Week 9 - Lecture 9 Flashcards
(16 cards)
What is the primary difference between Financial Accounting and Management Accounting?
Financial Accounting is prepared for both internal and external users, while Management Accounting is prepared solely for internal users.
Financial Accounting involves mandatory disclosure under accounting standards, whereas Management Accounting does not have regulatory requirements.
What are the main purposes of Management Accounting?
- Strategic Management
- Planning & Decision Making
- Operational Control
- Presentation
These functions guide management actions and decisions within an organization.
Define a budget.
A quantitative expression of an entity’s plans for a budget period, commonly one year.
Budgets operationalize strategic plans and help in assessing the feasibility of objectives.
List the seven key steps in the budgeting process.
- Review Past Performance
- Assess Trading & Operating Conditions
- Prepare Initial Estimates
- Communicate & Revise
- Prepare Final Budgets & sub-budgets
- Monitor Actual vs Budget
- Adjust Budgets as Needed
These steps ensure that the budgeting process remains relevant and responsive to changing circumstances.
What types of budgets are included in Operating Budgets?
- Sales (or Fees) Budget
- Production Budget
- Materials & Purchases Budgets
- Labour Budget
- Manufacturing Overhead Budget
- Selling & Administrative Expense Budget
These budgets focus on day-to-day operations and resource allocation.
What is a Master Budget?
A coherent set of all operating and financial budgets for a period.
It serves as a comprehensive financial plan for the organization.
What is the formula for calculating variance?
Variance = Actual – Budget
Variance analysis helps in identifying performance deviations from the budgeted figures.
True or False: A favourable variance occurs when actual revenues are less than budgeted revenues.
False
A favourable variance occurs when actual revenues exceed budgeted revenues or when costs are lower than budgeted.
What is the purpose of a Cash Budget?
To plan borrowing/investing decisions and identify shortfalls or surpluses in cash.
It helps manage liquidity and ensures that the organization can meet its financial obligations.
Fill in the blank: The budgeting process is often impacted by _______ such as economic shocks or industry changes.
[upheaval]
Upheaval can necessitate more frequent budget reviews and scenario planning.
What are the two styles of budgeting mentioned?
- Authoritarian
- Participative
Each style has its advantages and risks concerning goal setting and motivation.
What is the formula for Required Production in a production budget?
Required Production = Target Sales + Desired Ending Inventory - Beginning Inventory
This formula helps determine the number of units that need to be produced to meet sales forecasts.
What is the significance of the Cash Collections Schedule?
It breaks down credit-sales collections over periods to forecast cash inflows.
Understanding cash collections is crucial for managing cash flow effectively.
What does the Labour Budget calculate?
- Labour Hours = Units to Produce × Hours/unit
- Labour Cost = Labour Hours × Rate/hour
This budget ensures that labor resources are planned according to production needs.
What does a Schedule of Cash Payments outline?
The timing of payables, indicating when payments are due.
It helps in managing cash outflows effectively.
What is the primary focus of a Program Budget?
Cost-focus for government/non-profits.
It aids in resource allocation and financial accountability in non-profit sectors.
