ASSIGNMENT 2 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 5: Accounting Principles (5038)

Submission date 24/4/2022 Date received (1st submission)

Re-submission date Date received (2nd submission)

Student name Nguyen Duc Quang Student ID BH00184

Class PBBA17102 Assessor name Hoang My Linh

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I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I understand that
making a false declaration is a form of malpractice.

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 Table of Contents
i Introduction............................................................................................................................. 4

ii Producing Financial statments ................................................................................................ 4

iii Aanalysing and interpreting financial statements ................................................................. 8

1. Introduction ....................................................................................................................... 8

2. Financial performance of the company ............................................................................. 9

a) Solvency ratio................................................................................................................ 12

b) Efficiency ....................................................................................................................... 13

c) Liquidity......................................................................................................................... 14

d) Profitability ................................................................................................................... 15

3. conclusion ........................................................................................................................ 16

iv Budget ................................................................................................................................... 16

• The benefits and limitations of budgeting ........................................................................... 20

v Conclusion ............................................................................................................................. 22

vi References ............................................................................................................................. 22
 i Introduction

After explaining what accounting is and the concepts of accounting, today is a detailed description and how
to make a balance sheet, accounting income and expenditure in detail. As well as interpret and use formulas in
financial statements to analyze like a true financial analyst. You will see examples of the work of a financial
journalist as well as other tables related to finance in a business.

ii Producing Financial statments

15/12/2021, ABC owes its employees unpaid wages for the two weeks: 10 days @ $700

Employees wages for 1 day is 700. Therefore, 10 days is 7000.

Debit Credit

Salary expense 7000

Salary Payable 7000

15/12/2020, ABC agrees to provide training services to a client for a fixed fee of $6,000 for 30 days. All services
are to be completed before 14/1/2021, and the client will pay in full at that time.

From 15th to 31st of December, the unearned training fee from customer is (6000/30)x 17 days = 3400

Training service customer owe will be put on account receivables.

Debit Credit

Account Receivable 3400

Training fees earned 3400

On December 1st, 2020, ABC purchased equipment for $16,900, by cash. The equipment has an estimated
useful life of three years (36 months) and ABC expects to sell the equipment at the end of its life for $7,000 cash.

Depreciation Expense in Dec 2020 = (16900 – 7000)/36m = 275 per month

Debit Credit
Depreciation Expense 275
Accumulated depreciation 275

Income Statement
For the Month Ended December 31, 2020
Revenues:
Tuition fees earned $ 123,900
Training fees earned 43,400
Operating expenses:
Depreciation expense, Equipment $ 275
Salaries expense 57,000
Rent expense 33,000
Advertising expense 6,000
Utilities expense 6,400
Total expense 102,675
Net Income $ 64,625

ABC
Statement of Changes in Owner’s Equity
For the Month Ended December 31, 2020
ABC, Capital 01/12/2020
Add: Net Income $ 64,625
Investment by owner 90,000 154,625
Total 154,625
Less: ABC, Withdrawal 50,000
ABC, Capital 31/12/2020 $ 104,625
Balance Sheet
31/12/2020
 Assets
Cash $ 34,000
Accounts receivable 3,400
Teaching supplies 8,000
Prepaid insurance 12,000
Prepaid rent 3,000
Professional library 35,000
Accumulated depreciation, professional library 10,000 25,000
Equipment 80,000
Accumulated depreciation, equipment 15,275 64,725
Total assets $ 150,125

Liabilities
Accounts payable $ 26,000
Salaries payable 7,000
Unearned training fees 12,500
Total liabilities 45,500

Equity
ABC, Capital $ 104,625
Total liabilities and Equity $ 150,125
 ABC INSTITUTION
December 31st
Unadjusted Trial Balance Adjustments Adjusted Trial Balance
Debit Credit Debit Credit Debit Credit
Cash $ 34,000 $ 34,000
Accounts receivable - 3,400 $ 3,400
Teaching supplies 8,000 8,000
Prepaid insurance 12,000 12,000
Prepaid rent 3,000 3,000
Professional library 35,000 35,000
Accumulated depreciation, professional
library $ 10,000 $ 10,000
Equipment 80,000 80,000
Accumulated depreciation, equipment 15,000 275 15,275
Accounts payable 26,000 26,000
Salaries payable - 7,000 7,000
Unearned training fees 12,500 12,500
ABC, capital 90,000 90,000
ABC, withdrawals 50,000 50,000
Tuition fees earned 123,900 123,900
Training fees earned 40,000 3,400 43,400
Depreciation expense, Professional library - -
Depreciation expense, Equipment - 275 275
Salaries expense 50,000 7,000 57,000
Insurance expense - -
Rent expense 33,000 33,000
Teaching supplies expense - -
Advertising expense 6,000 6,000
Utilities expense 6,400 6,400
Total $ 317,400 $ 317,400 10,675 10,675 $ 328,075 $ 328,075
 iii Aanalysing and interpreting financial statements

