The Role of Management Accountants
Question 1- internal control bank reconciliation
- Bank reconciliation statement
|
Bargain Buys ltd |
||||
|
Bank Reconciliation as at 31 July 2018 |
||||
|
Cash balance as per bank Statement |
25,720.92 |
|||
|
Add: |
||||
|
Outstanding Deposits |
1190.4 |
|||
|
Bank fees |
60 |
|||
|
1482 |
unrecorded cheque payments |
475.5 |
||
|
1485 |
recording error |
90 |
||
|
27,536.82 |
||||
|
Less: |
||||
|
Unpresented Cheques |
Cheque amount |
|||
|
1470 |
410 |
|||
|
1474 |
1027 |
|||
|
1478 |
538 |
|||
|
1481 |
807 |
|||
|
1483 |
2360 |
|||
|
1484 |
832 |
|||
|
1486 |
972 |
6946.6 |
||
|
interest received |
148.62 |
|||
|
Recording receipt errors |
1009 |
|||
|
Unrecorded receipts |
2423 |
|||
|
Balance as per cash book |
17,009.6 |
|||
- Journal entries
|
account title |
debit |
credit |
|
Cash |
149 |
|
|
interest income |
148.62 |
|
|
Cash |
2423 |
|
|
account receivable |
2423 |
|
|
cash |
1000 |
|
|
account receivabble |
1000 |
|
|
cash |
9 |
|
|
account receivable |
9 |
|
|
bank fees expense |
60 |
|
|
cash |
60 |
|
|
account payable |
476 |
|
|
cash |
475.5 |
|
|
account payable |
90 |
|
|
cash |
90 |
Bank ledger
|
bank ledger account |
|||
|
Debit |
Credit |
||
|
Details |
amount |
details |
amount |
|
Balance |
$ 17,009.60 |
||
|
interest income |
$ 148.62 |
bank fees expense |
$ 60.00 |
|
account receivable |
$ 2,423.00 |
account payables |
$ 475.50 |
|
account receivable |
$ 1,000.00 |
account payables |
$ 90.00 |
|
account receivable |
$ 9.00 |
account payables |
|
|
$ 19,964.72 |
|||
|
$ 20,590.22 |
$ 20,590.22 |
||
|
adjusted balance |
$ 19,964.72 |
Question 2-Internal control
- Internal control over cash
Segregation of duties (Arens, et al., 2012)
The manager inserts the rolls of tickets in machines, removes the tickets, completes the cash count, puts the cash into a safe in the accountant office and takes the cash count sheet to accountant.
The cashiers receives cash, issues tickets and initiates cash count
Doorman receives the ticket confirm it validity, tears the ticket into half deposits one half into a locked box and gives the other to customer before admitting the customer.
Accountant receives cash count sheet, deposit the cash receipts for each week to the bank, and record the cash receipts and banking deposits in an accounting system.
Safeguarding of assets and records
Cash receipts are put into a safe while tickets pieces are stored into a locked box.
Cash receipts are banked every week and recorded in an accounting system.
Internal checks
Several different persons are involved in transaction, handing and counting of cash for example cashiers are checked by manager who is checked by accountant.
Weakness
Depositing of cash at end of each week may expose it theft or pilferage by employees such as accountant.
Internal checks are weak because manager has a huge control over cash and can therefore defraud the company if he wish to.
Suggestion
The company should deposit cash more often to the bank and the manager should have someone to check his tasks. For example the accountant can check the numbers of rolls the manager inserts in the machines and confirm the cash receipts agrees with the half pieces of tickets in the box.
- If the door and cashier decided to collaborate to misappropriate cash the cashier can issue duplicate tickets and the door person could agree not place the half of the duplicate in the box.
Question 3 –Memo
Date: 10/10/2018
To: Manager
From: Financial accountant
Subject: Role and Importance of management Accountants
Whereas financial accounting is concerned with providing information to external user’s management accounting provides very useful information to management or internal users which aid planning, control and decision making processes. Management accounting provides the indispensable information with which organizations are actually run and which affects the performance of the business. On the other hand financial accounting measures the company performance based on past results hence financial accounting measure effectiveness of management accounting role. While the financial accounting is focused on the past results management accounting is more forwarding looking and tries to improve the current decisions so as to realize good future results using the past and current data.
Management accounting focuses on both monetary and non-monetary information that inform management decisions and activities such as planning and budgeting, ensuring efficient use of resources, performance measurement and formulation of business policy and strategy. The role of a management accountant cannot be ignore as help management make decision that maximizes, creates, and protects the wealth/interests of an organization’s stakeholders.
