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Chapter 9 - Budgeting (Budgeting
Process which focuses on the short term…
Chapter 9 - Budgeting
Budgeting
- Process which focuses on the short term
- Often 1 year
A Budget:
- quantitative expression of an entities plans
- Consider past performances
- Assessment of the expected trading and operating conditions
- prep of initial budget estimates
- Adjustment of estimates through communication and feedback from managers.
- prep of budget reports and sub budgets
- monitoring of actual performance against the budget over the budget period
- making any necessary adjustments to the budget during the budget period.
Types of budgets
Cash budget
- shows expected future cash receipts and payments
-
Styles of budgeting
Authoritarian
- Senior management chooses targets and budgets for unit managers
- no input or participation
Participative
- input through discussion and negotiation of targets and budgets is sort after by senior management with unit managers
Budget Slack
- Budget targets which are more easily achievable than first thought
-
Master Budget
- set of inter-related budgets
Variance
- Difference between the budgeted amount and the actual amount
Chart if accounts
- the detailed listing that guides how transactions are classified in the financial reporting system
Strategic planning
- Relates to longer-term planning
- often 3 - 5 years
- can cover things like expansion, radical product/service development.
Performance Management
- Setting targets which aren't just based on financial terms.
- Example; governance, management techniques, HR