Managerial Accounting vs Financial Accounting (Coursework Sample)

Managerial Accounting vs Financial Accounting Institution Affiliation Student’s Name Course Instructor Date of Submission Managerial Accounting vs Financial Accounting Problem #1 1 Fundamental differences between Managerial and Financial Accounting Managerial accounting is purposely used for internal decision-making, whereas, on the other hand, financial accounting is used to relay the financial position of the company to external parties. Managerial accounting does not have to follow the GAAP guidelines, but financial accounting must comply with the guidelines (Liu, 2023). Managerial accounting emphasizes the future point of view of the company, while financial accounting focuses on past transactions. Managerial accounting always uses the current timeframes in reporting its events, while financial accounting uses monthly, quarterly, semi-annually, and annually in making its reports. 2 three primary functions of the Managerial Accountant One of the primary roles of a managerial accountant is to provide financial advice and support for the company. The accountant must be able to analyze and synthesize the daily transactions made by the company (Mert, 2022). For example, a management accountant can give reports to the management and advise them on the priorities that should be done in different departments. Second, a management accountant helps guide and come up with strategic decisions that the company has to take and evaluate all the associated risks. For example, a management accountant continually formulates a work plan on how the company can manage its cash inflows and outflows daily. Thirdly, the management accountant's primary role is to ensure that all the relevant financial data of the company's operations is collected and stored appropriately. For example, all transactions are supposed to be recorded by the management accountant to assist in future auditing purposes and other reviews. Problem #2 1.(a) According to the statement of ethical practice, Jim was wrong by ignoring the obsolete inventory. As a professional accountant, he is responsible for ensuring that he performs his professional duties per the relevant regulations, laws, and technical standards and avoids engaging in any activity that taints his profession. (b). According to the team review, it is evident that it violated IMA principles. Firstly, it is clear that the principle of honesty was disregarded due to greed and the desire for higher incentives. Secondly, the team violated the Responsibility principle, which dictates that all professionals must be able to identify and report any case that might undermine the company's future operations. Lastly, the team ignored the principle of fairness when they arrived at their decision. For instance, the company employs professionals to curb any risk, but in this case, the team deliberately ignored the obsolete inventory for their selfish interests. (c). Based on the case analysis, honesty, responsibility, and fairness principles reflect the team's true nature. These highlighted principles portray how professionals should be accountable for various responsibilities that are in their own hands when executing different duties. 2. Jim's approach was to sacrifice his vacation plan to hold on to the professional ethics that guide him as an accountant. The initially promised incentives could have been reduced, but the team would have upheld its professional ethics in the long run. 3. Jim's decision impacted the team's professional ethics and the company's future financial implications. On the team's side, it will be accorded with their earlier incentives for the short-run, but in the long run, the team will be implicated with its professional conduct. The company also faces severe losses since the obsolete inventory will be declared expired and unable to be sold in the market. Problem #3 Purchase of street paver machine $225,000 Expected life = 3 years Salvage value = $25,000 Annual maintenance cost = $7,500 Annual savings = $92,500 The required rate of return is 8% Solution Cash outflows: Amount Purchase of a street paver $225,000 Annual maintenance cost (3*$7,500) $22,500 Net Cash Outflows $247,500 Cash Inflows: Annual savings (3*$92,500) $277,500 Salvage value $25,000 Net Cash Inflows $302,500 Problem #4 Purchase of street paver machine $225,000 Expected life = 3 years Salvage value = $25,000 Annual maintenance cost = $7,500 Annual savings = $92,500 The required rate of return is 8% 1. Description Current (0) Year 1 Year 2 Year 3 Present Value Purchase price ($225,000) Maintenance cost ($7,500) ($7,500) ($7,500) savings $92,500 $92,500 $92,500 Salvage value $25,000 Total cash In (out) ($225,000) $85,00 $85,00 $110,000 PV factor = 8% *1.0000 *0.9259 *0.8573 *0.7938 Present Value ($225,000)+ $78,702+ $72,871+ $87,318 =$13,891 2. According to the analysis of the present value of cash flows, UMIPI should purchase the street paver machine due to its positive cash inflows. Problem #5 Workings; Cost of mini robot = $88 1 A sales budget and supplemental Schedule for cash collection Sales budget Year 2 Year 3 Description Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Forecasted units sales 45,000 65,000 105,000 55,000 75,000 85,000 *Price per unit $88 $88 $88 $88 $88 $88 Total gross sales $3,960,000 $5,720,000 $9,240,000 $4,840,000 $6,600,000 $7,480,000 Supplemental Schedule for cash collection Description Year 2 Year 3 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 From accounts receivables $70,000 80% * current quarter sales $3,168,000 $4,216,000 $7,392,000 $3,872,000 $5,280,000 $5,984,000 20% in the preceding quarter $792,000 $1,144,000 $1,848,000 $968,000 $1,320,000 Total cash collected $3,238,000 $5,008,000 $8,536,000 $5,720,000 $6,248,000 $7,304,000 2 A Production budget Production Budget Year 2 Year 3 Description Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Budgeted sales 45,000 65,000 105,000 55,000 75,000 85,000 Add: Ending inventory; 25% of quarter sales 11,250 16,250 26,250 13,750 18,750 21,250 Total units 56,250 81,250 131,250 68,750 93,750 106,250 Less: Beginning inventory 6,500 11,250 16,250 26,250 13,750 18,750 Required production units 49,750 70,000 115,000 42,500 80,000 87,500 3 A direct materials budget and the supplemental Schedule of expected cash payments Direct Materials Budget Year 2 Year 3 Description Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Required production units 49,750 70,000 115,000 42,500 80,000 87,500 *Direct materials per unit 4 4 4 4 4 4 Total Direct materials need 199,000 280,000 460,000 170,000 320,000 350,000 Add: Desired ending inventory 15,920 22,400 36,800 13,600 25,600 28,000 Total DM required 214,920 302,400 496,800 183,600 345,600 378,000 Less: Beginning inventory 22,000 15,920 22,400 36,800 13,600 25,600 DM purchases 192,920 286,480 474,400 146,800 332,000 352,400 Cost per pound $8.80 $8.80 $8.80 $8.80 $8.80 $8.80 Cost of DM purchases $1,543,360 $2,521,024 $4,174,720 $1,291,840 $2,921,600 $3,097,600 Supplemental Schedule of expected cash payments Year 2 Year 3 Descriptions Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Accounts payables $825,000 65% * current quarter purchases $1,003,184 $1,638,666 $2,713,568 $839,696 $1,899,040 $2,013,440 35% in the preceding quar...