Management and Cost Accounting Questions

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Topics: Budget, Budgets
IM 15.1 Intermediate

Outline: a) The objectives of budgetary planning and control system

1) To combine the ideas of all levels of management in the preparation of a budget. 2) To coordinate all the activities of the business so that each is part of an integral total. 3) To centralized control for example to control each function so that the best possible results may b obtained. 4) To decentralizes (delegate) responsibility to each manager involved. 5) To act as a guide for management decision when unforeseeable conditions affect the budget. 6) To plan and control income and expenditure so that maximum profitability is achieved. 7) To ensure that sufficient working capital is available for the efficient operation of the business. 8) To provide a yardstick against which actual results can be compared. 9) To show management where action is needed to remedy a situation.

b) The organization required for the preparation of a master budget

1) The budget committee It consists of high-level executives who represent the major segment of the business. Every part of the organization should be represented on the committee i.e. there should be a representative from sales, production, marketing and etc. Its major task is to ensure that budget are realistically established and that they are coordinated satisfactorily. The budget committee should appoint a budget officer, who will normally be the accountant. The role of budget officer is to coordinate the individuals’ budgets into a budget for a whole organization.

2) Accounting staff The accounting staff will assist managers in the preparation of their budgets; they will, for example, circulate and advise on the instructions about budget preparation, provide information that may be useful for preparing the present budget, and ensure the managers submit their budgets on time. The accounting

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