"If management accountants are to remain useful to the organisations within they work, they need to keep current with changes in management practices" (Horngern, 2002) Management accounting was evolved from financial accounting in the 19th century
"If management accountants are to remain useful to the organisations within they work, they need to keep current with changes in management practices" (Horngern, 2002) Management accounting was evolved from financial accounting in the 19th century, due to the escalated need for more detailed and timelier information for stock control, product costing and decisions affecting the future. The main aim of it was to "provide timely and accurate information which can help create value" (Atkinson et al). I am going to investigate how management accounting has developed over time and whether it still provides a useful tool to managers. Accounting is now facing new challenges, "business people must increasingly recognise that the challenge now is to help to deliver simultaneously economic prosperity, environmental quality and social equity" (Elkington, 1998), which is causing mangers to re-evaluate the practises that are currently conducted. Traditionally management accounting systems were concerned with providing financial information. However in respond to the changing environment an immense emphasis is now on gathering and reporting non-financial quantitative and qualitative information. This resulted in a movement; treating financial figures as part of a broader set of measures instead of foundations of the practise. In the 1950's efforts were made to calculate the total costs
Give an explanation of break-even analysis and explain how it supports the achievement of strategic aims and objectives.
Section 2 . Give an explanation of break-even analysis and explain how it supports the achievement of strategic aims and objectives. Break-even analysis compares a firm's revenue with its fixed and variable costs to identify the minimum sales level needed to make a profit. The starting point for all financial management is to know how much goods or services cost to produce. If a business knows how many products they have to sell, they can benefit from it because this can cover their costs. This is particularly important for new businesses with limited experience of their products or their markets. It is also of value for established businesses which are planning to produce a new product. A company whose aims and objectives are growth, continuity, investment, innovation etc can use break-even analysis as a cheap, quick and simple tool to analyse and estimate the future level of output they will need to produce and sell in order to meet given objectives in terms of profits. It can also help to assess the impact of planned price, changes upon profit and the level of output needed to break-even. It is also of value for established businesses which are planning to produce a new product. It also helps to support applications for loans from banks and offer financial institutions-the use of the technique may indicate good business sense as well as forecast profitability, and
Preparation of a cash flow forecast
Preparation of a cash flow forecast Cash flow forecast Cash flow relates to the amount of money received and spent in a given period. Cash flow problems occur when the amount spent is greater than the amount received. You may have cash flow problems from time to time-especially just before pay day-when you are short of cash to buy or do what you want. Unless you want to get into debt you need to reduce your spending until you get more money. Businesses can also have cash flow problems. This may be because some people who owe them money have not paid their bills when they should. The business then does not have enough money in the bank to pay the bills it has received from its suppliers. Businesses use cash flow forecast to predict how much money they should have in the bank at any particular time, usually at the end of a month. This means listing and adding up all their expected cash inflows. Cash inflow Cash inflows are money received by the business for variety of reasons such as the capital, which means the money that the owner puts into the business at the start and sales. Cash outflow Cash outflow is the money that goes out such as purchases for example manufacturing businesses will buy raw materials, wages, rent etc In flows is the money the business expects to receive and pay into its bank account. It then needs to add up its cash out flows. This is the
Unit 3 - Investigating Financial Control
Unit 3 - Investigating Financial Control I have recently completed my BTEC First Diploma Business and have been employed by Pedro, who owns and runs a hot dog van. He has asked me to investigate his finances; I will be creating a break-even chart for his business. A) Three types of costs to businesses are start-up costs, fixed costs and variable costs. Before a business is set-up, the business will need to buy various items such as building and equipment these are called start-up costs, these costs which happens before the business can begin. These costs also occur when a business expands or decides to star a new venture. Fixed costs are costs which usually occur when the business has begun; these costs remain the same for a period of time and do not vary on output. This means that the business needs to pay the bills whether it sold 100 units or 0 units. Fixed costs are also called indirect costs; these costs include rent and rates. Variable costs are costs which occur once the business has been set-up. This costs varies on output and is also called direct costs, an example of this cost are the amount of hot dogs vendor requires this depends on the amount it sells. Revenue is the amount of money received from all of the businesses activities. The main sources of income for most businesses are its sales which include money received from its customers who buy its
Business and finance
Business and finance Intermediate Personal finance unit eight Assignment number-one Date Set-16/02/01 Date Due- 15/03/01 By Christine Reid The unit I have been studying involves learning about planning, managing and controlling my finance. As I have seen from class discussions and through the personal budget that I draw up. It took a lot of self-discipline and skill to plan my finance. Sometimes it gets so complicated that we need the help of experts to advise us about ways to plan, manage and control our finances. For this assignment I will have to do the following ~ 1 ~ To produce a guide for a young employed adult. 2 ~ This guide must contain information that will help him/her to understand: 2.1 ~ Why it is important to plan their finance. 2.2 ~ Where they can get advice to help them in their financial planning. 2.3 ~ What financial services are available from banks and other financial institutions. 2.4 ~ Most people need a loan of some sort, it will also be helpful if you can give them information about different types of borrowing and how they can use these loans. 2.5 ~ You also need to advice them about methods of ensuring accuracy of financial records. Planning, managing and controlling your finances. Step one ~ * Title page. * Introduction. * Plan. Step two ~ Why is it
The business plan
. Introduction This portfolio work will enable me to learn how to set up a business. And we have to do many things to set it up. And I want to set a tuck shop in the boarding house which is near the school and what I have to do is get the tuck shop started. I also have to write a business plan for it to make sure that I know what is I doing. A business plan will also allow me to minimize risks of failure; failure can be very costly to a business. I set it up because the boarders in the house always go to the supermarket in MP .If I haven't written a business plan it will be an increase in risks and decrease in success in rate. 2. My business In the school, the student will get pressure from their studies. so by having some food and drinks to let them relax.. that's why tuck shops are very popular in school even in boarding house. From the result of my questionnaires I got over 50% boarders from the boarding house said they strongly advise to open a tuck shop in the boarding house. So I become confident of the demand of the house. The man of my tuck shop called "Come On". This type of business will be sole trader. This business only owned by me and I need to face "Unlimited liability" which means I face all the business risk and has to find all the capital to start the business. We will be selling many product including ice cream. "Come On" also selling smile and friendly
'Historic cost accounting is the worst possible accounting convention, until one considers the alternatives.'
