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

Explain the demand for bananas increases, Suppose the demand for bananas in...

Suppose the demand for bananas increases. Explain how the price of bananas adjusts after the increase in demand. If the demand for bananas rises, a shortage is made at the origin

Residual income, Residual Income This is used for external reporting pu...

Residual Income This is used for external reporting purposes. This term refers to the net income which is available for distribution to the firm's common stock holders. In mana

Define relationship between bond''s market price and its ytm, What is the r...

What is the relationship between a bond's market price and its promised yield to maturity?  Explain. A bond's market price relies on its yield to maturity abbreviated as YTM.  Wh

What could be your priority in baba''s case, QUESTION (a) A financial f...

QUESTION (a) A financial fraud has happened in BABA Bank. Your services have been retained as forensic examiner to investigate the above case While investigating you receive

Define hedger - market participants, Define Hedger - Market Participants ...

Define Hedger - Market Participants A hedger desires to prevent price variation by locking in a purchase price of the underlying asset by a long position in a futures contract

Calculate weighted average cost of capital, Ocean Blue Vessels Ltd is a rea...

Ocean Blue Vessels Ltd is a real Liner firm whose capital structure consists of debt, preference shares and equity shares. The company plans to raise further capital for its expans

Operating cycle, discuss the applicability of operating cycle in poultry in...

discuss the applicability of operating cycle in poultry industry

Delivery and credit risk, When a borrower uses repo market for fund f...

When a borrower uses repo market for fund financing, he has to deliver the securities to the lender. One way to do this is to deliver the collateral to the lender

Define the process of wealth maximisation, Define the process of Wealth Max...

Define the process of Wealth Maximisation Shareholders' wealth can be defined as total market value of all the equity shares of company. So when we talk about maximising wealth

Gordan model, A company has a total investment of Rs 500,000 in assets, and...

A company has a total investment of Rs 500,000 in assets, and 50,000 outstanding ordinary shares at Rs 10 per share (par value). It earns a rate of 15 per cent on its investment, a

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