Tài chính kế toán - Chapter 1: Budgeting fundamentals

Available NOW at your campus bookstore!This is the prescribed textbook for your course.1Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldChapter 1 Budgeting fundamentals2Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldBudgeting fundamentalsBudgeting is the process used to develop: A formal written statement Of managements plans for the future Expressed in financial terms3Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldTypes of plansLong term: 5 to 10 yearsMedium term: 1 to 5 yearsShort term: up to 1 year4Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldThe planning cycleComparison of actual results to budgetvarianceBudgetsPerformanceBudgets are the mechanism by which management control of an organisation becomes possible. RevisePlanActionResultsRemedy5Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldBenefits of budgetsForces 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.6Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldLimitations of budgetsOnly estimates, not statements of facts.No substitute for sound management practices.Need to be amended if circumstances change.Preparation does not guarantee success.Aspects of people’s behaviour may undermine the value of the process.7Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldBudget classificationStatic (fixed) budgets: prepared for one level of activity, usually around the forecasts made for sales. Flexible budgets: a series of fixed budgets set to different levels of sales activity within which the organisation may operate.8Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldCost/volume relationshipsFixed costs: in total remain the same for a period of time and over a particular range of activity.Variable costs: in total tend to change as the level of activity changes.9Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldBudget processesZero-based budgeting: sets the initial figures for each activity to zero.Period budgets: developed for a specific period of time, e.g. a month.Rolling (continuous) budgets: are continually updated by periodically adding a new incremental time period and dropping the period just completed.10Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldTypes of budgetsRevenue budgets: estimates of the income of an organisation from the sale of goods and/or provision of services for a specific period.Operating budgets: estimate activities that will affect profit.Budgeted financial statements: show the estimated results and projected financial position of a business. That is budgeted revenue, balance sheet and statement of cash flows.11Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldMaster budgetA combination of all the budgets of an organisation.12Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldMaster budgetMerchandising firmProfessional servicesManufacturing firmSales budgetFees or fees & sales budgetSales budgetPurchases budgetProfessional & support labour budgetCost of production budgetCost of goods sold budgetCost of supplies usedCost of goods sold budgetOther operating expense budgetsOther operating expense budgetsOther operating expense budgets13Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya AronfeldMaster budgetIrrespective of the type of organisation, the following budgets will be part of the master budget:Statement of financial performance [revenue budget]Statement of financial position [balance sheet]Statement of cash flow14Copyright  2003 McGraw-Hill Australia Pty LtdPPTs t/a Budgeting, second edition, by Banks & GilibertiSlides prepared by Mya Aronfeld