Why collect accurate financial records?
Why should organizations collect, file and maintain accurate financial records? Discuss in 50 words.
Collection and maintenance of financial records help in determining the performance of an organization. It also reflects the movement of currency within an outside in relation to the organization. It helps in analyzing and having records to judge the status of the business. A true picture of business is reflected by proper maintenance of records.
What are the expectations of managers and supervisors in relation to budget or financial plans? Discuss in 100 words.
The primary expectation is to uphold the budget and accordingly execute the framed financial plan in the organization. The idea of a budget is to act as a controlling system which tries to control financial operations in the best possible manner. Managers and supervisors expect to frame the budget, execute it, analyze the variance and take corrective actions. There exist some uncontrollable factors like, government interventions, interest rates etc. due to which the budget is affected. Still, the management tries to control all the possible variables to upkeep their financial plan and to be financially effective and efficient in the business (Shacklett, 2016).
What are the reports that can be used for financial planning in an organization? Discuss in 50 words.
Balance Sheet, Income Statement, Cash Flow Statement, budget, debtors and creditors report, revenue and expenditure report, project Report are some of the information that can be adopted for financial planning in an organization. This facilitates financial information with respect to the business to its owners; government authority, stakeholders, and employees (Australian Government, 2016).
What is the process for preparing budgets or other financial plans? Discuss in 80 words.
The step wise process for preparing a budget is:
- To identify, collect and ensure proper sources of data.
- To uphold the correctness, reliability, and currency of data.
- Classification and coding of data as per the followed principles of organization.
- To compute profit, break even or loss and other parameters wherever required.
- To analyze the outcome of the analysis of data and t communicate it to the management through reports.
- Finally, to maintain correct and safe records of the organization’s financial transactions (Tools, 2010).
Explain how contingency plans work. Discuss in 80 words.
It is also known as business continuity plan which helps in the protection of an organization’s resources, analyzing main responsibilities for the purpose of recovery thereby reducing the inconvenience of the customers. For example, IT department ensures disaster recovery plan in order to guard and restore the data along with software and hardware. It also ensures effective strategies for cost reduction and cost control. By having back up or alternate arrangements, it ensures continuity in the company’s course of operations (IFRC, 2017).
Why should a team or work group members be actively involved in designing and developing contingency plans? Discuss
Active participation of team or group members helps in adding valuable ideas in framing the contingency plan. By this, they will stay aware regarding the plan as in how to initiate and when to introduce it in the business operation. New ideas from the team will update the contingency plan thereby increasing its level of effectiveness. Effective involvement of team members will connect them together and they will be in the better position to protect the assets of the company (IFRC, 2017).
How can employees be engaged in the preparation of financial reports, allowing details to be easily disseminated among team members? Discuss in 80 words.
Expectations of managers and supervisors on budget or financial plans
Employees should be given an opportunity to contribute their value and information in the preparation of financial reports. For this, management should communicate to the employees regarding their benefits of effective participation. The purpose of the reports is to make it user-friendly and provide easy access to the needy. For this, employees’ cooperation will help in a massive way. Performance measures should be included in their job responsibilities in order to promote participation from the employees’ side for the business (International, 2017).
Why should employees be involved in setting and monitoring the budget? Discuss
Employees should be involved in setting and monitoring of budget as they will understand the financial expectations of the business and how they are supposed to be maintained and implemented.
What is responsibility accounting and what is its importance to an organization? Discuss
Responsibility accounting refers to the allocation of cost as per certain specific areas such as team, department etc. Revenue center, profit center, cost center and investment center are its main segments. It is important because it provides us with the way of managing the business. It facilitates the course of operation at all levels of management. By the top-down method, top levels are busy with policy making and lower level with their responsibilities. It helps in knowing the problems at right time and to take corrective action for improvement in the whole process. Responsibility accounting, the name itself suggests, interrelated and independent working factor of an organization (Knowledgiate, 2016).
What are cost centers? Discuss. Give examples of cost centers that might be encountered in an organization.
These centers are basically those areas, segment or division of an organization who are responsible for their expenditure incurred. It is one of the types of responsibility centers. The quality of cost center is that they are only responsible for their cost and not for any revenue. Some examples of cost centers found in an organization are production, sales, marketing, IT, human resource department, and accounting department and so on. The purpose of the cost center is to control cost and improve the quality of the work done. Their contribution is in an indirect manner towards the company’s profitability. Cost center helps us to analyze the overall effectiveness and efficiency of an organization. This can be achieved by analyzing individual department’s revenue with its costs (Bragg, 2017).
What is the importance of a cash flow budget or report? Discuss
The reason of a cash flow budget is to analyze beforehand the level of cash required in the business which is supposed to satisfy its due expenses. It also helps in achieving day to day commitment of a business. It helps in comparing the outward and inward flow of cash so as to understand whether the business is running profitably or not. Cash flow budget also highlights company’s level of performance and tries to take corrective action in case of financial disruptions. It also provides with a real time cash position of an organization and accordingly business decisions are taken for the organization (Financial, 2014)
Reports used for financial planning in organizations
What data do you need to collect, and from whom, in order to construct a cash flow budget? Discuss
Sales report from the sales manager to know the figures of marketing, sales. Purchase report from the purchase manager in order to know the figures of inventory and materials involved.