1. Introduction

LDG Group is known as one of the trillion real estate investment groups in Vietnam and used to be a subsidiary
of Dat Xanh Group. To polish its name, LDG has started hundreds of resort real estate projects in many provinces
and cities such as Phu Quoc, Phan Thiet, Da Nang, Nha Trang,...Although it is a leading brand, invest and develop
famous real estate projects, but very few people know well about LDG Group.

LDG Investment Joint Stock Company was established and granted a business license in 2010. Before operating
under the name LDG, the company was named Long Dien Real Estate Joint Stock Company.

After 11 years of construction and development, LDG Group is now considered a brand of investment and
development of real estate projects with the largest scale in the southern provinces, especially in Ho Chi Minh City.
Ho Chi Minh City, Dong Nai, Binh Duong. LDG Group is headquartered on the 2nd floor of 194 Golden Building, 473
Dien Bien Phu, Ward 25, Binh Thanh District, City. Ho Chi Minh.

Stock code: LDG (On August 12, 2015 LDG stock was officially traded on Ho Chi Minh City Stock Exchange)

On 14/07/2021 LDG officially changed the new brand identity (LDG Group to LDG Investment).

LDG Investment Joint Stock Company (LDG Investment) is an enterprise listed on the Ho Chi Minh City Stock
Exchange (HoSE) with a listed capital of more than 2,000 billion VND and total assets estimated at nearly 5,000
billion VND. For nearly 8 years of development, LDG Investment is a brand that invests and develops large-scale
real estate projects in Ho Chi Minh City, Dong Nai, Binh Duong and many other localities.

Especially, LDG Investment is also the unit with the strongest growth rate on the Ho Chi Minh Stock Exchange
(stock market price increased by more than 300%) and is one of the profitable businesses for 5 consecutive years.
contribute to local economic development. Currently, LDG Investment focuses on investing and developing real
estate projects in the segment of ready-built townhouses, urban areas, commercial apartments, entertainment
service urban areas... In which, LDG Investment places The goal is to become one of the five largest real estate
enterprises in Vietnam with a capital scale of over 1 billion USD.
2. Financial performance of the company
 Index 2020 2021 Amount per
Gross profit 371,062,116,725 182,810,447,276 (188,251,669,449) -50.73%
Operating profit 35,049,404,021 178,383,319,639 143,333,915,618 408.95%
Net sales revenues 1,483,927,908,034 478,286,238,499 (1,005,641,669,535) -67.77%
Net profit 12,909,867,021 140,652,309,599 127,742,442,578 989.49%
EBT 23,494,177,073 180,493,490,695 156,999,313,622 668.25%
Interest 20,661,233,697 49,960,158,149 29,298,924,452 141.81%

Asset begin 5,848,491,417,228 5,531,703,820,852 (316,787,596,376) -5.42%

Asset ending
Average Asset
Shareholder's equity begin
Shareholder's equity ending
Average shareholder's equity
Cash & Equivalents
5,531,703,820,852 6,841,069,106,949 1,309,365,286,097 23.67%
5,690,097,619,040 6,186,386,463,901 496,288,844,861 8.72%
3,123,026,203,693 3,104,404,089,080 (18,622,114,613) -0.60%
3,104,404,089,080 3,243,923,398,461 139,519,309,381 4.49%
3,113,715,146,387 3,174,163,743,771 60,448,597,384 1.94%
10,337,886,480 74,949,892,340 64,612,005,860 625.00%