Differences between Management Accountants and Financial Accountants
Through planning and budgeting management accounting provides effective business control, because the results are measured and compared to the set targets. Any deviation is identified, investigated and necessary action taken to control it.
The role nad importance management account is equally important as that of the financial accountant despite the role not being a legal requirement. The benefits of management accountant outweighs the cost and I would recommend hiring of a management accountant.
Regards
Financial accountant. (Pant, n.d.)
Question 4 – Decision making in Accounting
Report On cloud based management accounting
This report discusses the cloud based management accounting. The report defines the cloud based management accounting, argues the benefits of using a cloud based management accounting system and critically analysis the risks associated with cloud based management accounting. In addition the report looks at the development and evolution of cloud based management accounting.
Cloud based management accounting is use of remote servers to store data for ease access and processing from anywhere in similar way to the use of software as a service. Cloud computing solutions refers to a structure of computer hardware and software whereby the physical location of data and software doesn’t have to be related to where the end-user will access the data or processes data (Strauss, et al., 2015). Cloud computing technology acts as an enabling solution to management accounting in it decision making role by, improving, facilitating, and or influencing management accounting processes or systems.
Evolution and development of technology is positively affecting the way management accounting is done. Technology advancement in cloud computing has made it easy for management accountant to access and process data for easier decision making. Cloud computing allows sharing of resources among the company users without geographical limitation and at relatively low prices. With modern globalization trends cloud based management accounting is very reasonable system to use for any organization with operations at various different locations. The other reason for increased use of cloud computing in management decision making is the increased use of internet as platform for many transactions including retail, banking, health and working.
Benefits of Cloud based management accounting.
There are several benefits of using a cloud based management accounting solution including the following;
Cost effectiveness
Cloud based management accounting is very cost effective as an organization with different location can share it resources remotely at all it branches without investing physical storage devices. The firm can also avoid software installation on all it computer hence saving costs of installation as cloud based software is accessible through internet or other medium and works well without installing the software on a computer.
Understanding Cloud Based Management Accounting
The cloud based management accounting has low maintenance costs because the cloud service provider updates the software and backups data automatically without the need to upload updated software to computer manually and also without causing disruptions to operations. The work of It department is also significantly reduced as most of their functions in maintain software is delegated to the cloud service provider. Money is also saved as traditional expenditure in initial server’s infrastructures and software are avoided.
Increased data security
There is misguided perception that cloud based management accounting increases the risk of data security being breached. Cloud based management accounting offers a similarly secure medium of storing management accounting data to the traditional management accounting software and sometimes even more secure. For example an organization computer or storage device with very important management information may break down, crash get lost or even get stolen leading to loss of information. On the other hand information stored in cloud based solution can assessed from other devices even after of devices get lost or breaks down because the information is not stored in a physical device. The data is secured by use of passwords and is encrypted. According to (Strauss, et al., 2015) cloud service providers normally provide more secure services than the traditional solutions.
Ease of access and processing of data
Cloud computing solutions provide management accounting with an easy platform of accessing data from anywhere (Furth, 2017). So many users at different locations can still access data provided they have the required authorization details such as PIN and passwords as opposed to the traditional solutions which required transfer of data or sharing of resources in the same physical location (Kinsella, n.d.).
Cloud based data is backed up to more than one server
This provides the benefits of no disruption to operations when one server is not working as the employees will continue accessing data because cloud services providers usually backs up data to several servers (Anon., n.d.).
Additionally cloud technology improves the management accounting decision making capabilities by increasing the ability of the management to process information effectively.
Risks and limitation of using cloud based management accounting solution.
As with every other solution the cloud computing technology has it shortcomings and decision to use the cloud technology will depend on an entity needs other factors. The major concern with the use of cloud computing technology in management accounting has been security, privacy and integrity of the data stored and processed through cloud technology. Although some has argued that security of data stored in cloud based platforms is more secure than the traditional forms the concern of data security is still high because the control of data is left in the hands of the service provider.
Potential Benefits of Cloud Based Management Accounting
Another limitation of using cloud based management accounting solution is lack of high speed connection in some areas making this solution untenable.
The risk of cyber-attacks and hacking is also a concern for most organisation as this can cause breach of data security, integrity and privacy exposing the organization huge losses.
Another issue with cloud computing legal requirements in some jurisdictions for example in European Union companies are required to store data with the EU region.
The last issue is bankruptcy issues with cloud service provider and cost of transferring the data and cloud service from one vendor to another after bankruptcy of the initial provider.
