Kế toán, kiểm toán - Chapter 10: Basic budgetary controls

Chapter 10 Basic budgetary controls1 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by ObjectivesOutline the steps associated with an effective system of management control.Explain the benefits of adopting a formal budgeting process.Explain the importance of recognising the behavioural aspects of budgeting. 2 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Objectives (continued)Distinguish between operating budgets and financial budgets.Describe the method of preparation of a master budget.Explain the benefits of flexible budgeting and it’s use in performance reporting.3 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by System of managementPlanningObjectives of the organisation can be achieved.Budgets assist planning.OrganisingBudgets show the resources required to achieve goals.4 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by System of management (continued)MotivatingAssists each member in the organisation in achieving their goals.ControllingBudgets are statements of desired performance and provide a means of control.5 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Formal budgetingForces managers to do planning.Realistic performance targets.Basis for controlling what happens within the organisation.Helps coordinate the activities of the various centres that make up the business.Communication – managers exchange information on ideas, etc.Motivating tool – if the process involves staff.6 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Behavioral aspects of budgetingEmployees can perceive it as a checking mechanismInvolve users of the budget into its design and implementationBudgets are based on:discussions with employeesprojections based on trend analysisprevious budgetsshort-term and long-term objectivespresent and future policiesaccounting dataeconomic growth and cyclical factors.7 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Behavioural aspects of budgeting (continued)Increasing staff involvement should:assist in the coordinated planningfacilitate better acceptance of short-term and long-term goalsprovide stronger commitment to achieve goals.8 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Operating and financial budgetsOperating budgets are prepared for thefollowing areas:Sales budgetPurchase budgetCOGS budgetOperating expense budgetInventory budget.9 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Operating and financial budgets (continued)Financial budgets show the financial positionof the business as a result of the period’soperations.Such budgets include:Budgeted Statement of Financial positionCash budgetCapital expenditure budget.10 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Operating and financial budgets (continued)Budgets for manufacturing concerns include those functions directly associated withproducing the goods, for example:Production budgetsRaw materials usage and purchase budgetsDirect labour and cost budgetsManufacturing overhead budgetsCost of production budgets.11 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Master budgetThe master budget: highlights the interrelationship between all budgetsis not a budget but a plan showing the whole organisation.12 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Flexible budgetingFlexible budgets:allow managers to analyse how the business performed by comparison with the planned performance.This process of comparison is known as performance reporting.13 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Flexible budgeting (continued)Causes for the differences between plannedand actual budgets are:economic changespolitical staffing issues (budgetary slack)lack of support for the budgetcompetitors.14 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by