Cost of goods sold 1,017,377,995,336 357,951,547,690 (659,426,447,646) -64.82%

inventory begin 1,735,304,670,831 1,094,811,680,935 (640,492,989,896) -36.91%
inventory ending 1,094,811,680,835 1,044,751,475,920 (50,060,204,915) -4.57%
Average inventory 1,415,058,175,833 1,069,781,578,428 (345,276,597,406) -24.40%
Net Credit sales 403,615,390,014 468,578,220,856 64,962,830,842 16.10%
 Accounts Receivable begin 3,219,827,855,576 3,483,169,121,468 263,341,265,892 8.18%
Accounts Receivable ending 3,483,169,121,468 4,736,255,046,799 1,253,085,925,331 35.98%
Average Accounts Receivable 3,351,498,488,522 4,109,712,084,134 758,213,595,612 22.62%
Accounts Payable begin 2,725,665,213,535 2,427,299,731,772 (298,365,481,763) -10.95%
Accounts Payable ending 1,427,299,731,772 3,597,145,708,488 2,169,845,976,716 152.02%
Average Accounts Payable 2,076,482,472,654 3,012,222,720,130 935,740,247,477 45.06%
Net credit purchases 358,793,429,350 265,870,588,759 (92,922,840,591) -25.90%
Ending Inventory 1,094,811,680,835 1,044,751,475,920 (50,060,204,915) -4.57%

Current Assets 4,065,819,047,391 4,748,957,739,047 683,138,691,656 16.80%

Current Liabilities 2,422,377,786,242 2,487,897,907,166 65,520,120,924 2.70%
Inventory 1,094,811,680,835 1,044,751,475,920 (50,060,204,915) -4.57%
Prepaid Expenses 217,052,297,388 99,086,009,492 (117,966,287,896) -54.35%

Depreciation 5,832,653,981 2,800,492,102 (3,032,161,879) -51.99%

Total liabilities 2,427,299,731,722 3,597,145,708,488 1,169,845,976,766 48.20%
Ebit 44,155,410,770 230,453,648,844 186,298,238,074 421.91%
Shareholders' Equity 3,104,404,089,080 3,243,923,398,461 139,519,309,381 4.49%
 Index
2020 2021 Amount per
Profitability
Gross profit margin 25.01% 38.22% 13.22% 52.85%
Operating profit margin 2.36% 37.30% 34.93% 1479.06%
Net profit margin 0.87% 29.41% 28.54% 3280.26%
ROA 0.23% 2.27% 2.05% 902.09%
ROE 0.41% 4.43% 4.02% 968.75%
Efficiency
Inventory Turnover Ratio 71.90% 33.46% -38.44% -53.46%
Accounts Receivable Turnover
Ratio 12.04% 11.40% -0.64% -5.32%
Accounts Payable Turnover Ratio 17.28% 8.83% -8.45% -48.92%
Assets Turnover Ratio 26.08% 7.73% -18.35% -70.35%
Day's Sales in Inventory 392.78 1065.32 672,54 171.23%
Liquidity
Current Ratio 167.84% 190.88% 23.04% 13.73%
Quick Ratio 113.69% 144.91% 31.22% 27.46%
Solvency
Solvency Ratio 0.77% 3.99% 3.22% 416.47%
Interest Coverage Ratio 213.71% 461.27% 247.56% 115.84%
Debt - to - Equity Ratio 78.19% 110.89% 32.70% 41.82%
Debt - to - Capital Ratio 43.88% 52.58% 8.70% 19.83%

a) Solvency ratio

Based on the above data table, we see that the total liabilities in 2021 is 3,597,145,708,488 VND, an
increase of 1,169,845,976,766 VND corresponding to 48.20% compared to 2020 is 2,427,299,731,722 VND. In
which, accounting for a large proportion in the structure of debt items are current liabilities of customers. At the
end of 2021, short-term liabilities did not have a big change with the value of 2,487,897,907,166 VND in 2021 and
2,427,299,731,722 VND in 2020 with only a difference of 2.70%, equivalent to 65,520,120,924 VND. The amount of
short-term liabilities between the two years of comparison is not significant. However, the solvency ratio of 2021 is
higher than that of 2020 with 0.77% to 3.99%, an increase of 416.47%. Due to many reasons, but the biggest
reason is that the capital flow to be compensated as well as the projects to be handed over in 2021 has
skyrocketed due to the introduction of Covid treatment methods and the pursuit of land fever at the end of 2021.
Shows that the company's payment management is showing positive signs after the pandemic. Along with the
positive ratio of the company's solvency ratio, the Interest Coverage Ratio of the company also showed many
positive signs when it increased from 213.71% to 461.27%, the index increased twice as much. Between the two
years, the Company has enough money to focus on paying the due loans as well as not incurring any other loans,
which reduces the interest payable. An increase in the interest coverage ratio shows that the company has been
able to be autonomous and able to pay interest with normal business activities.

