Accounting for Managers 2015| S2 Assignment 1

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Accounting Assignment Question

Question 2 Total marks for Q5. (10 marks)

a. A local restaurant is noted for its fine food, as evidenced by the large number of customers.  A customer was heard to remark that the secret of the restaurant’s success was its fine chef.  Would you regard the chef as an asset of the business?  If so, would you include the chef on the balance sheet of the business and at what value? Discuss. (2 MARKS)

b. Accounting provides much information to help managers make economic decisions in their various workplaces. You are required to provide examples of economic decisions that the following people would need to make with the use of accounting information: (3 MARKS)

• A manager of human resources
• A factory manager
• The management team of an Australian Football League (AFL) club
• The manager of a second-hand clothing charity

c. Indicate the effect of each of the following transactions on any or all of the three financial statements of a business: (5 MARKS)

1. Statement of financial position
2. Statement of financial performance
3. Statement of cash flows

Apart from indicating the financial statements (s) involved, use appropriate phrases such as ‘increase total asset’, ‘decrease equity’, ‘increase income’, ‘decrease cash flow’ to describe the transaction concerned.

• Purchase equipment for cash.
• Provide services to a client, with payment to be received within 40 days.
• Pay a liability.
• Invest additional cash into the business by the owner.
• Collect an account receivable in cash.
• Pay wages to employees.
• Receive the electricity bill in the mail, to be paid within 30 days.
• Sell a piece of equipment for cash.
• Withdraw cash by the owner for private use.
• Borrow money on a long-term basis from a bank.

Accounting Assignment Solution

Question 2:

Solution for a)

It is true that we should consider the chef as an asset to that business. In fact, all employees who contribute to the success of the business are the assets for the company. Without them, no other assets have any value. But, unfortunately, there is no provision in the balance sheet to trap them as an asset. Since the chef is not purchased and also there is no record of the past transaction, so it is not possible to show him in the balance sheet. He can be considered as an expense item on the income statement. (Back, 2010)

Solution for b)

A manager of human resources: He/she uses the accounting information to make the economic decision on the budgeted items related to employees such as recruitment, staffing, training, and performance evaluation. It is done in terms of the costs to be incurred and the dollar benefits to be received.

A factory manager: He/she uses the accounting information to make the economic decision of whether the production line should be expanded or not. Through the accounting information, the manager can know whether the product is profitable or not. If he/ she finds it profitable, he/ she can take the economic decision to expand the production. Apart from that, he can compare the actual accounting information with the budgeted figures to determine the deviations, if any occurs. If any deviation is found, the corrective action can be taken by him/ her.

The management team of an Australian Football League (AFL) club: They can use the accounting information to get an idea about the expenses, incurred in the managing team and also about the available funds they have. Based on this, they can take the economic decision to recruit a renowned best trainer.

The manager of a second-hand clothing charity: He/she uses the accounting information to decide on whether he/ she is able to expand his/ her charitable activities. Expansion activity requires additional funds and through accounting information, he/ she can decide whether this financial burden can be managed or not.