Reflections On Its Further Potential For Management Accounting Research

Budget Preparation and Financial Statement Auditing

An organization is required to carrying out strategic plan for effective achievement of their business plan that is mainly assumed by management. It is regarded as prerequisite concerning statutory and current requirement. This incorporates lowering prices of product by decreasing rate of gross profit by 1% that helps in generating stable sales revenue in period that are hard-hitting for business. Moreover, for an organization to secure and capture a higher proportion of market share, budget concerning advertisement has also increased by amount of $ 70000. There has also been increment of amount of salaries and wages that are paid to staffs and employees by an amount of $ 172500. Amount of payroll tax as considered by organization is calculated as a percentage of salaries and wages. Amount of superannuation to be charged is allowed at 9% of salaries and wages. Effective corporation tax rate of company is 30% and computation of compensation given to workers is 2% of salaries and wages.

Some of the tax liabilities under tax legislation that VTI Homecare Pty Ltd is liable to pay incorporate Luxury Car Tax, GST, Payroll tax and Fringe Benefits Tax.

An organization is required to have a defined corporate governance and code of conduct so that they are capable of carrying out their operations seamlessly. VTI Homecare Pty Ltd should also have corporate governance structure along with code of conduct according to current compliance requirement as per Corporation Act, 2001. Financial or annual report of organization corresponding to Australian securities and investment commission should be capable of reflecting true and fair view of financial data. Furthermore, in order to have compliance with Australian corporation act, 2001 it is also essential to have their financial statements audited by appointment of auditors. VTI Homecare Pty Ltd is also required to have their board of directors that will b appointed or elected by shareholders

The suitability and effectiveness of software that is used in financial management such as MYOB is attributable to the fact that it assist in providing overall financial performance of business and thereby widening the scope of visibility.  Such software facilitates the flowing up of operations of complex business activities by simplifying it. Moreover, the convoluted structure of management is also simplified by the employment of this particular software. Entire process of accounting is efficiently consolidated with the help of financial management software.

Xero and Freshbooks are the two types of financial management software that are available commercially. These two software’s are in contemporary with MYOB.

Benefits and Drawbacks of Financial Management Software

Freshbooks is one of the best accounting software offering cloud solutions to small business and firms. This particular accounting software supports a large number of languages. This particular software can function on any kind of devices such as Windows, Mac, i phone, i pad and android. Organization employing Freshbooks is capable of efficiently and effectively performing functions such as expense tracking, time tracking, online invoicing and other related features (Coad et al. 2015). However, one of the drawbacks of this accounting software is its cost as it may not be affordable by small business owners.

Xero is cloud-computing software that is for medium sized and small sized business that assists them in meeting their business requirements relating to operations and it is irrespective for what purpose and types of business they are employed.  Simplifying of transactions, pain setting up, elaborated view of any business financial health along with many other related benefits or this accounting software facilitates advantages. They are capable of functioning on every kind of operating system such as androids, Mac, i phone, i pad and Windows. Costs of purchasing of this software are the only potential disadvantage.

Answer to part a:

In order to ascertain the profits pertaining to any business, it is essential to make or have a record of income as they arrive and their corresponding income. This is regarded as one of the matching principle of financial accounting.

Answer to part b:

Account group are summarized accounts effecting the creation of master records as its criteria. It helps in determination of screen layout in specific code area of company for creating general ledger account (Van 2016). Furthermore, account group also helps in selection of account number using number interval when there is a creation of general ledger account.

Answer to part c:

It is always recommended for organization to prepare budgets for specific and considerable time period. There are many advantages for business with the help of budget preparation such as company will be able to make forecast of their expected sales in a more accurate way.

Probity is the confirmed and complete integrity and maintaining honesty and uprightness in any particular accounting process. In this regard, probity is about

Gross profit of organization has been reduced in financial year 2016-2017 by 1% and this is indicated by dates. Over the first quarter of 2016-17, there have been increment in wages and salaries of employees and reduction in expenses concerning advertisement.

Company Budget Variance and Sales Budget

 Amenities of staffs, transportation cost and other related office expense are some of the items that are involved in VTI Homeware Pty Ltd budget preparation.

It is recommended to organization to adopt internal control system in different areas of operations such as segregation of duties. There will be mitigation of risks of fraud and errors in books of account due to segregation of duties. This in turn would help auditors is executing their tasks.

