HULT International Business School
Managerial Accounting (ACC220)
Outline of the Required Book
Chapter 6 - Budgeting
1. Budgets links with strategic plans and objectives
➔ The development of plans for businesses involve 5 steps:
- (1) Establish mission, vision and objectives
- (2) Undertake a position analysis
- (3) Identify and assess the strategic options
- (4) Select strategic options and formulate plans
- a budget is a business plan for the short terms typically 1Y, and expressed in
financial terms. It define precise targets concerning:
- cash receipts and payments
- sales volumes and revenues
- detailed inventories requirements
- detailed labour requirements
- specific production requirements
- (5) Perform review and control
➔ Exercising control:
- Control: the process of making planned events actually occur = compelling events to
conform to plan (valid definition in any context).
- MA has an important role to play in the control process. It is possible to state many in
financial terms.
- Where actual outcomes are in variance with B, the variance should be highlighted by
financial informations for managers to take decisions about them.
- The planning and control process:
- Establish mission vision and objectives; Undertake a position analysis; Identify and
assess strategic options; Select strategic options and formulate plans
- Prepare budgets
- Perform and collect information on actual performance
- Identify variances between planned (budgeted) and actual performance
- Respond to variances and exercise control
- Revise plans (and budgets) if necessary.
2. Times horizons of plans and budgets
➔ Setting strategic plans is typically a major exercise performed about every 5 years and budgets are
usually set annual for the forthcoming year, broken down into monthly budgets which vary for
seasonal periods (ie. retail & christmas)
➔ Time horizons may however vary with the respective business (ie. Tech = shorter, like overnight)
3. Budgets and forecasts
➔ Budget is a plan, not a forecast.
- Plan => determination/intention to achieve the target
- Forecast = predictions about the future of the environment
4. Periodic and continual Budgets
➔ Periodic budgets: prepared for a particular period (usually 1Y).
Managerial Accounting (ACC220)
Outline of the Required Book
Chapter 6 - Budgeting
1. Budgets links with strategic plans and objectives
➔ The development of plans for businesses involve 5 steps:
- (1) Establish mission, vision and objectives
- (2) Undertake a position analysis
- (3) Identify and assess the strategic options
- (4) Select strategic options and formulate plans
- a budget is a business plan for the short terms typically 1Y, and expressed in
financial terms. It define precise targets concerning:
- cash receipts and payments
- sales volumes and revenues
- detailed inventories requirements
- detailed labour requirements
- specific production requirements
- (5) Perform review and control
➔ Exercising control:
- Control: the process of making planned events actually occur = compelling events to
conform to plan (valid definition in any context).
- MA has an important role to play in the control process. It is possible to state many in
financial terms.
- Where actual outcomes are in variance with B, the variance should be highlighted by
financial informations for managers to take decisions about them.
- The planning and control process:
- Establish mission vision and objectives; Undertake a position analysis; Identify and
assess strategic options; Select strategic options and formulate plans
- Prepare budgets
- Perform and collect information on actual performance
- Identify variances between planned (budgeted) and actual performance
- Respond to variances and exercise control
- Revise plans (and budgets) if necessary.
2. Times horizons of plans and budgets
➔ Setting strategic plans is typically a major exercise performed about every 5 years and budgets are
usually set annual for the forthcoming year, broken down into monthly budgets which vary for
seasonal periods (ie. retail & christmas)
➔ Time horizons may however vary with the respective business (ie. Tech = shorter, like overnight)
3. Budgets and forecasts
➔ Budget is a plan, not a forecast.
- Plan => determination/intention to achieve the target
- Forecast = predictions about the future of the environment
4. Periodic and continual Budgets
➔ Periodic budgets: prepared for a particular period (usually 1Y).
