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Accounting assignment
 

Accounting assignment

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    Accounting assignment Accounting assignment Document Transcript

    • Student Name :Submission Date :
    • Table of Contents1. Task 1 .................................................................................................................................................... 3 1.1 Elements of Cost for a business .......................................................................................................... 3 1.2 Information for managing financial resources.............................................................................. 5 1.3 Regulatory requirements .............................................................................................................. 6 1.4 Management of financial resources ............................................................................................. 62. Task 2 .................................................................................................................................................... 7 2.1 sources of income for Health and social care organization ................................................................ 7 2.2 Factors affecting the ways of availability of financial resources .................................................. 9 2.3 budgetary Expenditure ..................................................................................................................... 10 2.4 Factors affecting for deciding on expenses ................................................................................ 113. Reference ............................................................................................................................................ 12
    • 1. Task 1 1.1 Elements of Cost for a business Explain the various elements of cost for a business and ways to manage those cost by means of business control systems. In an organization the cost is one of the most significant items as it can change the direction of the company. The cost is the amount of expenses incurred by the company with regard to its operations. The royal Dutch Shell PLC is an global leader in energy and petrochemicals business with more than 90,000 employees and in more than 80 countries across the globe. In Royal Dutch shell PLC the costs incurred by the company can be divided into following categories Material Cost Labor cost Other overheads and Expenses In order to carry out its operations the company incurs various costs and those can be mainly categorized to above cost elements as follows, Material cost Material cost is the cost incurred to purchase and extract petroleum products such as crude oil, petroleum etc. Further this may include expenses such as royalties and patent rights. Material cost can be divided in to two categories. Those are, Direct material cost Direct material costs are the costs that can be identified with regard to a particular product. This includes the direct material purchases such as crude oil, LP Gas and other petroleum based energy products. Indirect material cost These are costs that cannot be identified directly with regard to a particular product. These materials may be used throughout the company for all the products. Such as consumables packing material printing and stationery material costs etc. Labor Cost This includes the expense incurred with regard to the employees of the Royal Dutch Shell. In order to facilitate the production process as well the administrative and selling and distributional function
    • company needs to incur labor cost. Accordingly with regard to the company’s company may have toincur labor cost in the oil drilling, production and refinery activities. Thus this is a major element ofthe cost of the company. Labor cost of the company also can be divided in to two categories. Thoseare,Direct labor costThese are labor costs which are directly attributable to the manufacturing and processing activities ofthe company. Those may include labor costs related to oil drilling and refinery activities.Indirect labor costThese labor cost are not directly related to manufacturing activities. These may include labor costsincurred for administrative and selling activities of Shell.Other overhead and expensesThese are all other overhead and expenses other than material and labor cost incurred in theproduction of goods or providing of services. These costs also divided in to two categoriesDirect overhead expensesThose are overhead expenses that are directly attributable to a certain product or process of shell.Those expenses may include expenses such as patent expenses and other overheads directly relatedto manufacturing process.Indirect overhead expensesThose are overhead expense incurred by the company in general instead of incurring to a specificproduct or process.Managing cost is an essential element in operational activities. As these costs may be adverselyimpact on the company’s performance. Royal Dutch shell PLC is keen on the costs incurred by thecompany from its operations. Thus company has taken several measures to manage those costs.Budgetary control is one mechanism whereby company forecast a certain amount as the cost andcompares such cost with the amount actually incurred. Thereby it identifies the costs which that areexceed the expected amount and take necessary steps to reduce those.
    • 1.2 Information for managing financial resources What kind of information is required to manage financial resources? Managing financial resources is a challenging and important task in the organization as it has direct relationship with the profitability of the company. In order to manage financial resources the company needs to identify the financial resource requirement of the company for a particular period. Accordingly to manage financial resources the organization may need information with regard to following aspects. Labor cost Labor cost is one of the significant costs incurred by the company thus, to manage financial resources the company needs to have information relating to the labor force and man power requirement of the company to carry out its operations. Material cost In order to manage material cost and thereby manage financial resources of the organization the company needs to identify the material requirement of the company and needs to decide the optimum material amount that company should procure and maintain to manage the financial resources. Other overhead cost By identifying the appropriate amount of overhead expenses, the company can manage it financial resources effectively. Accordingly overhead expenses such as rent, rates maintenance etc needs to be properly identified and should estimate the appropriate amount. Apart from costs attention needs to be give to the revenue generated by the company. Accordingly the revenue generated by the company generates financial resources to the company therefore to manage the financial resource the company needs to have information with regard to the revenue of the company. Moreover the company needs to have information about the external forces such as competitiveness etc as those may have an impact on the financial resources of the company. Further legal and regulatory activities may also affect to the financial resources of the company. For example new regulation may have an impact to an outflow of financial resources. Therefore it can be concluded that in order to manage financial resources the company needs to have information with regard to every aspect of its operations.