However, the debt-to-equity ratio increased to 32.7% from 78.19% to 110.89%, which shows that the
capital used to operate the company is used more strongly. Especially in the construction and real estate sector of
the company it is a good look. Along with the debt-to-equity ratio increases, so does the Debt - to - Capital Ratio.
Increase from 43.88% to 52.58% 20% increase in total. That shows a more optimistic view for the company when it
mobilizes debt capital for investment and construction development after going through the heaviest period of the
epidemic.

Summary. Through the analysis of the solvency coefficient as well as the debt-to-capital ratio of the
company. We can draw comments that the company still needs to improve its ratio in recent years. It is necessary
to maintain and promote the positive points and improve the bad indicators in the past 2 years of the pandemic.

b) Efficiency

In the period from 2020-2021, in general, the inventory turnover of enterprises has significantly changed
when the cost of goods sold in 2020 is very large up to 1,017,377,955,336 VND but in 2021 it is only
357,951,547,690 VND down to 64.82%. Thus, it can be seen that the inventory of 2020 through 2021 has been
handled a lot. The high cost of goods sold also shows that the low profit margin has too many costs to be incurred
together with the cost of goods sold, creating a bad prospect for the company in 2020. Inventory sold helps the
company's business operations are smoother and more efficient, creating a sign of prosperity for the company so
that the company can bring itself a more optimistic vision of the future.

However, contrary to the cost of goods sold showing signs of improvement, the day's sales in inventory
index has a different view when it sharply increases from 392.78 days to 1065.32 days in 2021, nearly 3 times
higher than the previous ones. what 2019 can do. Shows that the company is struggling with a large amount of
inventory or maybe has invested too much.

The decrease in the number of days' sales in inventory in 2020 is due to the fact that businesses in this
period tend to increase the size of their inventory to prepare for a big boom in real estate. As well as the increase
in interest rates and interest rates among real estate businesses, prolonging the construction progress, the
business leaders believe in a boom in the near future. Ensuring adequate inventory can ensure safety in the distant
future, but may affect business operations in the immediate future.

Based on the calculated data table, we can see that the Accounts Receivable Turnover Ratio of 2020 and
2021 has not changed significantly, only from 12.04% down to 11.40%, only a change of 5.32% is not worth it.
However, it confirms that the company did not have a significant growth in 2 years but a slight decline. This shows
that the financial position of the company is not in a positive state,

As for the Accounts Payable Turnover Ratio, it is a big positive sign for the company as, a low ratio will
represent a better financial position as the longer the payment delay, the more money can be used for other
purposes. aim for higher productivity. For LDG, it's progress as the Accounts Payable Turnover Ratio falls by 8.45%
from 17.38% in 2020 to 8.83% in 2021. That has shown good things to come. financial position of the company

Finally, the Assets Turnover Ratio index, when looking at it right away, we can see a drop of nearly 4 times
from 26.08% to 7.73%. The higher the asset turnover ratio, the better the company is doing, because a high ratio
indicates that the company is generating more revenue per unit of assets. Therefore, we can see that the company
in 2021 is not really efficient when they cannot make good use of the company's existing asset resources and lag
much behind what was achieved in 2020.

In summary, most of the company's operating performance coefficients in the past 2 years have generally
decreased significantly. It shows that the business situation of the company is following a steady momentum,
although it is not large, but it is also quite clear. So the company needs to change, cut costs, solve the outstanding
difficulties of payables.

c) Liquidity

Coming to the company's short solvency, Current Ratio of the company increased by 167.84% in 2020 to
190.88% in 2021, an increase of 23.04%. The higher the company's current ratio, the greater the company's ability
to repay its debts. That is, the current assets of the business are much higher than the current liabilities. That
shows the company is still showing efficiency with the financial life cycle of the company. However, the reality
shows that the current ratio sometimes does not accurately reflect the current assets of the business.

