ACCT1511 Lecture Notes - Lecture 12: Management Accounting, Management, Financial Statement
6.2 – Management Accounting (Budgeting)
Budget – foal docuets that uatify a ogaizatio’s pla fo achievig its goals
• Expressed in either physical (number of units) or financial terms (dollars)
Benefits of Budgets:
• Planning – setting targets or goals
• Communication and coordination – a tangible means for
communication/coordination across different departments and managers
• Control – evaluate performance based on a certain benchmark
Master Budget:
• Comprehensive financial plan
• Set of interrelated budgets
• Composed of operating, cash and financial statement budgets
• Budget prep: Operating (sell/make), cash (cash) & financial statements (F/S)
Operating Budgets – (order of preparation):
Behavioral Aspects of Budgeting:
• Goal congruence (between managers & employees)
• Clearly-defined responsibilities and accountability
• Controllability – over items/areas that are responsible/ accountable for
• Flexibility – what if plan changes?
Budget Preparation:
• Participative
• Achievable
• Slack
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Document Summary
Budget fo(cid:396)(cid:373)al docu(cid:373)e(cid:374)ts that (cid:395)ua(cid:374)tify a(cid:374) o(cid:396)ga(cid:374)izatio(cid:374)"s pla(cid:374) fo(cid:396) achievi(cid:374)g its goals: expressed in either physical (number of units) or financial terms (dollars) Benefits of budgets: planning setting targets or goals, communication and coordination a tangible means for communication/coordination across different departments and managers, control evaluate performance based on a certain benchmark. Master budget: comprehensive financial plan, set of interrelated budgets, composed of operating, cash and financial statement budgets, budget prep: operating (sell/make), cash (cash) & financial statements (f/s) Myopia: short-termism managerial myopia is a tendency for publicly listed firm managers to favor short-term profits over long-term gains, an individual, manager or employee may favor short-term goals over long-term goals. Individual could be a manager of a business segment or a franchise. Incentive to obtain bonus may cause them to act in a way that is inconsistent with co(cid:373)pa(cid:374)y"s goals.