VTI Homeware Pty. Ltd.
Variance to Budget
Actual Results	Budget-Q1	Actual-Q1	$ Variance
Sales	$3,394,248	$3,371,200	$23,048
Cost of Good Sold	$1,934,721	$1,955,296	-$20,575
Gross Profit	$1,459,527	$1,415,904	$43,623
Gross Profit %	43%	42%
Expenses
Accounting Fees	$2,500	$2,500	$0
Interest Expense	$21,127	$28,150	-$7,023
Bank Charges	$400	$380	$20
Depreciation	$42,500	$42,500	$0
Insurance	$3,348	$3,348	-$1
Store Supplies	$750	$790	-$40
Advertising	$200,000	$150,000	$50,000
Cleaning	$3,256	$3,325	-$69
Repairs & Maintenance	$16,068	$16,150	-$82
Rent	$660,127	$660,127	$0
Telephone	$2,999	$3,100	-$101
Electricity Expense	$5,356	$5,245	$111
Luxury Car Tax	$7,491	$12,000	-$4,509
Fringe Benefits Tax	$6,500	$7,000	-$500
Superannuation	$37,404	$37,404	$0
Wages & Salaries	$415,600	$410,500	$5,100
Payroll Tax	$19,741	$19,741	$0
Workers’ Compensation	$8,312	$8,312	$0
Total Expense	$1,453,480	$1,410,572	$42,908
Net Profit (Before Tax)	$6,047	$5,333	$714
Income Tax	$1,814	$1,600	$214
Net Profit	$4,233	$3,733	$500

Preparation of sales budget by organization has been done by gathering relevant information. Sales budget helps organization in identification of changes in value of sales revenue generated in a specific time period. It can be depicted from above table that there has been increment in sales volume of bedroom decorative from $ $848,562 in first quarter to $ 1272843 in 4^th quarter. Sales of lighting fixtures have also increased from $ 678850 first quarter to $ 1,018,274 in 4^th quarter. This increase in sales volume of bedroom decorative and lightning fixtures depicts that there is a rising market demand of these products.

It can be ascertained from looking at the figures as mentioned in profit budget in the first quarter, firm has turn around and they have gained a considerable amount of profits in next quarter of this particular year.

In this particular table, inflow and outflow of tax flow has been depicted. The total amount of goods and services tax that has been collected and paid by company is provided. It can be seen that total amount of GST that has been paid is computed at $ 406,905.

Aged debtor’s budget:

It can be ascertained from above table that for all quarter of years, debtor sales are increasing. Over the quarter, there has been gradual increase in total value of debtors of business.

The financial transactions relating to debtors have been recognized and are met on legal terms and this is representative of the fact that while preparing the budget, business has taken into consideration financial probity issue. Business is required to make proper authentication of funds and figures mentioned in the budget and then carrying forward.

Section of expenses has witnessed variations due to anomaly in the system of accounting leading to recording of wrong values of transaction. Reason of variance is attributable to the fact that rising price of raw materials due to rising inflation. Frauds and accounting errors might be another reason for occurrences of these variances.

Fall in gross profit margin of business is indicative of the fact that financial performance is not favorable. This depicts that revenue is not generated as planned by company. Therefore, organization is required to boost sales for undertaking promotional activities and adopting advertising campaigns. Furthermore, for maintaining proper accounting records, there should be segregation of duties and employing quality accounting software.

It is recommended that entire process of making sales should be restructured by appointing proper techniques as discussed by management of business. For enabling products to thrive in market and attract more customers, marketing executives of organization should consider ways for product innovation and development. For mitigation of any risks associated with business, there should be implementation of adequate internal control system.

VTI Homeware Pty Ltd has been identified with one of the most important problem concerning their accounting software and inability of administration to make accurate forecasting of their sales and revenue generation. Therefore, it is recommended to organization to install competing accounting software that will help in making proper estimates along with facilitating internal control system. Modification of internal control system should be done and product development and innovation should be done.

References list:

Coad, A., Jack, L. and Kholeif, A.O.R., 2015. Structuration theory: reflections on its further potential for management accounting research. Qualitative Research in Accounting & Management, 12(2), pp.153-171.

Van der Stede, W.A., 2016. Management accounting in context: Industry, regulation and informatics. Management Accounting Research, 31, pp.100-102.