Advantages And Disadvantages Of Graded Unit 2 Management Accounting

Graded Unit 2 - Management Accounting

CONTENTS

Terms of reference 3

Procedures 3

Findings 3 - 9 Budgetary control process 3 - 7 Budgetary control system 7 - 8 Advantages of budgeting and budgetary control 8 Conclusions 9

Recommendation 9

Bibliography 10

References 11

Appendix 1 12 - 13

Appendix 2 14 - 15

Appendix 3 16 - 19

Appendix 4 20

Appendix 5 21 - 24

Appendix 6 25

Appendix 7 26 - 27

Appendix 8 28…show more content…
3.1.10 Cash Budget

The cash budget is “an estimation of the cash inflows and outflows for a business for a specific period of time. Cash budget are used to assess whether the entity has sufficient cash to fulfil regular operations and whether too much cash is being left in unproductive capacities”. (Reference 2)
The cash budget is prepared in advance for the first 6 months, and a cash deficit of £20,364 and £2,228 were incurred in January and February.
A second-hand bottling plant was purchased in January which cost £420,000. The business required £30,000 cash for working capital. The company gets a loan of £450,000 which was transfer into the business bank account in January as shown in appendix 6. The cash budget shows a balance of £3,918 in January and £16,335 February.
The loan calculation is shown in appendix 8. This is expected to be paid back within 8 years by monthly paid instalments of £5.718.41 which was calculated on a 5.1% interest rate.

3.1.11 Master Budget

The master budget is “a summary of company’s plan which formalizes the whole budget system into one single final document in which all the operational budgets flow; its goal is to draft the main economic and financial statement”. (Reference…show more content…
The net cash inflow and cash outflow are calculated using sales and production figures for the next 8 years. The unit cost from the first year is £0.89 which is the cost per mashing without depreciation and divided by 13,000 bottles. From this information provided, the cost will increase by 3.5% and also the selling price will increase by 4% every year (reference 4). These figures are based on the current rate inflation of 4% which is shown in appendix 9 The capital allowances are worked out on cased of 20% (Reference 5) and the annual investment allowance is £100,000 is available (Reference 6) in the first year which is restricted to £87,359. This figure is substrated from the acquisition giving a result of £332,641 which is the written down value. The capital allowance for the first year is £66,528 which is shown in appendix 9

Corporation tax worked out at the main rate of 21% from 1st of April of 2011 (Reference 7). The profit substrates the capital allowance and gives the taxable profit for the next year which is shown in appendix