中央财经大学会计专业英语教程Chapter 9

中央财经大学会计专业英语教程

中央财经大学会计专业英语教程

Feature TopicIn this chapter, we will deal with the way in which businesses convert their general object and long-term plans into workable short-term plans or budgets. Budgets are an important tool for management planning and control.

中央财经大学会计专业英语教程

Chapter SkeletonDefine a budget and show how budgets, corporate objectives, and long-term plans are related. Explain the budgeting process. Carry out a complete analysis of variances. Discuss possible reasons for key variances and other practical matters surrounding control budgets.

中央财经大学会计专业英语教程

9.1 Budgets and Plans

中央财经大学会计专业英语教程

The development of plans involves five key steps: Setting the aims and objectives of the business; Identifying the options available; Evaluating the options and making a selection; Setting detailed short-term plans or budgets; and Collecting information on performance and exercising control.

中央财经大学会计专业英语教程

Step 1: Setting the aims and objectives of the businessThe aims and objectives set out what the business is basically trying to achieve. The aims of the business are often couched in broad terms and may be set out in the form of a mission statement. Example 9.1 : p 200

中央财经大学会计专业英语教程

Step 1: Setting the aims and objectives of the businessThe objectives will vary between businesses but may include the following aspects of operations and performance: p 200

中央财经大学会计专业英语教程

Step 2: Identifying the options availableA creative search will involve collecting information, particularly when the business is considering entering new markets or investing in new technology, including: Market size and growth prospects; Level of competition within the industry; Bargaining power of suppliers and customers; Threat of new entrants into the market; Threat of substitute products; and Relative power of trade unions, community interest groups, and so on.

中央财经大学会计专业英语教程

Step 2: Identifying the options availableInformation concerning the capabilities of the business in each of the following areas may be collected: Marketing and distribution; Manufacturing and production operations; Finance and administration; Research and development; Information systems; and Human resources

中央财经大学会计专业英语教程

Step 3: Evaluating the options and making a selectionWhen deciding on the most appropriate options to choose, the managers must thoroughly examine the information relating to each option. The long-term plan will usually cover a period of five years or more and will specify such things as: The market that the business will seek to serve; The products or services to be offered; Amounts and sources fo finance to be raised by the business;

中央财经大学会计专业英语教程

Step 3: Evaluating the options and making a selectionCapital investments to be made; Amounts and sources of bought-in goods and services required; and Personnel requirements

中央财经大学会计专业英语教程

Step 4: Setting detailed short-term plans or budgetsA budget is a business plan for the short term — typically one year. Budgets will define precise targets concerning: Cash receipts and payments; Sales, broken down into amounts and prices for each of the products or services provide by the bu

siness; Detailed stock(inventory) required Detailed labor requirements; and Specific production requirements

中央财经大学会计专业英语教程

Step 5: Colleting information on performance and exercising controlControl can be defined as compelling events to conform to plan. This definition is valid in nay context. Illustration 9-1

中央财经大学会计专业英语教程

Identify business objectives Consider options Evaluate options and make a selection Prepare budgets Perform and collect information on actual performance Respond to variances and exercise control Revise plans (and budgets) if necessaryOnce the objectives of the business have been determined, the various options that can fulfill these objectives must be considered and evaluated in order to derive a strategic plan. The budget is a short-term financial plan for the business that is prepared within the framework of the strategic plan. Control can be exercised through the comparison of budgeted and actual performance. Where a significant divergence emerges, some form of corrective action should be taken. If the budget figures prove to be based on incorrect assumptions about the future, it might be necessary to revise the budget.

中央财经大学会计专业英语教程

Periodic and Continual BudgetsBudgeting can be undertaken on a periodic or a continual basis. A periodic budget is prepared for particular period (usually one year) . A continual budget , as the name suggests, is continually updated. Continual budgets are also referred to as rolling budgets.

中央财经大学会计专业英语教程

9.2 The budget-Setting ProcessIllustration 9-2 : Steps in the Budget-Setting Process