,48 £123.026,44 £140.157,80 £156.039,12 £171.265,04 £188.218,56 £206.369,84 £223.682,84 £259.346,80
Advantage:

In conclusion, it is evident that lowering prices supports higher sales (the quantity of
items sold) and lowers inventory, among other advantages. Show that offering discounts
can draw in additional clients.

Disadvantage:

However, if prices are lowered, the business's overall profit can be less than what was
first estimated to be sold for.

A corporation with low profitability may not have enough money for future expansion
(such as expanding the company, recruiting more staff, manufacturing more products, or
purchasing additional equipment to support future ambitions). This may limit or, at worst,
heavily indebt corporate growth and expansion in the upcoming years.

Solution:

On the other hand, lowering prices has the advantage of encouraging people to purchase
goods, which will result in a large influx of new clients. To keep both new and returning
clients in this discount program, businesses can take advantage of this chance to advertise
their goods and provide membership programs.

Scenario 2: increasing the marketing budget by 10 percent per month, which in turn
generates an additional 20 percent in sales revenue.

Similar to scenario 1, the budget of scenario 2 changes as follows:

+ In table 3 (Schedule of expected cash disbursements for selling and administrative

expenses), Marketing expense increased by 10%

Formula: Marketing expense = old cost (4000) * 110%

+ Table 1 sales increased by 20%

Formula: Sales volume = quantity (raw data) * 120%

Scenario 1's tables have the following changes:
1. Schedule of expected cash collections
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan N+1
Sale volume 11412 10920 10860 10392 10536 11100 11028 11136 11064 11376 11496 15780 11856
price £9,50 £9,50 £9,50 £9,50 £9,50 £9,50 £9,50 £9,50 £9,50 £9,50 £9,50 £9,50 £9,50
Sales £108.414,00 £103.740,00 £103.170,00 £98.724,00 £100.092,00 £105.450,00 £104.766,00 £105.792,00 £105.108,00 £108.072,00 £109.212,00 £149.910,00 £112.632,00
Cash sales £86.731,20 £82.992,00 £82.536,00 £78.979,20 £80.073,60 £84.360,00 £83.812,80 £84.633,60 £84.086,40 £86.457,60 £87.369,60 £119.928,00 £90.105,60
Credit sales £21.682,80 £20.748,00 £20.634,00 £19.744,80 £20.018,40 £21.090,00 £20.953,20 £21.158,40 £21.021,60 £21.614,40 £21.842,40 £29.982,00 £22.526,40
Total cash collection £102.931,20 £104.674,80 £103.284,00 £99.613,20 £99.818,40 £104.378,40 £104.902,80 £105.586,80 £105.244,80 £107.479,20 £108.984,00 £141.770,40 £120.087,60
2a. Merchandise purchases budget:
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan N+1
Budgeted cost of goods sold £43.365,60 £41.496,00 £41.268,00 £39.489,60 £40.036,80 £42.180,00 £41.906,40 £42.316,80 £42.043,20 £43.228,80 £43.684,80 £59.964,00 £45.052,80
Add desired ending inventory £8.299,20 £8.253,60 £7.897,92 £8.007,36 £8.436,00 £8.381,28 £8.463,36 £8.408,64 £8.645,76 £8.736,96 £11.992,80 £9.010,56
Total needs £51.664,80 £49.749,60 £49.165,92 £47.496,96 £48.472,80 £50.561,28 £50.369,76 £50.725,44 £50.688,96 £51.965,76 £55.677,60 £68.974,56 £45.052,80
Less beginning inventory £48.800,00 £5.434,40 £8.253,60 £7.897,92 £8.007,36 £8.436,00 £8.381,28 £8.463,36 £8.408,64 £8.645,76 £8.736,96 £11.992,80 £9.010,56
Required purchases £2.864,80 £44.315,20 £40.912,32 £39.599,04 £40.465,44 £42.125,28 £41.988,48 £42.262,08 £42.280,32 £43.320,00 £46.940,64 £56.981,76 £36.042,24

Cash disbursement for purchase £24.000,00 £14.398,00 £31.444,80 £33.546,40 £33.360,20 £34.412,80 £35.047,40 £35.104,40 £35.226,00 £35.666,80 £37.608,60 £43.301,00

