会计学原理课件11

between senior management and functional heads
between functional heads
between functional heads and their staff
External communication is also important during budget preparation:
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Supermarket- an illustration
Overriding purpose of an organisation may be expressed in its Mission Statement
Example of mission for retail supermarket sector: “the provision of a quality service to our customers through the continued development of robust retail formats capable of competing with the best in the industry”.
budget targets and encourage sup-optimal and biased behaviour.
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Budgeting methods
Incremental; Activity based budgeting (ABB); Zero based budgeting (ZBB)
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Supermarket illustration continued
Strengths for retail supermarket may be: Brand image; Strong perception of customer and employee confidence.
ACC08102 Managerarket illustration continued
• The company must then decide which options are suitable, feasible and acceptable for inclusion in the long term plan
Component parts of the Master budget must fit together.
For example, managers must check whether the necessary production capacity exists to meet demand. Need to determine ways to overcome any apparent shortfall in production capacity?
E.g. Consider impact of planned changes in areas such as quality and customer satisfaction on the budget requirements.
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Purposes of Budgeting Co-ordination
Identify the potential behavioural implications of budgeting
Calculate the ROI and RI for a division Explain the problem with these measure of
divisional performance
It could lead to budgeting becoming a competition between managers for scarce resources
It should result in a set of standards which management think are achievable.
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Budget preparation
Master budget as end product - elements:
Budgeted income statement Budgeted balance sheet Budgeted cash flow statement
ACC08102 Managerial Finance
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Purposes of Budgeting Motivation
The budget process should encourage staff at all levels to participate
A link must be made between personal and corporate goals. Lack of co-ordination and communication may lead to inefficiency and conflict.
• Strategic options must be identified that consider present position of the organisation.
• Current strengths and weaknesses should be identified – these help to establish opportunities and threats.
Weaknesses may be: Need to strengthen position through continued expansion and improvement.
Long term planning may include: Improving instore product availability; Improving customer service; Improving store standards; Improving effectiveness of promotions and price; Making investments to improve shopping/ working environment; Investing in the company brand image.
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Purposes of Budgeting Control and Evaluation
Control: The budget should be compared against actual results.
In feedback control, differences between budget and actual results are monitored and corrective action instigated. This allows a system of management by exception.
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Behavioural implications can
cause many problems
• Managers compete for resources through the
budget
• May overstate requirements to achieve personal
aims
• When the long term plan is complete, the shorter planning horizon can be considered in more detail.
• The annual budget can be prepared.
ACC08102 Managerial Finance
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Planning & control cycle
In context of longer term view of business objectives, planning and control: Establish business objectives Identify strategic options Select strategy and set long term plan Set annual budget Monitor results against plan and respond
Evaluation: Provides a focus for the
evaluation of corporate and management
performance. This will have motivational
implications for management.
ACC08102 Managerial Finance
• Understate sales in order to show success at the
end of the year.
• Overstate costs to show savings at the end of
the year
• Reward system may be linked to achievement of
Accounting Principles
Mira Steven Lecture 4 Week 11
Edinburgh Napier University