Accounting to budget, Financial Management

Assignment Help:

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.


Related Discussions:- Accounting to budget

Interpretations of activity ratio''s, Activity Ratio's   RT:        ...

Activity Ratio's   RT:           The Receivables Turnover ratio is the ratio between sales to accounts receivables. This says exactly how fast a company can collect on the s

Estimate most recent year-end financial statements, Select a publicly trade...

Select a publicly traded company (preferably manufacturing oriented; do not use a financial services company such as a bank or a bank holding company) and obtain a copy of their mo

Mountain fresh growth, The Mountain Fresh Company had earnings per share (E...

The Mountain Fresh Company had earnings per share (EPS) of $6.32 in 2006 and $11.48 in 2011.  The company pays out 30 percent of its earnings as dividends per share (DPS), and the

Exchange rate uncertainty affect firm exchange risk exposure, The exchange ...

The exchange rate uncertainty may not essentially mean that firms face exchange risk exposure. Describe why this may be the case. Answer:  A firm can comprise a natural hedging p

Callable bonds and puttable bonds, Convertible bonds can be classified into...

Convertible bonds can be classified into different types such as callable bonds and puttable bonds. These bonds are discussed as follows: Basics of Callable Bonds A callabl

Domestic factors were important than international factor, Why do you think...

Why do you think the empirical studies as regards factors influencing equity returns mainly showed that domestic factors were more significant than international factors, and, seco

Calculate the standard deviation , The attached file (MFR & FFM Ass Returns...

The attached file (MFR & FFM Ass Returns Data.xls) gives 132 months returns for thirty securities drawn from the FT ALL share index as well as the returns on the FT ALL share index

How does it help financial managers make business decisions, What is the in...

What is the investment opportunity schedule (IOS)?  How does it help financial managers make business decisions? The investment opportunity schedule illustrates graphically pro

Which is lower for company cost of debt or cost of quality, Which is lower ...

Which is lower for a given company:  the cost of debt or the cost of equity?  Explain.  Ignore taxes in your answer. The cost of debt is all the time less than the cost of equi

Define the hirfindahl-hirschman index, What is the Hirfindahl-Hirschman Ind...

What is the Hirfindahl-Hirschman Index? A: The Hirfindahl-Hirschman Index, or HHI, is the standard measure employed by economists to evaluate market concentration. The greater

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd