CHAPTER 15

1. The Planning And Control Cycle

2. Budgetary Planning And Control Systems

BUDGET is a quantified plan of action for a forthcoming accounting period. -- is a plan of what the organization is aiming to achieve and what is has set as a target FORECAST Estimate of what is likely to occur in the future.

Objectives of a Budgetary Planning And Control System. To ensure the achievement of the organization's objectives. To compel planning. To communicate ideas and plans. To coordinate activities To provide a framework for responsibility accounting To establish a system od control. To motivate employees to improve their performance. Provide a framework for authorization Provide a basis for performance evaluation

3. Responsibility Centres
RESPONSIBILITY CENTRE Is a function or department of an organization that is headed by a manager who has direct responsibility for its performance. Can be divided into 3 : 1) COST CENTRE act as a collecting place for certain cost before they analyzed further -- Responsible for the cost only. 2) PROFIT CENTRE any unit of an organization to which both revenues and cost are assigned, so the profitability of the unit can be measured. REVENUE CENTRE is similar to a cost center and profit center but accountable to revenue only. 3) INVESTMENT CENTRE is a profit center whose performance is measured by its return on capital. -- accountable to cost, revenues and investments.

4. Controllable Costs
CONTROLLABLE COSTS AND UNCONTROLLABLE COSTS

CONTROLLABLE IN SHORT TERM A cost which is not controllable by a junior manager or supervisor might me controlled by a senior manager A cost which is not controllable by a manager in one department may be controllable by a manager in another department.
CONTROLLABLE IN LONG TERM Production cost might reduced by introduction of new machinery and technology. NON-CONTROLLABLE COST Increase in expenditure due to inflation. THE CONTROLLABILITY OF FIXED COSTS Committed fixed costs uncontrollable in short term Discretionary fixed costs could be raised or lowered at fairly short notice. THE CONTROLLABILITY AND APPORTIONED COSTS Managers should only held accountable for cost over which they have some influence.

5. Fixed And Flexible Budgets

FIXED BUDGET is a budget which is designed to remain unchanged regardless of the volume of output or sales archived. FLEXIBLE BUDGET is a budget which, by recognizing different cost behavior patterns. --is designed to change as volume of output change.

6. Preparing Flexible Budgets

Look at page 323 BPP FMA STUDY TEXT

7. Flexible Budgets And Budgetary Control

Look at page 336 BPP FMA STUDY TEXT

8. Features and Functions of Spreadsheets

SPREADSHEETS is an electronic piece of paper divided into rows and columns. The intersections of the row and column called cell CELL CONTENTS - Text - Values - Formulae ADVANTAGES - Easy to learn and use - Calculation an d Manipulation quicker and easier - Enable the Analysis, reporting and sharing of financial information - Enable what-if analysis to be performed quickly DISADVANTAGES - Formulae hidden from sight - Presentation may make reports appear infallible - High proption of large model may having critical error - Database not suitable for large amount of data - Not good at word processing - Not suitable for constructing entire accounting system .

USES OF SREADSHEET - Budgeting - What-If Analysis