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    Master Budgeting and Responsibility Accounting

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    Abdur Rahman
    The document discusses master budgeting and responsibility accounting. It defines a budget as a quantitative plan for a specified period that helps management implement their plans. Master budgets have operating budgets that build to a budgeted income statement and financial budgets that build to budgeted balance sheets and cash flow statements. The basic steps for operating and financial budgets are outlined. Other issues discussed include sensitivity analysis, kaizen budgeting, and activity-based budgeting.

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    Master Budgeting and Responsibility Accounting

    Uploaded by

    Abdur Rahman
    40 views8 pages
    The document discusses master budgeting and responsibility accounting. It defines a budget as a quantitative plan for a specified period that helps management implement their plans. Master budgets have operating budgets that build to a budgeted income statement and financial budgets that build to budgeted balance sheets and cash flow statements. The basic steps for operating and financial budgets are outlined. Other issues discussed include sensitivity analysis, kaizen budgeting, and activity-based budgeting.

    Original Title

    Chapter 6

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    The document discusses master budgeting and responsibility accounting. It defines a budget as a quantitative plan for a specified period that helps management implement their plans. Master budgets have operating budgets that build to a budgeted income statement and financial budgets that build to budgeted balance sheets and cash flow statements. The basic steps for operating and financial budgets are outlined. Other issues discussed include sensitivity analysis, kaizen budgeting, and activity-based budgeting.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    40 views8 pages

    Master Budgeting and Responsibility Accounting

    Uploaded by

    Abdur Rahman
    The document discusses master budgeting and responsibility accounting. It defines a budget as a quantitative plan for a specified period that helps management implement their plans. Master budgets have operating budgets that build to a budgeted income statement and financial budgets that build to budgeted balance sheets and cash flow statements. The basic steps for operating and financial budgets are outlined. Other issues discussed include sensitivity analysis, kaizen budgeting, and activity-based budgeting.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 8

    COST ACCOUNTING- A MANAGERIAL

    EMPHASIS, 13TH EDITION,


    SRIKANT/ GEORGE/ MADHAV/
    CHRISTOPHER

    Chapter 6

    Master Budgeting
    and
    Responsibility Accounting
    BUDGET DEFINED
     The quantitative expression of a proposed plan of
    action by management for a specified period, and
     An aid to coordinating what needs to be done to
    implement that plan
     May include both financial and nonfinancial data
    ADVANTAGES OF BUDGETS
     Provides a framework for judging performance
     Motivates managers and other employees

     Promotes coordination and communication among


    subunits within the company
    COMPONENTS OF MASTER
    BUDGETS
     Operating Budget – building blocks leading to the
    creation of the Budgeted Income Statement

     Financial
    Budget – building blocks based on the
    Operating Budget that lead to the creation of the
    Budgeted Balance Sheet and the Budgeted Statement
    of Cash Flows
    BASIC OPERATING BUDGET STEPS

    1. Prepare the Revenues Budget


    2. Prepare the Production Budget (in Units)
    3. Prepare the Direct Materials Usage Budget and Direct
    Materials Purchases Budget
    4. Prepare the Direct Manufacturing Labor Budget
    5. Prepare the Manufacturing Overhead Costs Budget
    6. Prepare the Ending Inventories Budget
    7. Prepare the Cost of Goods Sold Budget
    8. Prepare the Operating Expense (Period Cost) Budget
    9. Prepare the Budgeted Income Statement
    BASIC FINANCIAL BUDGET
    STEPS

    Based on the Operating Budgets:

    1. Prepare the Capital Expenditures Budget


    2. Prepare the Cash Budget
    3. Prepare the Budgeted Balance Sheet
    4. Prepare the Budgeted Statement of Cash Flows
    Budgeting Overview Flowchart
    Operating Budget Financial Budget

    Revenues
    Budget

    Ending Capital
    Production
    Inventory Expenditures
    Budget
    Budget Budget

    Direct
    Direct Manufacturing
    Manufacturing
    Materials Overhead
    Labor Costs Cash Budget
    Costs Budget Costs Budget
    Budget

    Cost of Goods
    Sold Budget
    Budgeted
    Balance Sheet

    Operating
    Expense
    Budget Budgeted
    Statement of
    Cash Flows
    Budgeted
    Income
    Statement
    OTHER BUDGETING ISSUES
     Financial-planning software may be employed to conduct
    sensitivity (“what-if”) analysis to assist in the budgetary process.
    For e.g. Enterprise Resource Planning (ERP)
     “what-if” technique examines how a result will change if

    the original predicted data are not achieved or if an


    underlying assumption changes
     Kaizen Budgeting – incorporating continuous improvement
    factors in the budgeting process
     Activity-Based Budgeting – incorporating Activity-Based
    Costing in the budgetary process

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