The paper "Flexible Budget Management " is a good example of a finance and accounting assignment. A budget is a financial or quantitative statement, containing the plans and policies to be pursued by an organisation during a specified accounting period usually a fiscal year. (Blocher et al, 2005: Owe and Law, 1999). It is usually prepared prior to the accounting period and is used as a means for budgetary control. A budget is drawn up for each functional area of the company or organization. Also, a capital budget, a cash flow budget, a stock budget and a master budget containing a budgeted income statement and balance sheet is prepared.
(Owe and Law, 1999). Budgets are prepared in a section in the organization referred to as the budget centre, which is responsible for comparing budgets with actual performance as part of the budgetary control process. (Owe and Law, 1999). Regular financial statements are usually prepared on the basis of each budget center and as such, each budget centre is aware of its budgeted and actual performance as well as any subsequent variances. (Owe and Law, 1999).
Some of the different budgets prepared in the budget centres include sales budget, production budget, direct materials usage and purchases budget, direct labour budget, factory overhead budget, cost of goods sold budget, selling and general administrative expenses budget, cash receipts budget, cash budget, budget income statement and budget balance sheet. (Blocher et al, 2005). Two types of budgets have been identified, which include a fixed budget and a flexible budget. A fixed or static budget is a budget that is prepared at the beginning of the accounting period and is based on cost and revenue estimates (Blocher et al, 2005; Owe and Law, 1999).
This budget does not consider the circumstances that lead to the achievement of different levels of activity from that budget and as a result, the budget cost allowances for each cost item are not changed for the variable items. (Owe and Law, 1999). A flexible budget, on the other hand, is a budget prepared at the end of the accounting period when actual results for the period are known.
Best of HBR. (1992). The High Performance Organisation. Harvard Business Review. Pp 172-180
Blocher E., Chen K., Cokins G., Lin T. (2005). Cost Management A strategic Emphasis. 3rd Edition McGraw Hill.
Cooper R., Kaplan R. S. (1992). Activity-Based Systems: Measuring the Costs of Resource Usage. Accounting Horizons. Vol. 6(3), Pp 1-12.
Libby, Theresa, Salterio, Steven E. and Webb, Alan (2002). "The Balanced Scorecard: The Effects of Assurance and Process Accountability on Managerial Judgment" Available at SSRN: http://ssrn.com/abstract=317486 or DOI: 10.2139/ssrn.317486
Owe G., Law E. J. (1999). A Dictionary of Accounting. Oxford University Press, 1999. Oxford Reference Online. Oxford University Press.