Total £26.864,80 £58.713,20 £72.357,12 £73.145,44 £73.825,64 £76.538,08 £77.035,88 £77.366,48 £77.506,32 £78.986,80 £84.549,24 £100.282,76 £36.042,24
2b. Schedule of expected cash disbursements for merchandise purchases
Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec
December purchases £24.000,00
January purchases £1.432,40 £1.432,40
February purchases £22.157,60 £22.157,60
March purchases £20.456,16 £20.456,16
April purchases £19.799,52 £19.799,52
May purchases £20.232,72 £20.232,72
June purchases £21.062,64 £21.062,64
July purchases £20.994,24 £20.994,24
August purchases £21.131,04 £21.131,04
September purchases £21.140,16 £21.140,16
October purchases £21.660,00 £21.660,00
November purchases £23.470,32 £23.470,32
December purchases £28.490,88
Total cash disbursements purchases £25.432,40 £23.590,00 £42.613,76 £40.255,68 £40.032,24 £41.295,36 £42.056,88 £42.125,28 £42.271,20 £42.800,16 £45.130,32 £51.961,20
3. Schedule of expected cash disbursements for selling and administrative expenses
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Salaries and wages £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00
Marketing expense £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00 £4.400,00
An Advertisement project 1 £1.580,00
An Advertisement project 2 £4.500,00
Rental cost £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00 £8.000,00
Depreciation £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00
Other expense £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00
Maintenance service £2.100,00
Machine
A television £2.000,00
A New computer £3.700,00
An A/C £1.000,00
Total expenses £37.400,00 £39.100,00 £36.980,00 £35.400,00 £39.900,00 £35.400,00 £36.400,00 £37.500,00 £35.400,00 £35.400,00 £35.400,00 £35.400,00
Non-cash expenses £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00

Total cash disbursements for selling and £27.400,00

administrative£29.100,00
expenses £26.980,00 £25.400,00 £29.900,00 £25.400,00 £26.400,00 £27.500,00 £25.400,00 £25.400,00 £25.400,00 £25.400,00
4. Cash budget
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash balance, beginning £18.000,00 £68.098,80 £120.083,60 £164.942,80 £205.609,60 £242.167,80 £286.733,40 £330.188,80 £373.171,20 £417.790,00 £464.202,40 £510.177,80
Add cash collections £102.931,20 £104.674,80 £103.284,00 £99.613,20 £99.818,40 £104.378,40 £104.902,80 £105.586,80 £105.244,80 £107.479,20 £108.984,00 £141.770,40
Total cash available £120.931,20 £172.773,60 £223.367,60 £264.556,00 £305.428,00 £346.546,20 £391.636,20 £435.775,60 £478.416,00 £525.269,20 £573.186,40 £651.948,20
Less cash disbursements
Merchandise purchases £25.432,40 £23.590,00 £31.444,80 £33.546,40 £33.360,20 £34.412,80 £35.047,40 £35.104,40 £35.226,00 £35.666,80 £37.608,60 £43.301,00
Selling and administrative expenses £27.400,00 £29.100,00 £26.980,00 £25.400,00 £29.900,00 £25.400,00 £26.400,00 £27.500,00 £25.400,00 £25.400,00 £25.400,00 £25.400,00

Total cash disbursements £52.832,40 £52.690,00 £58.424,80 £58.946,40 £63.260,20 £59.812,80 £61.447,40 £62.604,40 £60.626,00 £61.066,80 £63.008,60 £68.701,00
Excess (deficiency) of cash £68.098,80 £120.083,60 £164.942,80 £205.609,60 £242.167,80 £286.733,40 £330.188,80 £373.171,20 £417.790,00 £464.202,40 £510.177,80 £583.247,20
Financing
Borrowing
Repayments
Interest
Cash balance, ending £68.098,80 £120.083,60 £164.942,80 £205.609,60 £242.167,80 £286.733,40 £330.188,80 £373.171,20 £417.790,00 £464.202,40 £510.177,80 £583.247,20
Advantage:

Marketing and advertising can draw in customers since sales volume, income, and
inventory clearing all increase in tandem with marketing expenses.

