Managerial accounting by garrison noreen13th chap009

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Managerial accounting by garrison  noreen13th chap009

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Profit Planning Chapter McGraw­Hill/Irwin    Copyright © 2010 by The McGraw­Hill Companies, Inc. All rights reserved Learning Objective Understand why organizations budget and the processes they use to create budgets 9-2 The Basic Framework of Budgeting A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period The act of preparing a budget is called budgeting The use of budgets to control an organization’s activities is known as budgetary control 9-3 Planning and Control Planning Planning –– involves involves developing developing objectives objectives and and preparing preparing various various budgets budgets to to achieve achieve those those objectives objectives Control Control –– involves involves the the steps steps taken taken by by management management to to increase increase the the likelihood likelihood that that the the objectives objectives set set down down while while planning planning are are attained attained and and that that all all parts parts of of the the organization organization are are working working together together toward toward that that goal goal 9-4 Advantages of Budgeting Define goals and objectives Communicate plans Advantages Coordinate activities Means of allocating resources Uncover potential bottlenecks 9-5 Responsibility Accounting Managers should be held responsible for those items - and only those items - that they can actually control to a significant extent 9-6 Choosing the Budget Period Operating Budget 2008 2009 2010 2011 Operating Operating budgets budgets ordinarily ordinarily A continuous budget is aa A continuous budget is cover cover aa one-year one-year period period 12-month budget that rolls 12-month budget that rolls corresponding to a company’s corresponding to a company’s forward one month (or quarter) forward one month (or quarter) fiscal year Many companies fiscal year Many companies as the current month (or quarter) as the current month (or quarter) divide their annual budget divide their annual budget is is completed completed into four quarters into four quarters 9-7 Self-Imposed Budget Top M anagem ent M id d le M anagem ent S u p e r v is o r S u p e r v is o r M id d le M anagem ent S u p e r v is o r S u p e r v is o r A self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at all levels 9-8 Advantages of Self-Imposed Budgets 1 Individuals Individuals at at all all levels levels of of the the organization organization are are viewed viewed as as members members of of the the team team whose whose judgments judgments are are valued valued by by top top management management 2 Budget Budget estimates estimates prepared prepared by by front-line front-line managers managers are are often often more more accurate accurate than than estimates estimates prepared prepared by by top top managers managers 3 Motivation Motivation is is generally generally higher higher when when individuals individuals participate participate in in setting setting their their own own goals goals than than when when the the goals goals are are imposed imposed from from above above 4 A A manager manager who who is is not not able able to to meet meet aa budget budget imposed imposed from from above above can can claim claim that that itit was was unrealistic unrealistic SelfSelfimposed imposed budgets budgets eliminate eliminate this this excuse excuse 9-9 Self-Imposed Budgets Self-imposed budgets should be reviewed by higher levels of management to prevent “budgetary slack.” Most companies issue broad guidelines in terms of overall profits or sales Lower level managers are directed to prepare budgets that meet those targets 9-10 Human Factors in Budgeting The success of a budget program depends on three important factors: 1.Top management must be enthusiastic and committed to the budget process 2.Top management must not use the budget to pressure employees or blame them when something goes wrong 3.Highly achievable budget targets are usually preferred when managers are rewarded based on meeting budget targets 9-11 The Budget Committee A A standing standing committee committee responsible responsible for for  overall overall policy policy matters matters relating relating to to the the budget budget  coordinating coordinating the the preparation preparation of of the the budget budget  resolving resolving disputes disputes related related to to the the budget budget  approving approving the the final final budget budget 9-12 The Master Budget: An Overview Sales Sales budget budget Ending Ending inventory inventory budget budget Direct Direct materials materials budget budget Production Production budget budget Direct Direct labor labor budget budget Selling Selling and and administrative administrative budget budget Manufacturing Manufacturing overhead overhead budget budget Cash Cash Budget Budget Budgeted Budgeted income income statement statement Budgeted Budgeted balance balance sheet sheet 9-13 Format of the Cash Budget The cash budget is divided into four sections: Cash receipts section lists all cash inflows excluding cash received from financing; Cash disbursements section consists of all cash payments excluding repayments of principal and interest; Cash excess or deficiency section determines if the company will need to borrow money or if it will be able to repay funds previously borrowed; and Financing section details the borrowings and repayments projected to take place during the budget period 9-14 End of Chapter 9-15 ... whose whose judgments judgments are are valued valued by by top top management management 2 Budget Budget estimates estimates prepared prepared by by front-line front-line managers managers are are... those objectives objectives Control Control –– involves involves the the steps steps taken taken by by management management to to increase increase the the likelihood likelihood that that the the... are are often often more more accurate accurate than than estimates estimates prepared prepared by by top top managers managers 3 Motivation Motivation is is generally generally higher higher when

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Mục lục

  • Profit Planning

  • Learning Objective 1

  • The Basic Framework of Budgeting

  • Planning and Control

  • Advantages of Budgeting

  • Responsibility Accounting

  • Choosing the Budget Period

  • Self-Imposed Budget

  • Advantages of Self-Imposed Budgets

  • Self-Imposed Budgets

  • Human Factors in Budgeting

  • The Budget Committee

  • The Master Budget: An Overview

  • Format of the Cash Budget

  • End of Chapter 9

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