Business reports are helpful for the functioning of the organisation and help the managers in taking important decisions. It provides a snapshot of the overall economic position of the organisation. These reports can be prepared yearly, monthly or on special demand of the mangers as and when they required. Utmost precision must be ascertained while the formulation of these reports as per the needs of the organisational and the managers If the managers are not happy with the reports than they can vein ask for expert guidance. These reports must be made with utmost accuracy and precision, because the overall functioning of the company is dependent on it. The managers take important decisions keeping in mind the investors and the stakeholders. The various types of organisational reports consist of the income statement, the financial statements, the cost sheet and the overall budgets that are prepared by the company. These few statements are prepared in several organsiations and are helpful to the managers of the company. (Annema, Frenken, Koopmans, & Kroesen, 2017).
Control functions are an important aspect of management, if the management installs proper controls than the organisation will function smoothly the employees will do their duty properly. It is important that proper control functions must be installed and properly updated with regard to the needs of the organisation. The managers while formulation of these functions must see that proper segregation of work is there, proper duties are assigned and the employees are implementing the same. Panopticism is a theory that was stated by a French philosopher that states that people function better when they know they are placed under surveillance. If the same is applied in case of an organisation, if the employees of the company know that they are under constant surveillance and authorities are watching them they will function better. This will reduce the overall chances of manipulation of accounts and malfunctioning. In this way, the control functions that are implemented by the management are helpful for the organisation.(Hopkin, 2017).
The main four process of product costing that has been identified in the text are –
- Product costing in financial accounting is something, which helps in ascertaining what is the effect on the finances of the cost of the product. It can be used in the calculation of the closing stock of good, other valuation measure
- Product costing as used in the cost of the management; it helps the managers in ascertaining the total cost that was incurred in the manufacture of a product by the company.
- Product costing in managerial accounting, is required by the managers in orders to take important decisions with regard to the production. It helps in the general, in planning and budgeting.
- Product costing is used also, while making important disclosures to the interested parties. Many electric and gas companies, provide proper costing details that are included to justify the same to the consumers(Baal, Meltzer, & Brouwer, 2016)
Question no 4
There are generally 2 methods of recording the cost: financial integrated accounting and interlocking system where the cost records are maintained separately as compared to the financial accounting books(Han, Subrahmanyam, & Zhou, 2017).
The major drawbacks are that the overall process is very time consuming and complicated and it leads to duplication of the expenses. The advantage is that it reduces the need to accommodate complex costing enteries in the overall integrated books of the company, while preparation of the integrated accounts.(Daff, 2017).
Example: Suppose the productive wage is $ 45000 and unproductive wage is $18000, then the scheme of entries would be:
- Wages control a/cadre 45000
To general ledger adj. a/c 45000
(Being wages payment made)
- Factory overhead control a/c Dr. 18000
To cost ledger control a/c 18000
(Being indirect wages recorded)
An example of the cost associated with the direct labour is overtime wages. Overtime wages are paid to the labours in lieu of the extra hour that they work for the company. These cost are mostly shows as aprt of the indirect cost and are shown under the head of manufacturing cost and are calculated at the normal wages rate. (Hopkin, 2017)
Question no 5
The T Account for materiaL control is given below.
The balance of the material control as on 1st June was $ 10,000
Question no 7
The T Account for accrued payroll expenses and the respective journal entries for the month is as follows:
Question no 8
The background is as follows:
- Amount to be credited to Accrued Payroll for September, i.e., paid via bank:
- The calculations are shown below:
- (i). The jornal entries are :
(ii) The ledger accounts are as follows:
Question no 9
Many methods help the organisation in the calculation of the cost and showing the same. Previously the companies used to use the traditional method of costing in which the cost was allocated on the basic of the cost drivers. However, since the new age revaluation, the cost is being calculated by various methods. One of these methods is the activity based costing. In this method, the allocation of the cost is done based on the cost activity that was done in making that product. In the traditional method, the allocation was done based on the cost drivers, this led to many complications and the results were not clear. Many companies have switched from the traditional method of costing to the activity based costing because the results are more accurate in this system. Three are a lot of advantages and disadvantages about the same.(Dichev, 2017).
There are many advantages and disadvantages that are involved in case of activity based costing The biggest advantage is that there is allot of accuracy involved, and the cost are properly allocated. The system abolishes the concept of allocation of the irrevocable costs that makes the overall process more clear and price. With better costing, the managers are able to perform better, they can decide the overall pricing accurately and hence that leads to more profit on part of the company (Venezia, 2017). The disadvantage is that the companies find it difficult to switch from the traditional method to the activity based method. The companies also require a lot of expert guidance and there is a lot of cost involved in making the switch. Training has to be provided to the employees of the company. However, it is more beneficial than the traditional method of costing and hence the companies are ready to bear the overall cost (Maynard, 2016).
There may be a lot of advantages and disadvantages that may be associated with new method. However, in the end, the traditional method will become obsolete and in that case, the companies will require to switch over the new method of costing. It is more beneficial for the companies. Traditional method is mostly preferred by small’s scale manufactures, all the big companies opt for the activity-based method for allocation of their cost.(Schlege, Frank, & Britzelmaie, 2017).
Question no 10
The various methods of allocation have been shown below along with calculations
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Baal, P., Meltzer, D., & Brouwer, W. (2016). Future Costs, Fixed Healthcare Budgets, and the Decision Rules of Cost-Effectiveness Analysis. HEALTH ECONOMICS, 25(2), 237-248.
Daff, L. (2017). Accountants and their Intra-Organisational Communication. Retrieved 2 10, 2017, from https://confidentcommunicators.files.wordpress.com/2014/07/executive-summary-of-doctorate.pdf
Dichev, I. (2017). On the conceptual foundations of financial reporting. Accounting and Business Research, 47(6), 617-632.
Han, B., Subrahmanyam, A., & Zhou, Y. (2017). The term structure of credit spreads, firm fundamentals, and expected stock returns. Journal of Financial Economics, 24(1), 147-171.
Hopkin, P. (2017). Fundamentals of Risk Management: Understanding, evaluating and implementing (Fourth ed.). London: The Institute of Risk Management.
Maynard, J. (2016). Financial Accounting, Reporting, and Analysis. U.K: Oxford University Press.
Schlege, D., Frank, F., & Britzelmaie, B. (2017). Investment decisions and capital budgeting practices in German manufacturing companies. International Journal of Business and Globalisation, 16(1).
Venezia, I. (2017). Behavioral Finance: 'Where Do Investors'' Biases Come From?'. Singapore: WORLD SCIENTIFIC.