There also the issue of suck cost as the company will be forced to invest in new solution before the end of economic lives of existing traditional structures.
Question 5
|
selling Price |
100% |
$ 34.00 |
|
variable cost |
60% |
$ 20.40 |
|
Contribution margin |
40% |
$ 13.60 |
|
Fixed cost |
21000 |
|
|
target income |
12000 |
break even units= fixed cost/ contribution margin= 21000/13.6=1,544.12
- Target income units= (fixed cost + target income)/contribution margin=(21000+12000)/13.6= 2,426.47
July net income $6,200.00
|
selling Price |
100% |
$ 34.00 |
|
variable cost |
65% |
$ 22.10 |
|
Contribution margin |
35% |
$ 11.90 |
|
Fixed cost |
21000 |
|
|
target income |
12000 |
a break even units = 21000/11.9= 1,764.71 breakeven point increases
target income units =21000+12000)/11.9=2,773.11 target unit also increases.
Question 6
Tv game
My decision is Yes because if the TV host had two chances of showing me the door with nothing but he chose one and left the other so it has a probability that it has a car behind.
|
TV game Survey |
|
|
Friend |
decision |
|
1 |
No |
|
2 |
No |
|
3 |
YES |
|
4 |
YES |
|
5 |
YES |
|
6 |
No |
|
7 |
YES |
|
8 |
No |
|
9 |
YES |
|
10 |
Yes |
6 out of 10 student got it right. When I originally picked one door the probability of winning was 1/3 but then when the host picked one door form the remaining two his action provide new information that the other door is likely to contain the car because it was not chosen by the host presuming an equal initial probabilities the unchosen door has a probability of 2/3 after host action as the revelation of the other door having nothing increases the probability that the unchosen door has a car (BetterExplined, n.d.).
Many people get it wrong because they fail to recognize that by choosing one door and not the other the host provides new information that the other door is likely to have a car. Simple the two remaining door after My choice have a probability of 2/3 of having a car behind but after revealing that one door has nothing the probabilities of the remaining door increases to (2/3-0) =2/3
I got it right
|
Condition probabilities |
|||
|
Has disease |
No Disease |
||
|
Test + |
98 |
198 |
296 |
|
Test- |
2 |
9702 |
9704 |
|
Total |
100 |
9900 |
10000 |
|
probability he has the disease |
33.108% |
This is an irrational decision because the actual probability is much less than he has been made to believe.
- I would pick red as it has a higher probability of being selected 65% compare to blue 35%.
Risks Associated with Cloud Based Management Accounting
Since the marble are being replaced I would stick to my choice of red to maximize my correct predictions.
Monte Carlo Gambler’s fallacy is the belief that if something happen more frequently in the past or present it is likely to occur less in the future (CROSON & SUNDALI, 2005).
- Using the available information to make management decision and re-evaluating decisions as and when information changes.
Question 7
|
Close |
division 3 only |
Division 4 only |
Both division 4 &3 and open division |
|
Contribution margin other divisions |
$ 490,000.00 |
$ 410,000.00 |
$ 430,000.00 |
|
Fixed costs (current) |
350,000 |
350,000 |
350,000 |
|
less avoidable fixed costs |
-20000 |
-45000 |
-70000 |
|
new fixed costs |
330,000 |
305,000 |
280,000 |
|
new contribution margin |
0 |
0 |
13000 |
|
New profit |
$ 160,000.00 |
$ 105,000.00 |
$ 163,000.00 |
The management should close both division 3 and 4 to maximize profit.
