It is stated in monetary terms 3. It generally covers a period of one year 4. Budgeting Process: Steps: 1. Call for expenditure proposals from various dept. Develop revenue projections based on projected base activity 3. Evaluate the proposals 4. Discuss preliminary with senior Manager 5. Finalize the budget 6. Provide regular reports 7. Conduct the annual review 4. Essential Element of Budget: 1. Objective: Have to set the objective first 2. Understanding of Cost Behavior : Need to understand different elements of costs attached with 3.
Forecasting: Of market, customer preference, competitor, Govt policies 4. Coordination: Between each department, different level of Mgt 5. Flexibility: Must have a scope for Adjustment based on actual situation 7. Accounting data support: Past data if available. Use of Budget: 1. Fine tuning the Strategic plan: 2. Coordination of the Activities of the several parts of the organization:. Assigning responsibility: 4. Basis for performance evaluation : 5. It leads to execution of task within the given means.
Recording the Actual performance 3. Continuous Comparison of Actual performance with planned 4. Taking remedial action 8. Benefits of Budgetary control: 1. Ensures economic working of an Enterprise: Utilization of resources 2. Establish coordination among Budget centers: in consultation with all functional managers 3. Large deviations must be examined. Objectives of Budgets: - Introduction: Objectives of Budgets: Administer business Helps decision making in the businesses and governments Put a ceiling on expenditures, control cost of business PowerPoint PPT presentation free to view.
Building Realistic Budgets - Identify budget ceiling and any budgetary limitations or restrictions Car Rental. Per Diem. Parking Fees. Registration Fees This allows budgeted amounts to be compared to actual Kenneth Lay.
Five Standards of Internal Control. Control Environment. Budgetary Control and Responsibility Accounting - The budget reports provide the feedback needed by Types of Responsibility Centers. Responsibility centers may be classified into one of three types Hansen, Mowen, Elias Define budgeting and discuss its role in planning, control, and decision making. Basic information for financial control Participation and teamwork are used to tackle significant problems Requires continuous monitoring of budgets, fund sources, and expenditures Application of record for approved budgets Budgetary basis.
Estimated revenues. Estimated other financing sources A sound budgetary system will promote desirable behavior and the right attitude. The process of gaining acceptance of the budget involved a lot of negotiation and subsequent revisions of budget estimates. Lengthy and time consuming.
Set at corporate level and cascaded down throughout the organisation. Advantages: Timely and cost effective. Disadvantages: Senior managers may have less knowledge of the local business environment unrealistic Limited involvement in setting budget targets can result in a lack of commitment of middle and junior managers. Budgets: collected at the lowest managerial levels and consolidated and fed up to senior management enhanced accuracy of estimates Advantages: Encourage coordination and communication between managers Greater understanding and appreciation of the objectives and strategy of the wider organisation.
Disadvantages: Expensive Time consuming Opportunities of padding the budget. Reasons for creating budgetary slack: People believe that their performance will look better if they can beat the budget Budget is used to cope with uncertainty If nothing goes wrong, supervisor can beat the budget If unfortunate event occur, budgetary slack will absorb Managers are competing for limited resources common for their initial budget requests to be cut by their manager or the budget review committee Budgetary projections are padded because they are likely to be cut, and they are cut because they are likely to be padded.
How to solve? Avoid relying on the budget as a negative evaluation tool. Allow some discretion to exceed the budgeted costs when necessary Managers can give incentives not only to achieve budgetary projections but also to provide accurate budget estimates.
Ethical issues involve honesty and trust of the employees when exercising their responsibilities to execute those operations based on budgets. Any action which goes against this will cause dysfunctional behaviour and upsets plans and implementation. Dysfuntional behaviour employees who does not carry out duties morally as expected. Its purpose is to enable the organization to meet the success factors of the information economy e.
Beyond budgeting, p. Open navigation menu. Close suggestions Search Search. User Settings. Skip carousel. Carousel Previous. Carousel Next. What is Scribd? Explore Ebooks. Bestsellers Editors' Picks All Ebooks. Explore Audiobooks.
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