Disadvantage:

If the company's marketing and advertising plan is unsuccessful, it will incur higher
expenses and be unable to sell its products, which will result in a rise in inventory (since
the company will be able to produce more products if the plan is implemented).
marketing performance). It might hurt the company's finances.

Solution:

Learn about and give credible marketing strategies or marketing service providers some
thought. Create cutting-edge marketing strategies for the industry to draw in clients.

Scenario 3: Granting suppliers a trade credit of one month.

The anticipated cash outflow for the goods purchases in scenario 3 is as follows: every
one of the merchandise purchases will be settled within a single later month.
2b. Schedule of expected cash disbursements for merchandise purchases
Jan Feb March Apr May Jun Jul Aug Sep Oct Nov Dec

December purchases £ 24.000,00

January purchases
February purchases £37.087,60
March purchases £40.912,32
April purchases £39.599,04
May purchases £40.465,44
June purchases £42.125,28
July purchases £41.988,48
August purchases £42.262,08
September purchases £42.280,32
October purchases £43.320,00
November purchases £46.940,64
Total cash disbursements purchases £24.000,00 £0,00 £37.087,60 £40.912,32 £39.599,04 £40.465,44 £42.125,28 £41.988,48 £42.262,08 £42.280,32 £43.320,00 £46.940,64
 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash balance, beginning £18.000,00 £55.476,00 £127.837,00 £165.333,40 £195.334,28 £226.853,64 £262.066,60 £296.144,12 £331.042,44 £365.325,16 £401.824,04 £438.788,04
Add cash collections £88.476,00 £101.061,00 £103.284,00 £99.613,20 £99.818,40 £104.378,40 £104.902,80 £105.586,80 £105.244,80 £107.479,20 £108.984,00 £141.770,40
Total cash available £106.476,00 £156.537,00 £231.121,00 £264.946,60 £295.152,68 £331.232,04 £366.969,40 £401.730,92 £436.287,24 £472.804,36 £510.808,04 £580.558,44
Less cash disbursements
Merchandise purchases £24.000,00 £0,00 £37.087,60 £40.912,32 £39.599,04 £40.465,44 £42.125,28 £41.988,48 £42.262,08 £42.280,32 £43.320,00 £46.940,64
Selling and administrative expenses £27.000,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00 £28.700,00

Total cash disbursements £51.000,00 £28.700,00 £65.787,60 £69.612,32 £68.299,04 £69.165,44 £70.825,28 £70.688,48 £70.962,08 £70.980,32 £72.020,00 £75.640,64
Excess (deficiency) of cash £55.476,00 £127.837,00 £165.333,40 £195.334,28 £226.853,64 £262.066,60 £296.144,12 £331.042,44 £365.325,16 £401.824,04 £438.788,04 £504.917,80
Financing
Borrowing
Repayments
Interest
Cash balance, ending £55.476,00 £127.837,00 £165.333,40 £195.334,28 £226.853,64 £262.066,60 £296.144,12 £331.042,44 £365.325,16 £401.824,04 £438.788,04 £504.917,80

In the third scenario, the company is allowed to defer payments to suppliers until the
following month.

Advantage:

Trade credit increases the ease with which a business may afford to buy products. Even
during turbulent financial times, the corporation maintains a continuous supply of
commodities because it responds to seasonal and market shifts with greater skill.

Disadvantage:

When a business doesn't pay suppliers or trade credit on time, it can become vulnerable,
lose its reputation, or lose clients.

Measure:

Neither the revenue nor the profits are enhanced under the third scenario. However, it
gives companies access to a consistent supply of goods. To prevent harming their
reputation, businesses should make timely loan repayments.

