Ajmal and Mustafa work at the Batol Manufacturing Company. Ajmal is manager of the machine shop in the company’s factory; Mustafa is manager of the equipment maintenance department. The men had just attended the monthly performance evaluation meeting for plant department heads. These meetings had been held each month since Sara Vali, the president’s daughter, had become plant manager a year earlier. As they were walking, Ajmal spoke: “Boy, I hate those meetings! I never know whether my department’s accounting reports will show good or bad performance. I’m beginning to expect the worst. If the accountants say I saved the company a dollar, I receive praise,’ but if I spend even a little too much— I get in trouble. I don’t know if I can hold on until I retire.” Ajmal had just been given the worst evaluation he had ever received in his long career with the company. He was the most respected of the experienced machinists in the company. He had been with the company for many years and was promoted to supervisor of the machine shop when the company expanded and moved from Herat to Kabul. The president had often stated that the company’s success was due to the high-quality work of machinists like Ajmal. As supervisor, Ajmal stressed the importance of craftsmanship and told his workers that he wanted no sloppy work coming from his department. When Sara Vali became the plant manager, she directed that monthly performance comparisons be made between actual and budgeted costs for each department. The departmental budgets were intended to encourage the supervisors to reduce inefficiencies and to seek cost reduction opportunities. The company controller was instructed to have his staff “tighten” the budget slightly whenever a department attained its budget in a given month; this was done to reinforce the plant manager’s desire to reduce costs. The young plant manager often stressed the importance of continued progress toward attaining the budget; she also made it known that she kept a file of these performance reports for future reference when she succeeded her father. Ajmal’s conversation with Mustafa continued as follows: Ajmal: I really don’t understand. We’ve worked so hard to meet the budget, and the minute we do so they tighten it on us. We can’t work any faster and still maintain quality. I think my men are ready to quit trying. Besides, those reports don’t tell the whole story. We always seem to be interrupting the big jobs for all those small rush orders. All that setup and machine adjustment time is killing us. And quite frankly, Mustafa, you were no help. When our hydraulic press broke down last month, your people were nowhere to be found. We had to take it apart ourselves and got stuck with all that idle time. Mustafa: I’m sorry about that, Ajmal, but you know my department has had trouble making budget, too. We were running well behind at the time of that problem, and if we’d spent a day on that old machine, we would never have made it up. Instead we made the scheduled inspections of the forklift trucks because we knew we could do those in less than the budgeted time. Ajmal: Well, Mustafa, at least you have some options. I’m locked into what the scheduling department assigns to me and you know they’re being harassed by sales for those special orders. Incidentally, why didn’t your report show all the supplies you guys wasted last month when you were working in Mohammad’s department? Mustafa: We’re not out of the woods on that deal yet. We charged the maximum we could to other work and haven’t even reported some of it yet. Ajmal: Well, I’m glad you have a way of getting out of the pressure. The accountants seem to know everything that’s happening in my department, sometimes even before I do. I thought all that budget and accounting stuff was supposed to help, but it just gets me into trouble. It’s all a big pain. I’m trying to put out quality work; they’re trying to save pennies. Required: Identify the problems that appear to exist in the company’s budgetary control system and explain how the problems are likely to reduce the effectiveness of the system. Explain how the company’s budgetary control system could be revised to improve its effectiveness. Your answers should be organized, specific and to the point. Use numbers or bullet points to organize the identification and discussion of problems/improvements
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Ajmal and Mustafa work at the Batol Manufacturing Company. Ajmal is manager of the machine shop in the company’s factory; Mustafa is manager of the equipment maintenance department. The men had just attended the monthly performance evaluation meeting for plant department heads. These meetings had been held each month since Sara Vali, the president’s daughter, had become plant manager a year earlier.
As they were walking, Ajmal spoke: “Boy, I hate those meetings! I never know whether my department’s accounting reports will show good or bad performance. I’m beginning to expect the worst. If the accountants say I saved the company a dollar, I receive praise,’ but if I spend even a little too much— I get in trouble. I don’t know if I can hold on until I retire.” Ajmal had just been given the worst evaluation he had ever received in his long career with the company. He was the most respected of the experienced machinists in the company. He had been with the company for many years and was promoted to supervisor of the machine shop when the company expanded and moved from Herat to Kabul. The president had often stated that the company’s success was due to the high-quality work of machinists like Ajmal. As supervisor, Ajmal stressed the importance of craftsmanship and told his workers that he wanted no sloppy work coming from his department.
When Sara Vali became the plant manager, she directed that monthly performance comparisons be made between actual and budgeted costs for each department. The departmental budgets were intended to encourage the supervisors to reduce inefficiencies and to seek cost reduction opportunities. The company controller was instructed to have his staff “tighten” the budget slightly whenever a department attained its budget in a given month; this was done to reinforce the plant manager’s desire to reduce costs. The young plant manager often stressed the importance of continued progress toward attaining the budget; she also made it known that she kept a file of these performance reports for future reference when she succeeded her father.
Ajmal’s conversation with Mustafa continued as follows:
Ajmal: I really don’t understand. We’ve worked so hard to meet the budget, and the minute we do so they tighten it on us. We can’t work any faster and still maintain quality. I think my men are ready to quit trying. Besides, those reports don’t tell the whole story. We always seem to be interrupting the big jobs for all those small rush orders. All that setup and machine adjustment time is killing us. And quite frankly, Mustafa, you were no help. When our hydraulic press broke down last month, your people were nowhere to be found. We had to take it apart ourselves and got stuck with all that idle time.
Mustafa: I’m sorry about that, Ajmal, but you know my department has had trouble making budget, too. We were running well behind at the time of that problem, and if we’d spent a day on that old machine, we would never have made it up. Instead we made the scheduled inspections of the forklift trucks because we knew we could do those in less than the budgeted time.
Ajmal: Well, Mustafa, at least you have some options. I’m locked into what the scheduling department assigns to me and you know they’re being harassed by sales for those special orders. Incidentally, why didn’t your report show all the supplies you guys wasted last month when you were working in Mohammad’s department?
Mustafa: We’re not out of the woods on that deal yet. We charged the maximum we could to other work and haven’t even reported some of it yet.
Ajmal: Well, I’m glad you have a way of getting out of the pressure. The accountants seem to know everything that’s happening in my department, sometimes even before I do. I thought all that budget and accounting stuff was supposed to help, but it just gets me into trouble. It’s all a big pain. I’m trying to put out quality work; they’re trying to save pennies.
Required:
- Identify the problems that appear to exist in the company’s budgetary
control system and explain how the problems are likely to reduce the effectiveness of the system. - Explain how the company’s budgetary control system could be revised to improve its effectiveness.
Your answers should be organized, specific and to the point. Use numbers or bullet points to organize the identification and discussion of problems/improvements.
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