Therefore, we need to go to Quick Ratio to better analyze the ability to pay in cash and the current asset
value of that business. For LDG Quick ratio, the index is 144.91% in 2021 and before the increase of 31.22%, it has
113.69% in 2020. The higher this ratio shows that the enterprise needs to recover large amounts of working cash.
However, it will also show that the ability of the business to pay on time is not high.

In general, this ratio is quite high, the company now has a surplus of cash to actively cover the regular
expenses as well as pay the due debts.

d) Profitability

Finally we have the company's performance indicators with the first basic index to evaluate the profitability of
the business. This metric shows how much gross profit is generated for each dollar of revenue generated. Gross
profit margin, for LDG we can see a positive change when this index increases from 25.01% in 2020 to 38.22% in
2021. This increase shows that the business The more efficient the operation, the more focused on the change
from sales when in 2020 it amounted to 1,483,927,908,304 VND and in 2021 it is only 478,286,238,499 VND, down
79.77%. Although net revenue decreased, it can be seen that gross profit still increased as the company's gross
profit decreased by only 50.73% in 2021. It can be seen that although sales in 2020 outperformed, the index gross
profit margin shows that in 2021, despite selling less, the profit brought to the company is much better because
the company has reduced many costs as well as optimized sales in 2021. .

Coming to profit after deducting operating expenses, right from the financial statements, we can see the big
difference in operating profit in 2020 and 2021 when from VND 35,049,404,021 to 4 times of VND 178,383,319,639
in In 2021. Since then, a significant change to Operating profit margin has helped the index increase from 2.36% to
37.30% in 2021. That is the company's greatest success when it has reduced a lot of expenses. work. Thereby
helping the company to be positive and have a better vision for the future and to develop the company in the right
direction than before.

The positivity across the company's 2 profit indexes is even brighter when the company's net profit increases
10 times in 2020 to 2021 only from VND 12,909,867,021 to VND 127,742,442,578 in 1 year. Thereby helping net
profit margin to increase strongly from 0.87% to 29.41%. A spike in corporate profits
 Thanks to such indicators, we can see that although the company's sales in 2021 will decrease significantly, the
expenses are a positive point because it can bring long-term benefits to the company. . When the rate of profit has
grown greatly during the operation of the company.

ROA shows how efficiently a business is using its assets, showing how much profit a business earns per dollar of
assets. In 2020, the ROA coefficient is 0.23%, in 2021 it is 2.27%. Reflects 1 dong of capital used in the period to
generate 2.27 dong of profit after tax. This is extremely good for the size of the company because the company
must always have inventory in stock to serve production and business in the long run and include long-term
financial investments that make the company's financial resources less expensive. enormous production. While the
company's after-tax profit increased strongly, this ratio is very good for the company's business.

The ultimate goal of any business is to achieve the highest profit for that business owner. Therefore, this
indicator is very interested by business owners, it evaluates the level of net profit generation for business owners.
ROE shows the efficiency of the business when using capital or in other words, how much profit can be earned
from 1 dollar of capital spent. In 2020-2021, ROE coefficients are 0.41%, 4.43%, respectively. This coefficient in
2021 has had a big growth due to the huge growth in profit after tax.

3. conclusion

Through the above analysis and evaluation, we see that the company's financial management and use
efficiency tends to be more positive in 2021 than in 2020. That is, businesses need to try to maintain efficiency.
activities and propose additional business strategies and solutions. further increase the above coefficients to
achieve the goal of improving operational efficiency and advancing to a new position in the real estate industry.

