AC2200 TOPIC 4

Question 1

What is budgeting widely used for?

Answer 1

As an accounting tool for planning and controlling

Question 2

what is budgeting

Answer 2

it is a qualitative expression of a proposed plan of action by management for a future time period and an aid the coordination an implementation of the plan

Question 3

what are the advantages of budgeting

Answer 3

• improves coordination and provides advance warning of internal problems
• provided an enhanced managerial perspective
• can be used for the motivation of individual
• can be a framework of control

Question 4

what are the key budgeting dimensions

Answer 4

• participation
• budget forecast
• budget detail
• budget model
• budget evaluation

Question 5

participation

Answer 5

authoritarian and participatory

Question 6

what is authoritarian participation?

Answer 6

budgeting and decision making done by a relatively few people that are concentrated in the highest level of the organization structure

Question 7

what is the participatory participation?

Answer 7

a method of budgeting in which roles and responsabilities of putting a budget together are diffused throughout the organisations.

Question 8

what are advantages of the participatory participation

Answer 8

shared undestanding
motivation
cost awarness
clarified roles and responsabilities
cooperation and competitonq

Question 9

what are disadvantage of the participatory participation

Answer 9

loss of control
time consuming
high resource use
dissapointment

Question 10

what are the objectives of budgeting

Answer 10

compels planning
communication of objectives throughout hierarchy
coordination of effort throughout the organisation
control performance
motivation
delegation and responsibility accounting

Question 11

role of budget committee

Answer 11

• oversee budget setting process
• allocate responsibility to budget holder
• determining budget reporting timetable
• agreeing final budgets
• regular monitoring budgetary performance
• taking appropriate control action
• ensuring appropriate training, support and censure of budget holder

Question 12

the budgeting cycle

Answer 12

• planning the performance of the organization
• provide a frame of reference, a set of specific expectations against which actual results can be compared
• investigating variations from plan
• correcting action follows, if necessary
• planning again

Question 13

budget periods

Answer 13

ordinarly they are set to over a one year period

Question 14

what is a continuous perpetual budget

Answer 14

a 12 month budget that rolls forward one month as the current month is completed

Question 15

what is a master budget

Answer 15

a comprehensive expression of managments operating and financial plan for a future time period.

Question 16

What are the two major parts we find in a master budget

Answer 16

operating budget and financial budget

Question 17

what do operating decisions centre on?

Answer 17

the use of scarce resources

Question 18

what do financing decisions centre on?

Answer 18

how to obtain the funds to acquire those resources

Question 19

what do we find in the operating budget?

Answer 19

supporting budget schedules
revenue budget
production budget in units
direct material purchase budget
direct labour budget
cost of goods sold budget
non wmanufacturing cost budget

Question 20

what do we find in the financial budget

Answer 20

cash budget
budgeted balance sheet
budgeted statement of cash flows

Question 21

what is the sales budget

Answer 21

it is the starting point in the master budget, it is a detailed schedule showing expected sales for the coming period expressed in units and in pounds

Question 22

what does the direct material budget detail

Answer 22

is details the raw materials that must be purchased to fulfil the production budget and to provide for adequate inventory

Question 23

what do we find in the direct labour budget

Answer 23

it is also developed from the product budget

Question 24

what do we find in the manufacturing overhead budget

Answer 24

a schedule of all costs of production other than direct material and direct labour

Question 25

give me a key budget

Answer 25

a cash budget

Question 26

what is a cash budget

Answer 26

an estimation of the cash flows of a business over a specific period of time.

Question 27

what are problems in budgeting

Answer 27

• can be seen as pressure devices imposed by managers
• departamental conflicts can arise : disputes over resources allocations or departments blaming each other if the targets arent achieved
• difficult to reconcile individual and corporate goals
• managers may overestimate costs so that they will not be blamed in the future should they overspend