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Budgetary control & flexible budgeting (Budgets for control (Variances…
Budgetary control & flexible budgeting
Elements of control
Measure & compare actual performances
The differences
Organisation in control to what happing
System
Planning
Actuality
Comparison
Validation
Action
Responsibility accounting
Resource consumption, activity & achievement of targets
Delegation of authority & assignment of responsibility
Responsibility centres
Cost, profit, revenue, investment
Budgets for control
Continuous comparison
Individual action objectives
Recording revenue & expenditure + how totals compare
Monitor progress & identify areas of differences
Variances
Favourable = going better
Adverse = worse
Or unfavourable
Go unnoticed
Clear & understandable
Recognise warning signals
Reports
Reliable
Relevant
Clear
Timely
External reporting & actions for now
Financial records to guidelines
Key performance indicators
Control
Control loops
P.52 example of budgeting process
Revising budget with flexibility
Can be change / should be
Flexibility budget process p.52
Regular reporting back
Fixed & flexible
Reality is unlikely to match plans
Measure performances
Fixed
Given / intended activity
Over/under spend
Creates problems
Flexible
Changes in activity
Variable cost will vary
Cost behaviour patterns
Flexible in practice
Series budgets r & c for diff levels
Spend variance example p.55
Reflect spend or revenue
Budget statement p.56
Limits of control
Recognises the behavioural
Accept, respond & implement
Backwards looking