Unit 7
Assignment 3
Task 1:
In this task I will be describing how the variances in sales affects the cash budget. I will
describe how variances should be analysed and investigated and what could likely be the
cause. I will also be considering how it is important to monitor budgeted and actual figures.
Budgetary Control:
Budgetary control refers to how well managers utilise budget to monitor and control costs
and operations in a given accounting period. Financial and performance goals are usually
set with budgets, the results are compared and performance is adjusted as needed.
Preparation of Plans: This is where targets are set to measure whether objectives have
been met and actual results can be compared with the targets that have been set.
Comparison of Plans with Results: It is important for information to be received quick to
improve control. Managers need budgetary data promptly. The financial year is divided into
smaller control periods which is usually four weeks. Budgets are then prepared for each
control period and targets are compared with actual results at the end of each period.
Analysis of Variances: This is the most important stage in the budgetary control process.
Variance analysis attempts to find reasons for the differences between actual and expected
results.
Zero Based Budgeting:
Zero based budgeting is a method of budgeting in which all expense must be justified for
each new period and then no money is allocated for those costs. It encourages the regular
evaluation of costs and helps minimise unnecessary purchases. Zero based budgeting
allows for strategic goals to be implemented into the budgeting process by trying them to
specific functional areas of an organisation, where costs can be grouped and then measured
against previous results and current expectations.
Advantages of Zero-Based Budgeting:
Improved resource allocation
Developed questioning reducing unnecessary costs and eliminating inefficient
practices
Encourages managers to seek alternatives
Disadvantages of Zero-Based Budgeting:
Collecting and analysis of information is time consuming
Subjective opinions may influence decisions
Management justification of spending may jeopardise potential spending benefits.
Different types of Variance:
Assignment 3
Task 1:
In this task I will be describing how the variances in sales affects the cash budget. I will
describe how variances should be analysed and investigated and what could likely be the
cause. I will also be considering how it is important to monitor budgeted and actual figures.
Budgetary Control:
Budgetary control refers to how well managers utilise budget to monitor and control costs
and operations in a given accounting period. Financial and performance goals are usually
set with budgets, the results are compared and performance is adjusted as needed.
Preparation of Plans: This is where targets are set to measure whether objectives have
been met and actual results can be compared with the targets that have been set.
Comparison of Plans with Results: It is important for information to be received quick to
improve control. Managers need budgetary data promptly. The financial year is divided into
smaller control periods which is usually four weeks. Budgets are then prepared for each
control period and targets are compared with actual results at the end of each period.
Analysis of Variances: This is the most important stage in the budgetary control process.
Variance analysis attempts to find reasons for the differences between actual and expected
results.
Zero Based Budgeting:
Zero based budgeting is a method of budgeting in which all expense must be justified for
each new period and then no money is allocated for those costs. It encourages the regular
evaluation of costs and helps minimise unnecessary purchases. Zero based budgeting
allows for strategic goals to be implemented into the budgeting process by trying them to
specific functional areas of an organisation, where costs can be grouped and then measured
against previous results and current expectations.
Advantages of Zero-Based Budgeting:
Improved resource allocation
Developed questioning reducing unnecessary costs and eliminating inefficient
practices
Encourages managers to seek alternatives
Disadvantages of Zero-Based Budgeting:
Collecting and analysis of information is time consuming
Subjective opinions may influence decisions
Management justification of spending may jeopardise potential spending benefits.
Different types of Variance:
