Download - Ch 10 budget
What are the organizational functions of budgets?
1. Budgets as a planning process
2. Budgets as a priority setting process
3. Budgets as a resource allocation process
4. Budgets as a responsibility allocating process
5. Budgets as an evaluation process
Uses of Budgets
Budgets can be useful To provide overview To help allocate resources To determine leverage points In financial control
For-profit enterprises
1. Two flavors of money: revenue and investment.
2. Budgets do not allocate "money," but allocate revenue projections.
3. Quarterly review of revenue vs. projections, continuous evaluation and problem solving.
4. Performance against the budget determines rewards.
Technology budgeting
1. Startup: Defining the product
Differentiating brand
2. For-profit: Controlling/reducing costs
Analysis of what’s going on
New products
3. Agency & n-p: Improving service
Controlling/reducing costs w/o reducing staff
Planning horizon: motivation
1. Startup: differentiating brand
creating market
2. For-profit: controlling costs and maximizing profit for
shareholders
3. Agency & n-p: Quality of service, asdefined by professionals, notcustomers
Incentives
1. Startup: Valuation of options
2. For-profit: Bonus
Raises
Promotion
3. Agency & n-p: Professional ethics, job security
D. The Role of Accounting
Provide useful information to Owners Managers Potential investors Regulators
What would be in the introductory parts of a financial management course
• Background/Objectives
• Key Financial Accounting Concepts
• The Financial Statements
• Interpretation and Analysis
What Are We Talking About?
What do accountants do? How do they do it? Who cares about what they do and how it’s done?
• Financial Accounting
– Preparation of financial statements
– Audit
– Control
• Managerial (or Cost) Accounting
– Budgets and variances
– Analysis for management decisions
– Cost and profitability assessment