Question 1
Question 1
Part A
Book keeping is an art of recording monetary and financial transactions in company’s books of accounts. It basically deals with maintaining and keeping the records of business transaction in accounts books. Accounting is refer as a systematic and comprehensive system of identifying, recording, analysing and summarizing the business transactions that has taken place in a particular financial period. It is considered as one of the important and key function of business (Tracy, 2016).
Although book keeping and accounting involve the same process but both are different in their own terms. One includes the recording of daily transactions of the business in a chronological manner whereas other deal with providing information about recording, classifying, reporting, analyzing and interpreting the financial transactions. Furthermore, accounting system also communicates the financial performance and position of the business to its stakeholders and other users. Therefore, it can be said that book keeping is a part of accounting system. Although both the terms are interrelated but accounting has wider scope and role and that is why book keeping is not synonymous to accounting (Sangster, 2015).
Question 2
Part A
Financial statements are those sheets which provide overall information about the performance and position of the company in financial terms. They are very important for the business as they communicate its activities to its shareholders like investors, creditors, customers, owners and many other people. Moreover, data presented in the financial reports is also required by the law and accounting standards. The statements are necessary as they help in efficient and effective company’s management by reflect the past trends going on in the business (Epstein, 2013). Data related to cash flows, snapshot of all the assets, liabilities and equity, operating and net profit made and others all is reflected by the financial statements of the company. In addition, they help the management to take correct and suitable decisions that prove to be favourable for the business in coming future. All such reasons clearly justify the need and importance of financial statements for a business (Thukaram, 2007).
Question 3
Part B
Zero based budgeting is the method under which all the expenditures are justified for each new period. The procedure starts from a zero base and every function which is to be performed in the organization is analyzed according to its needs and costs. It assists the management in implementing top-level strategic goals into budgeting by aligning them to the particular function areas of the company. As each expense is attributed to new period so there is no expenditure presumed to be acceptable because it is reflective of the status quo. The approach of ZBB is very much useful for the government units and departments as they struggle a lot to control their costs. Government officers use the concept of ZBB in order to filter or segregate necessary services from those that are involved in the process of incremental budgeting. Overall, it is very important for the management to be familiar with zero-based budgeting so as to find out and remove the budgetary slack from the procedure (Walther and Skousen, 2009).
Question 2
Question 4
Part B
The two important functions which allow the managers to continually plan for the future and evaluate the performance are planning and controlling. Planning deals with the procedure of determining objectives in advance and communicating the same to the employees. On the other hand, the control function focuses on evaluating whether the plans and the targets set are properly implemented or not. These two are the pervasive functions which are required at each level of the management. Planning ultimately helps the company to move in correct and right direction by guiding their employees. Along with this, establishing proper control on the activities and reviewing the performance periodically assist in smooth evaluation of company’s performance in relation to its plans and set objectives (Cassidy and Kreitner, 2011).
Question 5
Part A
It is very important for the management to understand the cost behaviour as the cost data is influenced and impacted by complex interactions. Although they can understand the concept of cost behaviour but they should also know to apply the same in the real world data. Generally, in terms of behaviour there are three types of costs named as variable, fixed and mixed costs. Variable costs are the one which change according to the change in level of output whereas the fixed costs remains same and intact at all the level of production. The one which contains both the fixed and variable elements are known as mixed costs or semi-variable costs. Generally, it is harder to evaluate mixed cost as their variable portion changes as per the fluctuation in the volume whereas the fixed cost element remains same. There are various methods used for sorting out mixed costs, one of them is high-low method. Under this, the highest and lowest levels of activities are identified and then the difference between the two represents the variable cost element. Further, the cost difference is divided by the difference between activities to calculate per unit VC. The remaining part is considered as fixed cost. Another technique used is method of least squares which is most suited to the cost behaviour analysis (BARBU, 2015).
Question 6
Part C
Matching the physical count of goods with the inventory recorded in the books is the common phenomena used by the warehousing staff of a company. However, doing the same may involve some kind of errors like the physical count is incorrect which results in excessively high and low inventory quantity. Sometimes incorrect unit of measure is also used at time of counting the inventory which is different from the one assumed in the item master file. Moreover, inaccurate inventory adjustments also contribute to the error occurred at time of inventory reconciliation. In order to avoid such errors, the stock should be recounted and properly verified. In addition, the value of scrap should also be accurately examined so that proper recording of inventory can be done (Muller, 2011).
References
BARBU, I.M. (2015). COST BEHAVIOR ANALYSIS. Review of General Management, 21(1).
Cassidy, C.M. and Kreitner, R. (2011). Principles of management. USA: Cengage Learning.
Epstein, L. (2013). Reading Financial Reports for Dummies. New Jersey: John Wiley & Sons.
Muller, M. (2011). Essentials of inventory management. New York: Amacom Books.
Sangster, A. (2015). The genesis of double entry bookkeeping. The Accounting Review, 91(1), pp.299-315.
Thukaram, R.M. (2007). Accounting and Financial Management for BCA & MCA. India: New Age International.
Tracy, J.A. (2016). Accounting for dummies. New Jersey: John Wiley & Sons.
Walther, L.M. and Skousen, C.J. (2009). Budgeting and Decision Making. BookBoon.com Available at: https://books.google.co.in/books?id=MB21MHFsR_QC&pg=PA2&dq=budgeting+and+decision+making+by+Larry+M+Walther&hl=en&sa=X&ved=0ahUKEwjtjs2G96DdAhVJRY8KHaJuDXMQ6AEINjAD#v=onepage&q&f=false
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