Comparing real and planned outcomes and responding to Divergences from Plan

The final phases in the process outlined in figure shown below of comparing real and planned outcomes and responding to divergences from plan symbolize the firm's control procedure. The managerial function of control includes the measurement, reporting and consequent correction of performance in an attempt to make sure that the firm's objectives and plans are attained. In another words, the objective of the control process is to make sure that the work is completed so as to fulfill the original intentions.

 

To monitor performance, the accountant generates performance reports and represents them to the suitable managers who are responsible for implementing different decisions.  Performance reports including a comparison of actual outcomes (real costs and revenues) and planned outcomes (budgeted costs and revenues) must be issued at regular intervals. Performance reports give feedback information by comparing planned and real outcomes.  These reports must highlight those activities which do not conform to plans, therefore that managers can devote their scarce time to focusing on such items. This procedure represents the application of management by exception. Effective control needs that corrective action is taken and hence actual outcomes conform to planned outcomes.

 

Posted Date: 12/4/2012 6:42:54 AM | Location : United States

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