AAT BGT Tutor Study Notes

Topics: Costs, Cost, Variable cost Pages: 197 (17250 words) Published: March 4, 2014
aat

Study Notes

QCF Diploma in Accounting
Level 4

BUDGETING
(BGT)
Principles of Budgeting
Drafting Budgets

TUTOR NOTES

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CONTENTS
Session

Page

Session 1:

The Business Environment

Session 2:

Collection of cost information; Cost behaviour

11

Session 3:

Accounting for overheads

17

Session 4:

Forecasting Methods and techniques

27

Session 5:

Standard Costing and variance analysis

39

Session 6:

Investigating and reporting variances

53

Session 7:

Performance indicators

67

Session 8:

Budget Preparation

79

Session 9:

Budgetary control and responsibility accounting

101

Appendix :

Alternative approaches to variances

107

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INTRODUCTION
Principles of Budgeting and Drafting budgets are combined for assessment purposes. The purpose of this document is to describe what is assessable for each of these criteria.
Please read this document in conjunction with the standards for the two units. The purpose of the units
The creation of these two core units at level four is recognition of the importance of financial planning in every organisation. Budgets are an essential tool in planning, coordinating, authorising and cost control. Much of the Principles of Budgeting unit consolidates knowledge required at level three. However, Drafting Budgets requires new skills to create appropriate forecasts and budgets for a wide range of activities and circumstances; to agree the budgets with other functional managers, to monitor results against budget and trigger suitable management interventions.

Learning objectives
In the Principles of Budgeting unit, learners develop an understanding of how and why budgets are prepared. Assessment candidates need to display the necessary knowledge to prepare revenue forecasts and a range of budgets for different circumstances, and be able to tailor them to meet organisational requirements. They must understand the component parts of budgetary procedure to aid organisational planning and control.

In the Drafting Budgets unit, learners develop their forecasting and budgeting skills. Assessment candidates need to demonstrate their ability to prepare budgets, analyse variances and make recommendations for improving organisational performance. They must also be able to guide managers in planning and control.

Learning outcomes
Each unit includes three learning outcomes comprised of a number of assessment criteria.

Principles of Budgeting (knowledge)
1

Demonstrate an understanding of the impact of internal and external business factors on budgets

2

Understand why budgets are used

3

Understand the skills needed in budget preparation

Drafting Budgets (Skills)
1

Prepare forecasts and budgets

2

Understand the impact that changes in the economic environment will have on the budget

3

Use budgetary control to ensure organisational targets are met.

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