AF 301 Financial Accounting II Historical Costing Name: Shengheng Guan Student No.: M207952 4 December 2004 Table of Contents . INTRODUCTION ...................................................................... 3 2. THE LIMITATIONS OF HISRORICAL COST ACCOUNTING ............. 3 3. THE ALTERNATIVES UNDER CONSIDERATION 3.1 CURRENT PURCHASING POWER ACCOUNTING ......................... 4 'Historic cost accounting is the worst possible accounting convention, until one considers the alternatives.' . INTRODUCTION The most commonly encountered accounting convention is the "historical cost accounting". The creation of this accounting convention can be traced to the work of a Franciscan monk by the name of Pacioli in the year 1494. Historical cost accounting sets prices on the basis of original costs, where the cost of assets is measured by their depreciated historic cost. Therefore, no account is taken of changing prices in the economy under historical cost accounting. Over time, numerous other accounting theories have been developed by a number of well respected scholars and historical cost accounting has been criticised on the basis that it has too may shortcomings, with particular emphasis on its failing to provide useful information in times of rising prices. However, many of the proposed methods have been rejected by the accounting profession. In the following
COMMUNICATIONS SATILLITE CORPORATION AN ANALYSIS OF DR. WILLARD T. CARLTON'S DEBT EQUITY RISK PREMIUM APPROACH I. STATEMENT OF PROBLEM Did Professor Willard Carleton do a reasonable job of estimating the cost of common equity for Communications Satellite Corporation for 1964 - 1975? II. FINANCIAL FRAMEWORK Debt Equity Risk Premium The financial framework used by Dr. Willard T. Carleton is the Debt Equity Risk Premium (DERP). The cost of equity equals the cost of debt plus an equity risk premium and is represented by the following equation: Ke = Kd + ERP1 Cost of Debt As shown above, the DERP model uses a firm's cost of debt as a starting point for the formula and adds a risk premium to it to determine the appropriate cost of equity. When the company has no debt to establish a starting point, the risk-free rate may be used instead, but to some disadvantage. There are similarities and differences between the risk-free rate of return and the cost of debt. They both account for the rate of inflation and long-term rates include a maturity risk premium. The cost of debt also includes a risk premium for the risk of liquidity, marketability, and default that is not a part of the risk-free rate. Government bonds can be used to determine the appropriate risk-free rate. Either T-bonds or T-bills can be used for this determination. The length of the project should play a
In this assignment I will illustrate in a report the financial state of Domestic Dog Homes by use of accounting ratios. The ratios I will be using are: -Solvency -Profitability -Performance
Unit 2 - P6 Ratio In this assignment I will illustrate in a report the financial state of Domestic Dog Homes by use of accounting ratios. The ratios I will be using are: - Solvency - Profitability - Performance Businesses use ratios to find out how solvent they are. Solvency Equation Current Ratio To find the Current Ratio we have to divide the current assets with the current liabilities. The Current ratio formulae show us how many assets a business owns in compared to their liabilities. Current Ratio formulae: Current Ratio = Current assets / Current liabilities Domestic Dog Homes current ratio: 2.46 = 40,275 / 16,367 Acid test ratio To find the Acid test ratio we have to take away the stock from the current assets and divide it by current liabilities. The Acid test ratio formulae show us how the business can pay its liabilities without selling stock. Acid test ratio formulae: Acid test ratio = Current assets - Stock / Current liabilities Domestic Dog Home Acid test ratio: .46 = 40275 - 16300 / 16367 Profitability Equation Gross Profit Percentage To work out the Gross profit percentage you have to divide the gross profit with the turnover and multiply it by 100. The Gross Profit Percentage shows how well the business is managing its spending on stock. Gross profit percentage formulae: Gross profit percentage = Gross profit / Turnover x 100
International Harmonisation of Accounting.
International Harmonisation of Accounting I will begin by making just a brief comment on international harmonisation of accounting, following this I will put forward arguments both for and against the harmonisation of accounting. The aim of accounting harmonisation is to make the financial statements of companies comparable with the financial statements of companies in other countries. There certainly is no question that a standardised single set of international rules is needed. The harmonisation of accounting sets out a common set of standards, so that analysts, users of financial statements, people who make economic decisions, investment decisions have, in a sense, the same or equivalent information and they can compare the information that they have therefore enabling them to make those decisions. As with any set of rules there will always be arguments both for and against and accounting harmonisation is no different. I will now present arguments for both cases. Obviously when we speak of international harmonisation, businesses with multi-national dealing will be the main targets for any changes, reasons why they desire a standardised single set of rules include, accounting harmonisation is important because companies want to operate in a business environment in which they can trade, raise capital, list their securities and attract investors in different countries.