Lecture Management accounting: An Australian perspective: Chapter 9 - Kim Langfield-Smith

Lecture Management accounting: An Australian perspective - Chapter 9 introduce the budgeting systems. In this chapter, students will be able to understand: strategic planning and budgeting systems, purposes of budgeting, responsibility accounting, the annual budget: a planning tool,...
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Lecture Management accounting: An Australian perspective: Chapter 9 - Kim Langfield-Smith Chapter 9 Budgeting systemsCopyright 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & Hilton Slides prepared by Kim Langfield-SmithStrategic planning andbudgeting systems Abudget Adetailedplansummarisingthefinancial consequencesofanorganisation’soperating activities Afinancialmodelthatsummarisesfuture operation Acriticalstepinplanninganyactivity continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 2Strategic planning andbudgeting systems Strategicplanningislongtermplanning usuallyundertakenbyseniormanagers Decisionsaboutthetypeofbusinessesand marketsthattheorganisationoperatesin,and howthosebusinessesandactivitieswillbe financed DecisionsaboutcorporatestrategyCopyrightª2003McGrawHillAustraliaPtyLtd, 3Purposes of budgeting Planning Toquantifyaplanofaction Facilitatingcommunicationandcoordination Providesaformalmechanismtoenable communicationandcoordination Allocatingresources Providesaforumforevaluatingalternativeuse ofresourcesamongcompetingusers continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 4Purposes of budgeting Controllingprofitandoperations Thebudgetcanserveasabenchmarktoallow comparisonwithactualresults Evaluatingperformanceandproviding incentives Comparingactualresultwithbudgetprovidesa basisforevaluationoftheperformanceof individuals,departmentsortheentirecompany Thiscanbelinkedtoformalincentives,suchas cashrewards,orprofitsharingCopyrightª2003McGrawHillAustraliaPtyLtd, 5Responsibility accounting Budgetsarepreparedalongresponsibility accountinglines Responsibilityaccounting Thepracticeofholdingmanagersresponsible fortheactivitiesandperformanceoftheirarea ofthebusiness Managersofvariousdepartments Developtheirownbudgetestimatesforcost, revenueorprofitsoftheirareas Arethenheldresponsibleformeetingthose budgettargets continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 6Responsibility accounting Responsibilitycentres Asubunitoftheorganisationwhosemanageris heldaccountableforthesubunits’activitiesand performance Costcentres,revenuecentres,profitcentreand investmentcentre Thetypeofresponsibilitycentredeterminesthe typesoffinancialresultsforwhichamanageris heldaccountableCopyrightª2003McGrawHillAustraliaPtyLtd, 7The annual budget Theannualbudget(ormasterbudget)isa comprehensivesetofbudgetsthatcoverall aspectsofafirm’sactivities Consistsofseveralinterdependentbudgets continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 8The annual budget Operatingbudgetsincludethesalesbudget andthevariouscostbudgets Thefinancialbudgetsconsistofthe budgetedstatementoffinancial performance,thebudgetedstatementof financialposition,thecashbudgetsandthe capitalexpenditurebudget continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 9The annual budget continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 10The annual budget Budgetsaredevelopedforspecifictime periods Rollingbudgets(orcontinuousbudgets)are continuallyupdatedbyperiodicallyaddinga newtimeperiod,suchasaquarter,and droppingtheperiodjustcompleted Budgetswillvaryintheirlevelofdetail, oftendependentonthesizeandcomplexity oftheorganisationCopyrightª2003McGrawHillAustraliaPtyLtd, 11Strategic plans and budgetassumptions Budgetsmustcommencewithan understandingofthestrategyofthe organisation Thebudgetmustbeformulatedinlightof thestrategicplans Thebudgetisbasedonvarious assumptionsaboutthecompetitive environmentandtheeconomicenvironmentCopyrightª2003McGrawHillAustraliaPtyLtd, 12The operating budgets Thesalesbudget adetailedsummaryoftheestimatedsalesunits andrevenuesfromtheorganisationsproducts ...