BSB110 Lecture Notes - Lecture 12: Cash Flow, Management Accounting, Scenario Planning

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5 Jul 2018
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Accounting – Introduction to Management Accounting
Management Accounting
- Prepares information for people inside the organisation e.g. line managers, general
managers, board of directors etc.
- Can be targeted and tailor made for these people
- About planning e.g. marketing strategies, promotions etc.
Budgeting
- Budget – a formal written statement of management’s plan for a specified future time
period, expressed in financial terms
- Budgets are forecasts
- Forward planning
- ‘a plan that is described with dollar signs’
- Coordination
- A plan and tool to coordinate efforts
- Also serves as a warning system
- Allows for corrective action
- Master budget
oOverall budget – gives an overall picture
oLooks at multiple areas within an organisation
oRequires smaller budgets to support it
oOperating Budget
Cash flows
Revenues and expenses
Allows for a budgeted profit and loss statement
oCapital Expenditures budget
5-10 years long term acquisition plan (e.g. replacing asset – when is it going
to be replaced? How is it going to be replaced? How it is going to be
funded?)
oFinancial Budget
Allows for budgeted statement of financial position and cash flows
Includes cash budget
oCash budget
Receipt vs. payment
Only cash items in the cash budget
Planning about cash
Allows for having a good cash flow
- Cost-Volume-Profit (CVP) Analysis
oThe relationship between the cost and volume and how it will affect the profit
oEasy to apply to small businesses
oLarge business may use CVP analysis for scenario planning
oCost Behaviour analysis
Does the cost stay the same? Does it change?
Can be expressed as either fixed cost of variable cost
Fixed
Total costs stay the same when there is a change in activity level
Variable
Total costs changes with the change in activity level
Costs per unit say the same
Relevant Range
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Document Summary

Prepares information for people inside the organisation e. g. line managers, general managers, board of directors etc. Can be targeted and tailor made for these people. Budget a formal written statement of management"s plan for a specified future time period, expressed in financial terms. A plan that is described with dollar signs". Master budget: overall budget gives an overall picture, looks at multiple areas within an organisation, requires smaller budgets to support it, operating budget. Allows for a budgeted profit and loss statement: capital expenditures budget. How it is going to be funded?: financial budget. Allows for budgeted statement of financial position and cash flows. Only cash items in the cash budget. Cost-volume-profit (cvp) analysis: the relationship between the cost and volume and how it will affect the profit, easy to apply to small businesses, large business may use cvp analysis for scenario planning, cost behaviour analysis. Can be expressed as either fixed cost of variable cost.

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