iv Budget
 HAC
BUSINESS PLAN FOR NEXT YEAR

Net profit = net

Production Units Sales Units Depreciation
Revenue COGS/Unit Sale expenses R&D expense Interest EBT incomé Tax expense
Jan 400 350 59,500 17,500 20,833.33 5,950 2,975 8,400 3,842 3,073 768.3333333
Feb 450 500 85,000 25,000 20,833.33 8,500 4,250 7,700 18,717 14,973 3743.333333
Mar 500 350 59,500 17,500 20,833.33 5,950 2,975 7,000 5,242 4,193 1048.333333
Apr 350 400 68,000 20,000 20,833.33 6,800 3,400 6,300 10,667 8,533 2133.333333
May 400 400 68,000 20,000 20,833.33 6,800 3,400 5,600 11,367 9,093 2273.333333
Jun 500 550 93,500 27,500 20,833.33 9,350 4,675 4,900 26,242 20,993 5248.333333
Jul 500 500 85,000 25,000 20,833.33 8,500 4,250 4,200 22,217 17,773 4443.333333
Aug 600 600 102,000 30,000 20,833.33 10,200 5,100 3,500 32,367 25,893 6473.333333
Sep 700 650 110,500 32,500 20,833.33 11,050 5,525 2,800 37,792 30,233 7558.333333
Oct 750 750 127,500 37,500 20,833.33 12,750 6,375 2,100 47,942 38,353 9588.333333
Nov 800 850 144,500 42,500 20,833.33 14,450 7,225 1,400 58,092 46,473 11618.33333
Dec 850 850 144,500 42,500 20,833.33 14,450 7,225 700 58,792 47,033 11758.33333
Initial cash balance 140,000 COGS/Unit 50
Cost of manufactor 250,000 Price 170
Income Tax 20% Sale expense 10%
R&D expense 5%
Interest 7%
 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
New Borrowing 120,000
Beginning Debt 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000
Interest 8,400 7,700 7,000 6,300 5,600 4,900 4,200 3,500 2,800 2,100 1,400 700
Principal repayment 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Ending Debt 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Product 400 450 500 350 400 500 500 600 700 750 800 850
Revnue 59500 85,000 59,500 68,000 68,000 93,500 85,000 102,000 110,500 127,500 144,500 144,500
COGS 17,500 25,000 17,500 20,000 20,000 27,500 25,000 30,000 32,500 37,500 42,500 42,500
Depreciation 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833 20,833
Sale expense 5,950 8,500 5,950 6,800 6,800 9,350 8,500 10,200 11,050 12,750 14,450 14,450
R&D expense 2,975 4,250 2,975 3,400 3,400 4,675 4,250 5,100 5,525 6,375 7,225 7,225
Interest 8,400 7,700 7,000 6,300 5,600 4,900 4,200 3,500 2,800 2,100 1,400 700
EBT 3,842 18,717 5,242 10,667 11,367 26,242 22,217 32,367 37,792 47,942 58,092 58,792
Tax expense 768 3,743 1,048 2,133 2,273 5,248 4,443 6,473 7,558 9,588 11,618 11,758
NI 3,073 14,973 4,193 8,533 9,093 20,993 17,773 25,893 30,233 38,353 46,473 47,033

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Beginning cash balance 140,000 153,907 179,713 194,740 214,107 234,033 265,860 294,467 331,193 372,260 421,447 478,753
Cash sales Revenue 59,500 85,000 59,500 68,000 68,000 93,500 85,000 102,000 110,500 127,500 144,500 144,500
Total Cash inflow 199,500 238,907 239,213 262,740 282,107 327,533 350,860 396,467 441,693 499,760 565,947 623,253
COGS 17,500 25,000 17,500 20,000 20,000 27,500 25,000 30,000 32,500 37,500 42,500 42,500
 Sale expense 5,950 8,500 5,950 6,800 6,800 9,350 8,500 10,200 11,050 12,750 14,450 14,450
R&D expense 2,975 4,250 2,975 3,400 3,400 4,675 4,250 5,100 5,525 6,375 7,225 7,225
Principal repayment 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Interest 8,400 7,700 7,000 6,300 5,600 4,900 4,200 3,500 2,800 2,100 1,400 700
Tax expense 768 3,743 1,048 2,133 2,273 5,248 4,443 6,473 7,558 9,588 11,618 11,758
Total Cash outflow 45,593 59,193 44,473 48,633 48,073 61,673 56,393 65,273 69,433 78,313 87,193 86,633
Ending cash balance 153,907 179,713 194,740 214,107 234,033 265,860 294,467 331,193 372,260 421,447 478,753 536,620
 • The benefits and limitations of budgeting

Benefits

Budgeting helps businesses forecast income and expenses and spot potential cash flow problems. Budgets provide a
road map for performance that provides insights into expected outcomes that proactive managers can use to guide decisions
toward desired goals. Budgets should also be updated monthly or quarterly to help companies spot opportunities and
potential problems and react promptly.

Income and Expense Planning

As a manager looking at a business phase and preparing, he can consider how much money is needed to pay expenses,
such as materials or employees. When a budget shows expected sales for the same period, a manager can take the budgeted
cost of goods sold and work backwards to determine material or labor hour requirements. necessary.