    • 1.3 Regulatory requirements While you are managing financial resources of your organization, you need to fulfill some regulatory requirements, discuss them. When managing financial resources of the organization there are certain aspects that the company needs to make sure that those are addressed and duly complied with. If not, those may have an impact on the overall operations of the company. More specifically companies in regulated industries such as banking and financial market, power and energy sector companies have to comply with lots of rules and regulations and if not such violation may affect to the company’s operations. Further as per the best practices followed by companies, company needs to incur some expenditure on corporate social responsibility activities. Moreover attention should be given to the policies of the company when managing financial resources. Accountability towards the stakeholders of the company also needs to be complied with when managing the financial resources of the company. This is because certain stake holders may be interested about the company’s policy and ways in which managing financial resources.1.4 Management of financial resources For your selected organization, evaluate the system in practice for better management of financial resources. Do you have suggestion and recommendation to improve the current practices? In the Royal Dutch Shell PLC the management of financial resources is done in several ways among other methods budgetary control is one of the key methods that they used to manage finance. As the cost of petroleum products fluctuates periodically budgeting has become a challenging task to Royal Dutch shell PLC. Moreover the company not only relies on cost to control its financial resource but pay attention on the revenue generated by the company. Accordingly the company has following revenue sources Revenue from sale of crude oil Electricity generation Sale of refined petroleum products Sale of other industrial chemicals The company develops their budget based on the previous year’s financial information and the anticipated future changes in the market. As the petroleum prices are fluctuating daily the company cannot rely solely on the historical financial information to manage its financial resources. Accordingly based on the current information future trends are forecasted and based on this budget
    • is prepared and control activities are initiated to control the financial resources. Moreover control activities have become a part of the duties of the employees of the company and thereby company was able to properly carry out the budgetary control activities. Moreover budgetary control activities were linked to the compensation of the top level management and therefore the management is concentrates highly on the budgetary control. Apart from those the company has established some Key performance indicators relating to managing financial resources. In order to strengthen its activities relates to financial resources the company has implemented a effective internal control system which is oversight by the board of directors continuously. Futher effectiveness of the internal control system over financial reporting is evaluated by the external auditors of the company annually. By the above means the Royal Dutch Shell PLC company ensures that the company’s financial resource management activities are carried out effectively and reporting over such activities to the stake holder of the organization. 2. Task 22.1 sources of income for Health and social care organization List and explain the different sources of income for health and social care organization. Also list what sources of income are there in your selected organizations. Health and social care organizations may be ranged from profit oriented companies to not for profit organizations. Health care organization may be providing various products and services such as manufacturing of drugs, surgical and hospital equipments etc. further companies who is engaged in providing hospital services also can be considered as health and social care organizations. Profit oriented multinational organizations such as GlaxoSmithKline, Oxfam etc to not for profit organizations such as International Red Cross, United Nations etc. Those health and social care organizations have different sources of revenues. Those revenues can be classified in to following categories. Revenue from Pharmaceutical and vaccines These are the revenue generated by the companies through the sale of pharmaceutical items and vaccines to customers for various deceased. Revenue from medical equipments
    • This is the revenue generated by the health care companies by sale of medical equipments to thehospitals, other health care companies those may include all the related medical equipments such assurgical equipments laboratory equipments etc.Revenue from consumer healthcare productsThese are revenue generated by healthcare companies through the sale of personnel care productssuch as body lotions, shampoo and other products.When consider the not for profit organizations the donations are the main source of revenue.In Jonson and Jonson which is one of the leading US based multinational pharmaceutical and medicalservices company. The category wise sales of the company for the financial year 2011 is as follows,Consumer and personnel care sales 2011($ 2010 ($ Mn) Mn) OTC Pharmaceuticals & 4,402 4,549 Nutritionals Skin Care 3,715 3,452 Baby Care 2,340 2,209 Women’s Health 1,792 1,844 Oral Care 1,624 1,526 Wound Care/ Other 1,010 1,010(Source Jonson & Jonson Annual report 2011)Pharmaceutical sales 2011($ 2010 ($ Mn) Mn) REMICADE® (infliximab) 5,492 4,610 PROCRIT®/EPREX® (Epoetin 1,623 1,934 alfa) RISPERDAL® CONSTA® 1,583 1,500 (risperidone) VELCADE® (bortezomib) 1,274 1,080 CONCERTA® 1,268 1,319 (methylphenidate HCl) PREZISTA® (darunavir) 1,211 857 ACIPHEX®/PARIET® 975 1,006 (rabeprazole sodium) LEVAQUIN®/FLOXIN® 623 1,357 (levofloxacin/ofloxacin)