Describe in 100 words how the budget is used to monitor work, performance, variation, and team/ division outputs.
The purpose of the budget report is to provide a proper overview in terms of the position of a business. It is the quality of budget which helps in converting every expense in a percentage form of the total expense in order to learn whether they are cost effective or not. If they are spent more than the limit various methods can be adopted like outsourcing, controlling stock levels, ways to increase the level of sales, uplifting staff levels and reconsidering the supplier cost. Not only it provides deficiencies but also propagates corrective action for the growth and development of an organization (WMO, 2017).
What is the meaning of the following terms:
It is a store of economic value which a person or a company controls that will provide future economic benefits. For example, land and building, goodwill, furniture, cash and even employees.
These are a commitment that arises due to past efforts during the business or which it owes to the outsiders. It can be in the form of finance, time, debt etc.
Expenses are an outflow of money in order to get something in return. For example, rent paid, insurance paid, travel charges etc. all are expenses which can add to the future value.
These are known as stock which reflects ownership interest. It is the difference between the worth of assets and liabilities of anything owned. When not publicly traded, these are private equity (Support, 2017).
Describe what the following budgets/ reports are and how they might be used to inform a team’s operations.
It facilitates comparison of the actual with the budgeted standards of company’s performance. It also estimates of the reason behind the variance and helps in the process of decision making for the future.
These are one of the main accounting records which contain all the financial transactions of a company. From here, information is taken to prepare company’s financial statements of a business.
These are used to check company’s sales performance. It includes a figure of sales, sales target, sales profit and the products sold. It also involves monitoring of sales performance and accordingly taking corrective action (Gilani, 2016).
A method of budgeting which helps in analyzing the difference of the actual with the budgeted standards. These further helps in taking a corrective course of action based on the report.
This helps in analyzing the latest and the past status of a business. These help in the decision-making process and to analyze the overall growth of an organization or business (Gilani, 2016).
Explain why reports must be made to:
Management. – To know the latest position of their organization and to analyze the overall growth.
Investors. – To know whether their investment in such organization will be profitable or not.
Creditors. – To know the credibility and capacity of an organization regarding payment of debts and dues.
The government. – To know whether an organization is following the predefined guidelines issued by the government or not.
What details might be provided in a financial report? Discuss
Financial reports are considered as a detailed summary of all the financial records or transactions of an organization. This includes assets, liabilities, expenses, revenues, debts, and dues etc. These are formal in the record and helps in providing the financial position of an entity or an individual. All the above-stated items are summarized by the sub reports of balance sheet, cash flow statement, statement of changes in equity and income and expenditure statement. This serves as a valuable source of information for the creditors, management, investors, stakeholders, users and the government. All of them will analyze it as per their own way and for their own benefit. Even non-financial information like any pending suits related to the business or any other important matter are also shared in the financial report (Woelfel, 2017).
Australian Government, B. (2016, May 9). Prepare financial reports - Budgeting and forecasting. Retrieved from https://www.business.gov.au/info/run/finance-and-accounting/accounting/prepare-financial-reports-budgeting-and-forecasting
Bragg, S. (2017, May 4). Cost Center. Retrieved from Accounting Tools: https://www.accountingtools.com/articles/2017/5/4/cost-center
Financial, R. (2014, december 11). What is a Cash Flow Budget (and Why Do You Need One)? Retrieved from https://www.rtsfinancial.com/guides/what-cash-flow-budget-and-why-do-you-need-one
Gilani, N. (2016). The Finance Base. Retrieved from Five of the Different Types of Budgets: https://thefinancebase.com/five-different-types-budgets-3736.html
IFRC. (2017). Contingency planning. Retrieved from https://www.ifrc.org/en/what-we-do/disaster-management/preparing-for-disaster/disaster-preparedness-tools/contingency-planning-and-disaster-response-planning/
International, A. S. (2017). 4 Things All Employees Should Know About Financial Analysis. Retrieved from https://income-outcome.com/financial-analysis/
Knowledgiate. (2016). Responsibility Accounting and Its Purpose. Retrieved from https://www.knowledgiate.com/responsibility-accounting/
Shacklett, M. (2016, july 20). How to manage a departmental budget. Retrieved from Tech Republic: https://www.techrepublic.com/article/how-to-manage-a-departmental-budget-a-guide-for-beginners/
Support, K. (2017). Assets, Liabilities, Equity, Revenue, and Expenses. Retrieved from https://www.keynotesupport.com/accounting/accounting-assets-liabilities-equity-revenue-expenses.shtml
Tools, A. (2010, December 14). The steps in preparing a budget. Retrieved from https://www.accountingtools.com/articles/what-are-the-steps-in-preparing-a-budget.html
WMO. (2017). Budget Monitoring and Reporting. Retrieved from https://www.wmo.int/pages/prog/dra/eguides/en/10-financial-management/10-5-budget-monitoring-and-reporting
Woelfel, C. (2017). FINANCIAL STATEMENTS. Retrieved from Reference for business: https://www.referenceforbusiness.com/encyclopedia/Fa-For/Financial-Statements.html
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