Question 8
|
Cash Budget April-June |
|||
|
April |
May |
June |
|
|
Cash Receipts |
|||
|
Cash balance |
3500 |
$ 3,000.00 |
10660 |
|
Accounts receivables |
$ 19,900.00 |
$ 24,000.00 |
$ 23,400.00 |
|
Total cash receipts |
$ 23,400.00 |
$ 27,000.00 |
$ 34,060.00 |
|
Cash payments |
|||
|
Accounts payable |
$ 10,040.00 |
$ 10,300.00 |
$ 11,400.00 |
|
Wages and salaries |
$ 4,000.00 |
$ 3,800.00 |
$ 4,200.00 |
|
Gen And admin costs |
$ 1,500.00 |
$ 1,000.00 |
$ 1,500.00 |
|
Insurance |
$ 4,100.00 |
$ – |
$ – |
|
income tax |
$ 2,000.00 |
$ – |
$ 14,500.00 |
|
Total cash payments |
$ 21,640.00 |
$ 15,100.00 |
$ 31,600.00 |
|
Net cash |
$ 1,760.00 |
$ 11,900.00 |
$ 2,460.00 |
|
minimum cash balance |
3000 |
3000 |
3000 |
|
Cash surplus (deficit) |
$ (1,240.00) |
$ 8,900.00 |
$ (540.00) |
|
cash Borrowing |
$ 1,240.00 |
$ 540.00 |
|
|
Repayment |
$ (1,240.00) |
||
|
Ending Cash balance |
$ 3,000.00 |
$ 10,660.00 |
$ 3,000.00 |
Question 9 – Variance analysis
Direct material Price variance Actual Quantity x Actual Price – Actual Quantity x Standard Price
$(110.00) favourable
Direct labour rate variance Actual Quantity x Actual rate – Actual Quantity x Standard rate
$(1,200.00) Favourable
Direct material quantity variance Actual Quantity x Standard Price-Standard Quantity x Standard Price
300 Adverse
Direct labour quantity variance Actual Hours x Standard Rate – Standard Hours x Standard Rate
550 Adverse
Question 10
|
Question 10- Capital budgeting |
|||||||||||
|
Initial cost |
$ 75,000.00 |
||||||||||
|
useful year |
8 |
||||||||||
|
discount rate |
9% |
||||||||||
|
Residual value |
$ 21,000.00 |
||||||||||
|
i) NPV |
Year |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
|
|
Cash outflow |
|||||||||||
|
Initial cost |
$ (75,000.00) |
||||||||||
|
overhaul |
$ (5,600.00) |
||||||||||
|
Cash inflows |
|||||||||||
|
Towing cash inflows |
$ – |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
||
|
residual value |
$ 21,000.00 |
||||||||||
|
Total cash flow |
$ (75,000.00) |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 2,800.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 8,400.00 |
$ 29,400.00 |
||
|
Discounted cash flow |
$ (75,000.00) |
$ 7,706.42 |
$ 7,070.11 |
$ 6,486.34 |
$ 1,983.59 |
$ 5,459.42 |
$ 5,008.65 |
$ 4,595.09 |
$ 14,754.87 |
||
|
NPV |
$ (21,935.51) |
||||||||||
|
Recommendation |
The truck should not be purchased as it has negative NPV |
References
AccountingExplained, 2018. AccountingExplained.
Anon., n.d. Financialforce:What is Cloud Accounting
Arens, A. A., Elder, R. J. & Beasley, M. S., 2012. Auditing and Assurance Services. 14th ed. s.l.:Pearson.
BetterExplined, n.d. Understanding the Monty Hall Problem
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Corporate Finance Institute, 2018. Contribution Analysis.
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CROSON, R. & SUNDALI, J., 2005. The Gambler’s Fallacy and the Hot Hand: Empirical Data from Casinos. The Journal of Risk and Uncertainty, 30(3), p. 195–209.
DeMarzo, P. & Berk, J., 2014. Corporate Finance. 3rd ed. Boston: Pearson.
Dopson, L., 2004. Linking Cost-Volume-Profit Analysis with Goal Value Analysis in the Curriculum Using Spreadsheet Applications. Journal of Hospitality Financial Management, 12(1), pp. 78-80.
Furth, D., 2017. Cloud-Based Accounting Software: What Your Clients Need to Know.
Kinsella, K., n.d. CPA Ireland:HOW CLOUD COMPUTING CAN BENEFIT ACCOUNTANTS.
[Accessed 10 October 2018].
Millians, P. M., 1947. Profit Planning and Budgetary Control. The Accounting Review, pp. 65-68.
Mongiello, M., 2016. Management accounting. London: University of London.
Pant, S., n.d. 7 Roles of Management Accountant
Ross, S. A., Westerfield, R. W. & Jordan, B. D., 2016. Fundamentals of corporate finance. 11 ed. New York(NY): McGraw Hill Education.
Strauss, E., Kristandl, G. & Quinn, M., 2015. The effects of cloud technology on management accounting and decision making, London: Chartered Institute of Management Accountants.
Sybba, et al., 2017. Bayes’ Theorem and Operations Research. Imperial Journal of Interdisciplinary Research, 3(10), pp. 404-412.
THE INSTITUTE OF COMPANY SECRETARIES OF INDIA, 2014. FUNDAMENTALS OF ACCOUNTING AND AUDITING. New Delhi: THE INSTITUTE OF COMPANY SECRETARIES OF INDIA.
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