    • Other Pharmaceuticals 10,319 8,733(Source Jonson & Jonson Annual report 2011)Medical Equipments sales 2011($ 2010 ($ Mn) Mn) DEPUY® 5,809 5,585 ETHICON ENDO-SURGERY® 5,080 4,758 ETHICON® 4,870 4,503 Vision Care 2,916 2,680 Diabetes Care 2,652 2,470 Cardiovascular Care* 2,288 2,552 ORTHO-CLINICAL 2,164 2,053 DIAGNOSTICS®(Source Jonson & Jonson Annual report 2011)2.2 Factors affecting the ways of availability of financial resources What factors affect in what ways upon the availability of financial resources for health and socialcare organizations? Which factor do you think is most prominent in all, in your opinion?When considering the financial resources of health and pharmaceutical companies certain factors areaffecting to the availability and the requirement. Among other factors the company’s long term goalsand objectives plays a major role in this regard. Accordingly the company may be consider inexpanding in to new areas or it may be focusing on existing market to grow in such market.Another important factor is that the ways in which the company finances its financial resources. Ifthe company relies more on debt finance rather that equity finance the company may face toliquidity threats and going concern issues. Further if the company concentrates on equity financethen the share holders expectations needs to be considered.Another major factor that affects to financial resources of a health and social care organization is thatthe amount of research and development cost that the company planed and committed to incur inthe future periods. As research and development is one of most important aspect of health carecompany needs to pay attention to this when considering its financial resources.Further government policy towards the activities of the health and social care organizations may alsohave a impact to the financial resources of the company. In some countries government may grantfinancial assistance to health and social care organizations due to the contribution they make touplift the living hood of the people. Further organization may receive other means of benefits such as
    • tax concessions, resources to carry out research and development activities etc. Thus it can be noted that there are several factors that affects to the financial resources of the health and social care organizations. Further 3 Es concept can be considered when managing financial resources. Economic In this case the attention should be given to what is less cost way which saves financial resources of the company when making financial decisions. Efficiency This refers to the fact that the maximum amount of output needs to be obtained by using minimum level of financial resources. Effectiveness This refers to the level of objectives are achieved in the form of financial resources to the organization. Among other factors the company’s long term goals and objectives plays a vital role in determining financial resources of an health and social care organization as such objectives sets the future direction of the organization.2.3 budgetary Expenditure What kinds of budgetary expenditure are there for your organizations? In a health and social care organization it can be found that budgetary control is an effective way of managing its financial resources. Thus the company has established a budgetary control system within the company concentrating on the cost centers of the organization. The company has identified several cost centers in the organization and established effective budgetary control system in those cost centers. Such cost centers includes following divisions of the organization. Research and development division As the research and development activities plays a major role in a health and social care organization. Accordingly, Companies needs to make sure that the research and development activities are carried out without affecting to the financial resources adversely. Further due attention
    • is given when applying budgetary control activities to the research and development activities asthose research and development activities are very important to companies in this kind.Finance and planning divisionThis is also a cost center where the organization control expenses related to this division throughbudgetary control. Accordingly in Jonson and Jonson budgetary control has implemented in relationto finance and planning activities.Further as a measure of budgetary control Jonson and Jonson can outsource some activities of theorganization which will helps to improve the financial resources of the company. Accordinglysupporting functions of the organization which helps to carry out main activities can be outsourcedto outsourcing activities. Those activities may include finance activities, logistics operations etc.2.4 Factors affecting for deciding on expensesWhich factor do you consider while deciding about any expenditure in health and social care? Whichis most important and effective in your opinion, analyze it critically.There are lots of factors affects the decision about any expenditure of an health and social careorganization. Accordingly such factors may include.Goals and objectives of the organizationLong term, Medium term and short term goals and objectives are important factor when decidingabout an expenditure of the organization. For example in Jonson and Jonson if the company isincurring some expenditure which is directly links with the achieving of goals and objectives, thecompany needs to incur such expenses. Further if the company is incurring expenses which may nothelps in achieving goals and objectives such expenses needs to be carefully analyzed and controlled.Cost benefit analysisAttention should be given by Jonson and Jonson as to whether such expenses incurred are benefittedthe company subsequently. Accordingly of the company is benefitted through the expenses itincurred such expenses needs to be carried out while expenses that does not provide benefits morethan the expenses incurred needs to be controlled.Environmental implication
    • Attention should be given by the company as to whether the expenses incurred are does not affect environmental adversely. If Jonson and Jonson incurs such expenses that affect to environment adversely those expenses needs to be controlled. Further if the company incurs any expense for the benefits environment such expenses needs to be maintained. Accountability When incurring expenses Jonson and Jonson needs to consider the accountability towards the stake holders of the company. Accordingly the expenses incurred needs to be disclosed properly to the stake holders of the company and attention should be given whether the expenses are incurred which will in turn increase the share holders’ value. Importance of the expense The company needs to consider the importance on the expense incurred by the company. If the expense incurred is important to carry out the company’s performance then such expenses needs to be incurred. If the expenses are not such important to carry out operation such expenses needs to be controlled to maximize the financial resources. 3. Reference1. Jonson & Jonson ,2011, Jonson & Jonson, (www.JnJ.com) , viewed 21 April 20122. Royal Dutch Shell, 2011,Royal Dutch shell, (www.shell.com) , viewed 21 April 20123. Lewis, R. & D. Pendrill, (2004) Advanced Financial Accounting, (7th ed.), Prentice Hall, Atrill, P. & E. McLaney, (2002) Financial Accounting for Non-specialists,(3rd ed.) Prentice Hall4. Alexander, D. & A. Britton, (2004) Financial Reporting, (7th ed.), Thomson5. Social Science Research network,2011, Social Science research network (www.SSRN.com) viewed 21 April 2012.6. Emeralinsight,2011,Emeralinsight, (http://emeralinsight.com/), viewed 21 April 2012.