In standard costing and budgetary control, adverse variance indicates discrepancies where actual performance falls short of budgeted expectations, impacting the budgeted profit negatively.
Variance analysis in standard costing and budgetary control examining sub-variances to understand the causes of differences between budgeted and actual figures in financial performance.
Behavioral accounting is an approach that incorporates psychological and social factors alongside traditional technical aspects in accounting. This multifaceted perspective is essential for understanding the operation of various accounting mechanisms, such as budgetary control systems.
A comprehensive financial or quantitative statement prepared prior to a specified accounting period, containing the plans and policies to be pursued during that period.
A budget centre is a segment within an organization for which budgets are prepared and compared against actual performance as part of the budgetary control process.
A committee responsible for overseeing and managing the budgetary control process within an organization, including the preparation, scrutiny, and submission of budgets for approval.
A budget director is responsible for the administration of the budgetary control process within an organization. They coordinate the flow of information between budget centers, the budget committee, and the board of directors.
A detailed manual outlining the administrative procedures and operations for the effective management of a budgetary control system, including the roles and responsibilities of the budget committee and budget centers, timetable for budget preparation, and procedures for budget revision.
Budgetary control is the process through which financial control is exercised within an organization by preparing budgets for income and expenditure in advance, comparing them with actual performance, and taking necessary actions on variances.
In standard costing or budgetary control, a controllable variance is a variance regarded as controllable by the manager responsible for that area of an organization. The variance occurs as a result of the difference between the budget cost allowance and the actual cost incurred for the period.
Cost control refers to the techniques used by various levels of management within an organization to ensure that costs incurred fall within acceptable levels. It involves the provision of financial information to management by the accountant and the use of various techniques such as budgetary control and standard costing to highlight and analyze any variances.
In standard costing and budgetary control, a favourable variance is any difference between the actual and budgeted performance of an organization where this creates an addition to the budgeted profit. For example, a favourable variance may occur if the actual sales revenue is greater than that budgeted or if actual costs are less than budgeted costs.
Financial control encompasses actions taken by the management of an organization to ensure that costs incurred and revenues generated are at acceptable levels. It involves the provision of financial information to management by accountants and utilizes techniques such as budgetary control and standard costing to highlight and analyze variances.
An integral part of financial analysis, financial modelling involves creating representations of the financial performance of a business or project over time. These models aid in decision-making by simulating different scenarios and outcomes based on historical data and assumptions.
A constraint in budgetary control and decision making that prevents an organization from achieving higher levels of performance and profitability.
Management by Exception is a management principle where decisions that cannot be handled at one level are escalated to higher levels. It is also used in budgetary control to focus on significant variances, leaving small variances without intervention.
A critical component of an organization's operating budget, the production budget outlines the volumes and costs associated with producing goods within a set period, ensuring effective budgetary control.
A comprehensive budget set for the purchasing function of an organization under a system of budgetary control, planning the volumes and costs of purchases to be made in a budget period, typically analyzed by material and accounting period.
Quantitative budgets refer to budgets that cover the non-financial aspects of budgetary control, including the number of units of products planned to be produced and the number of direct labor hours to be worked.
A system in management accounting designed to provide information to all levels of an organization, based on the responsibility of individual managers for specific items of expenditure or income.
A sales budget is a financial plan that outlines projected sales volumes and revenues for a specific budget period. It serves as a critical component of the budgetary control system and aids in strategic planning and performance evaluation.
Stock budgets are formulated under a budgetary control system to plan the levels of materials, work in progress, and finished goods, both in volumes and values, at specified times throughout a budget period.
Variance in standard costing and budgetary control refers to the difference between the standard or budgeted levels of cost or income for an activity and the actual costs incurred or income achieved.
In certain systems of budgetary control, virement is an agreed practice allowing for the transfer of funds from one part of the budget to another within the financial year. This can help manage projected surpluses and deficits across different budget heads.
