Accounting to budget, Financial Management

Accounting to Budget:

Accounting to budget is a commonly used term to describe how an organisation controls its accounting process.

Typically, an organisation divides its revenue and expenditure into various groups. Such groupings are called the chart of accounts. The chart of accounts are broadly divided into areas of assets, liabilities, equity, revenue (or income), expense and cost of sales.  These broad areas will then be divided further into sub-groupings depending on the type of asset, income, expense etc.

When a particular sale is made, or expense incurred, the transaction will be recorded within one of these accounts.

For example:

The payment of a telephone bill will be recorded within an expense account, most likely divided into an individual account entitled telephone expenses. Professional fees / commission on a sale would be recorded within an income account, most likely divided into in an individual account entitled revenue from sales. When financial reports are prepared, in particular the Profit and Loss statement, the chart of accounts becomes the items within the statement. By establishing a chart of accounts, and recording transactions within those account, an organisation can more accurately track their revenue and expenses.

It is important that when preparing a budget, the budget items reflect the chart of accounts.  In doing so, it is a simple matter of comparing the totals of those accounts with the budget amounts for easy comparison.

Posted Date: 10/1/2012 4:21:03 AM | Location : United States







Related Discussions:- Accounting to budget, Assignment Help, Ask Question on Accounting to budget, Get Answer, Expert's Help, Accounting to budget Discussions

Write discussion on Accounting to budget
Your posts are moderated
Related Questions
Outsourcing Outsourcing is referring to purchase of parts from outside suppliers. Outsourcing is the external acquisition of services or components used in the production of go

Fixed Costs The costs a rigid incurs doing business that do not change in relation to production. Rent, for example, is a fixed cost because it remains constant whether product

What are the main classes of institutions that issue bonds in the USA? There are three major classes of institutions which issue bonds in the USA: national governments, local g

Difference between venture capital and conventional financing

International Finance Problem Analyze the attached case, along the lines indicated by the Assignment questions listed at the end of the case.  Since you will have plenty of tim

As we know, zero-coupon bonds are issued without any periodic coupon payments. The investor gets the interest and the principal on a maturity date. The interest i

Meaning merits nd demerits of modern approch of financial management

Chi Square Test as a Test of Independence In real life decision making, managers often have to know whether the differences between the proportions observed from a number of sa

Under what circumstances will the foreign subsidiary’s financial structure become relevant? The subsidiary’s own financial structure will become applicable when the parent firm

a) Year 2 ROCE = $400k / $1,000k = 40% Year 1 ROCE = $360k / $800k = 45% b) ROCE is an efficiency ratio that measures the monetary performance of a firm compared with the amo