Scenario 4: Reducing rental/property-related costs by 15 percent per month. Rental

cost (raw data) – Rental cost (raw data) * 15% = Rental cost in scenario 4
3. Schedule of expected cash disbursements for selling and administrative expenses
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Salaries and wages £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00 £12.000,00
Marketing expense £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00 £4.000,00
An Advertisement project 1 £1.580,00
An Advertisement project 2 £4.500,00
Rental cost £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00 £6.800,00
Depreciation £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00
Other expense £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00 £1.000,00
Maintenance service £2.100,00
Machine
A television £2.000,00
A New computer £3.700,00
An A/C £1.000,00
Total expenses £35.800,00 £37.500,00 £35.380,00 £33.800,00 £38.300,00 £33.800,00 £34.800,00 £35.900,00 £33.800,00 £33.800,00 £33.800,00 £33.800,00
Non-cash expenses £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00 £10.000,00

Total cash disbursements for selling and

£25.800,00
administrative
£27.500,00
expenses£25.380,00 £23.800,00 £28.300,00 £23.800,00 £24.800,00 £25.900,00 £23.800,00 £23.800,00 £23.800,00 £23.800,00

4. Cash budget
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Cash balance, beginning £18.000,00 £56.676,00 £102.007,00 £131.252,20 £156.916,80 £178.438,60 £207.207,80 £234.779,40 £261.764,00 £290.442,00 £320.541,20 £349.952,60
Add cash collections £88.476,00 £87.229,00 £86.070,00 £83.011,00 £83.182,00 £86.982,00 £87.419,00 £87.989,00 £87.704,00 £89.566,00 £90.820,00 £118.142,00
Total cash available £106.476,00 £143.905,00 £188.077,00 £214.263,20 £240.098,80 £265.420,60 £294.626,80 £322.768,40 £349.468,00 £380.008,00 £411.361,20 £468.094,60
Less cash disbursements
Merchandise purchases £24.000,00 £14.398,00 £31.444,80 £33.546,40 £33.360,20 £34.412,80 £35.047,40 £35.104,40 £35.226,00 £35.666,80 £37.608,60 £43.301,00
Selling and administrative expenses£25.800,00 £27.500,00 £25.380,00 £23.800,00 £28.300,00 £23.800,00 £24.800,00 £25.900,00 £23.800,00 £23.800,00 £23.800,00 £23.800,00

Total cash disbursements £49.800,00 £41.898,00 £56.824,80 £57.346,40 £61.660,20 £58.212,80 £59.847,40 £61.004,40 £59.026,00 £59.466,80 £61.408,60 £67.101,00
Excess (deficiency) of cash £56.676,00 £102.007,00 £131.252,20 £156.916,80 £178.438,60 £207.207,80 £234.779,40 £261.764,00 £290.442,00 £320.541,20 £349.952,60 £400.993,60
Financing
Borrowing
Repayments
Interest
Cash balance, ending £56.676,00 £102.007,00 £131.252,20 £156.916,80 £178.438,60 £207.207,80 £234.779,40 £261.764,00 £290.442,00 £320.541,20 £349.952,60 £400.993,60

Advantage:

By lowering tax expenses, businesses can cut expenses and increase profits. Furthermore,
the funds saved might be used to launch new projects or carry out fresh commercial
strategies.

Disadvantage:

It is necessary to employ space and equipment that might not be appropriate for the
company's purposes and could have a negative impact on business operations in order to
lower rental expenses. Performance in business can be impacted by subpar facilities.

Measure:
The business can ascertain and enumerate the plans and requirements that must be
fulfilled for the enterprise. Next, pick a good rental location to save as much money as
possible.

Discuss, compare and make decisions

Because they contain too many significant dangers and not enough benefits for the
company, I do not think favorably of scenarios 3 and 4.

In terms of income or profit, scenario 3 does not provide enterprises with a lot of
advantages.

Scenario 4 reducing and conserving rental expenses might lead to infrastructure

degradation and hinder the growth of businesses.

The budgets in scenarios 1 and 2 have the best chance of turning a profit for the company.
Due to the fact that each of these situations have the ability to draw clients and boost
industry income. Nonetheless, since most organizations already incur advertising
expenses, spending an extra 10% won't make much of a difference in scenario 2.

Scenario 1 has the most potential to attract clients to a firm because discounts are an
alluring program that can achieve the best efficiency. In my opinion, this makes it the
most worthwhile to adopt. In addition to speeding up inventories, raising the company's
earnings. This program also aims to improve client perception of the company, which will
help them remember it longer and be more likely to visit again in the future.