Finance for managers

6 How Stakeholders use financial statements (1. 8 Differences that exist between management accounting as well as financial accounting (3. 9 Process of budgetary control (3. 10 Costing Techniques employed in determining and setting the price of commodities (3. 11 Calculations of the variance of the budget in business (3. Businesses mainly depend on managers, finance, and budget among others. Finance for managers is important for those people stating business. It provides help to them since they can know about those things that are important in a corporate entity. They include; what are legal responsibilities, ways of keeping records of finance, ways of finance control, ways of budget control, costing and the pricing, meaning of those statements that are financial, methods of appraisal of the project, the usefulness of statements that are financial to the stakeholders.

Task one • The Purposes as well as set requirements that have to be fulfilled when financial records are kept Finance is a very critical aspect of every business. The first aim and requirement when finance-based records are kept are to fulfill legal requirements. In the United Kingdom, the government requires all companies to have good financial records that are also properly kept. The important aims and the requirements available when financial data is kept has a lot of stress on the legal requirements. After starting a business law, rules and regulations should be followed to run the business. The business has legal rulings. The gauge used to determine the amount of tax that a company will pay is its financial strength.

The large the company, the higher the taxes it pays. In that view, it is important to safely keep financial records to enable the government's taxation agencies to effectively impose taxes to the companies following their capacity. These records are the ones that are used to make sure that a company does not pay too little or high taxes which is not corresponding with the size of the company. Every firm has to pay taxes in the United Kingdom and failure to comply with this law attracts very high and ruthless penalties. It helps in pointing out corruption deals as well as financial recording mistakes in the company. Auditing is greatly needed by the company's shareholders as well as the government.

Shareholders are usually willing to know how the finance of the company is used. They want to know the effectiveness and capacity of the finance manager. The government also wants to understand whether companies are properly run without corruption deals. The ledger can also be defined as the book of accounting that has entries that are final and transaction here is found in accounts that are different (Brown, 2006). In the ledgers, the balance at the beginning and the end of every transaction is recorded. In addition to that, there are daybooks which are used to record daily financial transactions in a business. The other technique used to record financial information includes the trial balance. These are the balance that is of debt and that is of credit to ensure that the debt total equal to the credit total.

Recording of finances is a process and also a procedure that an organization uses in the financial control and also accountability. These process and procedures entail the following: recording, timely transaction reporting, verification, expenditures, liabilities, and assets. Accountants are needed to keep records of finance so as the business can develop and have profit. Techniques for financial recording information are keeping of books that involve entry that is double: these are a technique that involves accounts and every transaction is recorded as a debit or credit. The business contains requirements for reporting of finances and they are for those traders that are sole, partnership, companies that are limited and companies that are publically limited. Lenders and investors in a company have the right of knowing how their money is being used, whether it brings profit to the business.

• How Stakeholders use financial statements Records of finance are very important to the company's stakeholders. The first use of the statements by stakeholders is to find out the extent that the business has made either profit or loss. Stakeholders are always risk-averse and they would prefer to make profits out of their investments. In that view, they need to use financial statements to find out the loss or profit realized by the business (Rauf, 2011). The income statement is used to show profits as well as other expenses of an organization. Stakeholders can analyze the income statement data to find out whether the firm has made profits or has incurred losses (Rauf, 2011). In addition to that, the cash flow statement helps the stakeholders understand how the organization is acquiring and spending finances.

• Differences that exist between management accounting as well as the financial accounting Accounting is a term mostly used to mean transactions that deal with finances. It may be a loss of profit. • Process of budgetary control Budget is a process of making an effective decision and decision coordination and the action of the department regarding their capital. Budget control is necessary due to the limited budget a business has. Types of budgets in business include the following: budget used for advertising, budget used for purchasing, budget used in sales, budget used in cash, budget used in development among others. Process of budget control includes: effective communication and cooperation amongst the departments and various legal regulatory entities lead to ideal control of the budget.

Ways of budget control are decided by the manager through planning that is good and that is available in the departments. This is helpful since it forecasts costs that are overhead fixed, computed by the help of addition or subtraction of a percentage that is predetermined from the cost available historically Advantages of budgetary control include the following: Enabling business management has its concern in the conduction of the activities in the business effectively. It gives a yardstick necessary in the measurement and evaluation of individuals and department performance. It also helps in revealing deviation to the management, from figures that are budgeted with actual figures. Utilization that is effective of different raw materials, machinery. It also gives a trend that is current review and policies that are future framing.

Time and cost The expensiveness of things may be found during the introduction and also implementation. • Costing Techniques employed in determining and setting the price of commodities Different costs that are various types are found in a business. Costs in the industry need to be classified for pricing. For example, costs that are direct or indirect. Separate units are found in each cost of units to know the amount of their cost. Another method of costing that is important is break-even, these imply that there is no gaining of profit or even occurrence of loss and it can only be seen after cost balancing. Task 2 Calculations of variance from the budget of the business The revenue that was generated after selling the product was £62 while the cost of labor was estimated on an hourly basis and each hour cost 22.

The cost of purchasing direct materials per kilogram was 20. In addition to that, the cost of fixed overheads was just 6 and finally, the company made a standard profit of 14. The company had already made a budget of the predicted output which stood at 1000 units of the commodity. On the other hand, efficient machines produce a lot of products in the shortest time possible. In addition to that, the cost of raw materials keeps changing. In this case, the cost of raw material might be very high when they were budgeting for it but later on, the price might have gone down resulting in the difference. Besides, the variance might have been caused by lowered taxation. The government might have decreased the rate of taxation on the company at the end of the production.

It is therefore advisable to invest in this project. A long payback period would have meant that it would take a long period before a project repays its initial value. The internal rate of return which the investment will have will be 24. The NPV will end up becoming zero when the rate will be 24. The organization should therefore invest in the project since it yields 24. 400     Residual Value 12,350     Net Present Value 2, 350 Evaluation of the Project Appraisal Projects NPV and IRR Both of these apply the time value of money aspects. Besides, they give very reliable data on the company’s future cash flows. The methods are highly used since they give both the profitability and risks that the investment might be projected in.

However; they have a major setback since they are very complicated when calculating profitability and risks of huge projects. Payback Period This technique is very easy to use and can be easily be used when an entrepreneur is willing to make swift investment decisions. Loans granted by financial institutions such as banks form the basic source of finance for companies. However, this option should be properly evaluated before deciding to use it since, in some instances, it can be very expensive. In addition to that, the company may also decide to seek grants from well-wishers such as donors (Fernandes, 2014). This is without doubt an ideal source of cash for companies where some people come in and donate money to finance the companies.

This kind of source of finance is very real and cannot be full depended on. It is therefore essential for the business to pay for all services and goods received to prevent interference of the working capital. On the other hand, inventory can be defined as the stock which a business entity holds to increase the level or rate of the product's demand. Ways through which Working Capital is Effectively Managed Working capital can be managed by calculating the liquidity ratios in an organization. The most basic liquidity ratios which are widely analyzed are the Quick and current ratio. The capacity of a business to effectively and timely clear all short-term loans and obligations is determined through calculation of the current ratio.

Collection Cycle, on the other hand, is the length of time that a company allows its customers to repay for the services and goods supplied. About 2-3 weeks is the most recommendable period that a customer can be required to clear his/her outstanding. Overdraft is also important for the company. This is when a company can access more money from the bank than what is presented in its account. Overdraft is important since it helps the company to fund immediate or urgent investments. For the proper understanding of the business people need to have the knowledge for finance for managers. It is important to learn about finance for managers because it leads to business growth and success. References Bamber, M.