Budgets help managers create financial controls by letting them know when they have to limit spending and when they
have more cash to spend to reduce debt or increase inventory.

Prioritize Spending Goals

Comparing annual performance with budget can help a manager decide how to approach a problem or challenge. For
example, if labor costs in a particular area are above budget, but the purchase of new equipment is below budget, a manager
can requisition a new machine that reduces future labor.

In this case, the budget acts as a justification for a proposal. When an account item goes over budget, it becomes the
manager's priority to control cash outflows. Budgets also help companies forecast cash flow, TrustPlant.com explains. This
helps managers reduce spending during certain periods or warns companies that they need to increase their access to capital
sources, such as lines of credit or loans.

Continuous improvement processes

An effective manager not only seeks to meet budgets, but also seeks to improve. With weekly or monthly
performance figures against budget, a manager is a tier one systems analyst for operations.

Revenue and Profit Forecast

A year's budget often serves as the basis for the following year, and as managers are involved in the budgeting
process, each previous step can be applied into the future. Managers may be in a unique position to observe the impact of
employee training improvements, for example, as a contributor to improved performance.

Forecasting becomes an opportunity for an effective manager to reach beyond the confines of his or her department
to suggest changes that can better facilitate financial success in the following year.

Limitations

Inaccuracy

Budgeting is based on a lot of assumptions in estimating costs and revenues. These are often based on prevailing
market trends and scenarios when budgeting. Budgets can also be based on projections made for the coming year
considering the data available at the time of budgeting.

Any change in macroeconomic conditions, like an economic downturn or changes in exchange rates, changes in
interest rates, etc., can result in actual costs that vary significantly from costs. budgeted fees.
 Time consuming and expensive

Sometimes, the budgeting exercise can be a very time consuming exercise. It involves an additional workforce to get
the most accurate estimates possible. Especially for a large company with many different departments, budgeting takes a
huge effort. The time consumed can be low in case the company uses budgeting software and the staff is well trained. If a
company uses zero-based budgeting techniques, the time, cost, and effort involved can be enormous.

monstrous

The budgeted numbers are considered sacrosanct by all departments. And there is often little flexibility after the
budgeting exercise is over. The entire focus of senior management is on budgeting, and all strategies revolve around
budgeted numbers. Any change in market conditions usually does not arouse management's attention to make any drastic
changes in strategy due to budget constraints. Instead, the company should change according to the market and put in more
profits than stick to the budget.

Overspending

Some managers believe that all funds allocated to their division need to be spent. It is believed that if they do not use
as much as is allowed in the current budget, their budget in the next budget will be reduced. This leads to unnecessary waste
of funds and is harmful to the company, affecting its profits.

Operation range

At times, an experienced manager may deliberately inflate his costs and try to reduce the revenue target within the
budget. In this way, he can easily get the opportunity to get favorable variances compared to the budgeted numbers, that is,
by incurring lower costs than budgeting costs and achieve the same revenue. revenue is higher than budgeted revenue. This
misleads stakeholders and demoralizes employees.

Cost allocation

The allocation of expenditures between departments is usually done by top management. Managers of some
divisions may raise problems with the method used to allocate these costs, and this can create controversy. It is not possible
to consider proposals from all departments regarding budgeting and cost allocation methods.

Drive financial results

The budgeting exercise is supposed to be based on numbers. It focuses on the quantitative aspect of the business or
improving the profitability of the company. And do not consider the subjective or qualitative aspects. The fact that
stakeholders, including the company's customers, care about service quality along with its costs is completely sidetracked.
They are considered part of the budget but are not actually seen in the budget. So budgeting does not always consider the
needs of the client.

Conflict within the organization

At times when a particular department cannot meet its budget target, they will blame the other department
providing services to that department for not providing the necessary support. They even contradicted the transfer price
decided internally between the divisions. This creates unnecessary stress and the company as a whole may not be able to
operate efficiently.
 v Conclusion

Through this article, I have shown that the process to calculate a balance sheet includes what indicators,
order and steps like. At the same time, also analyze the financial statements of a company to better understand
how an accountant works and operates in the company. Not only that, but also how to set up a detailed budget
table for the company. Thereby to be able to see a small part of accounting work and how it works

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