cima c1 unit 10 2012(2)

7/23/2019 CIMA C1 Unit 10 2012(2)

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7/23/2019 CIMA C1 Unit 10 2012(2)


CIMA C1Fundamentals Of Management Accounting

Budgeting

7/23/2019 CIMA C1 Unit 10 2012(2)


CIMA C1Fundamentals Of Management Accounting

Class Slides – Ian Wilson

7/23/2019 CIMA C1 Unit 10 2012(2)


1. Explain w! a compan! will set out its plansfo" a #nancial !ea" in a $udget.

%. &"epa"e functional $udgets ' CapitalExpenditu"e()ep"eciation $udgets.

*. &"epa"e a Maste" Budget.

+. Explain Budget statements

,. Identif! Budget su"plus o" so"tfalls in caste"ms

-. &"epa"e a Flexi$le/ Budget

0. Calculate Budget a"iances

2. &"epa"e a "econciliation $etween Budget '

Actual "esults

Learning Aims (CIMA)

7/23/2019 CIMA C1 Unit 10 2012(2)


7/23/2019 CIMA C1 Unit 10 2012(2)


We need to co3e" te following a"eas4

1. Budget p"epa"ation

%. Sales Budgets

*. Functional Budgets+. Cas Budgets

,. Income Statements

-. Balance Seets

0. Maste" Budgets

2. Flexed Budgets

Introduction

7/23/2019 CIMA C1 Unit 10 2012(2)


Why do you as individuals Budget? Think aout a com!any " #hat do they

need to do$

Business planning at &epsi was 5 6e &lan isnoting7 $ut &lanning is e3e"!ting.8 &eople 9ust didn/t $udget at &epsi: te!

made commitments.

56e $udget sould $e a nume"icalexp"ession of te st"ategic plan.8 I "eall!lo3e tat: it sa!s so muc wit so fewwo"ds.

Why do #e Budget?

7/23/2019 CIMA C1 Unit 10 2012(2)


7/23/2019 CIMA C1 Unit 10 2012(2)


A Budget% What is it?& a ;uantitati3e statement: fo" a de#ned

pe"iod of time: wic ma! include planned"e3enues: expenses: assets: lia$ilities andcas <ows fo" a fo"tcoming accountingpe"iod/.

A $udget =f"om old F"enc wo"d $ougette:

pu"se> is a #nancial plan and a list of allplanned expenses and "e3enues. It is a planfo" sa3ing: $o""owing and spending

Introduction

7/23/2019 CIMA C1 Unit 10 2012(2)


Budgets are !re!ared to4

1. Set ' communicate ta"gets

%. Esta$lis a standa"d to wic actual

pe"fo"mance can $e compa"ed*. Co?o"dinate inte"(int"a functional acti3ities

Bot functional $udgets ' a maste" $udget

can $e p"epa"ed@emem$e" &4)(M4C

Introduction

7/23/2019 CIMA C1 Unit 10 2012(2)


Ty!ical 'unctional udgets4

1. Sales Budget

%. Sales O3e"ead Budget

*. &"oduction Budget+. Mate"ials sage Budget

,. Mate"ials &u"case Budget

-. a$ou" Budget

unctional Budgets

7/23/2019 CIMA C1 Unit 10 2012(2)


A MAS6E@/ B)E6 will include4

1. Income Statement

%. Cas Budget*. Balance Seet =Statement of Financial

&osition>

Budget const"uction is o3e"seen $! aB)E6 COMMI66EE wo often p"oduce aB)E6 MADA.

Master Budget

7/23/2019 CIMA C1 Unit 10 2012(2)


Contains the 'ollo#ing4

1. O$9ecti3es $eind te Budget

%. ists of o"ganisational st"uctu"es: Ma9o"

Budgets ' Budget "esponsi$ilit!*. &"ocedu"es ' cont"ol

+. 6imeta$les

,. e! assumptions made

-. &"inciple Budget Facto"s =&BF/s>

The Budget Manual

7/23/2019 CIMA C1 Unit 10 2012(2)


Functional $udgets p"epa"ed BEFO@E teMaste" Budget.

Man! Budget canges can $e expected anda"e made $efo"e a #nal 3e"sion is complete.

&"ocess $egins wit identif!ing te &BF =&"incipal Budget Facto">

6is is a imiting facto"/.

Sales: a$ou" Mate"ials ' Cas ma! all $e&BF/s.

Budget re!aration

7/23/2019 CIMA C1 Unit 10 2012(2)


See pages 0- to 2 fo" Budget p"epa"ationp"actice ' examples.

Exe"cise 1 Sales Budgets Exe"cise % &lanning &"oduction Exe"cise * Mate"ial Deeds –sage '

&u"cases

Exe"cise + a$ou" Budgets

Budget re!aration

7/23/2019 CIMA C1 Unit 10 2012(2)


6"u"o td

1. &"epa"e &"oduction Budget

%. &"epa"e )i"ect a$ou" Budget

*+ercise ,

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)ealing wit StocGs(In3ento"!4 Sales &S Closing StocG

ESS Opening StocG H &"oduction nits &"oduction &S Closing StocG ESS Opening StocG H Mate"ial sage

-olden .ules

7/23/2019 CIMA C1 Unit 10 2012(2)


Mate"ial sage A)) Closing StocG ESS Opening StocG

H Mate"ials &u"cases ABO@ EFFICIEDC4 If EJcienc! is 2K: %K of ou"s is wasted 6o maGe p"oduct: input ou"s need to $e

enoug to maGe 1K of p"oduct.

More -olden .ules

7/23/2019 CIMA C1 Unit 10 2012(2)


7/23/2019 CIMA C1 Unit 10 2012(2)


What is a Cash Budget?. @eco"ding of te cas impacts of te

functional $udgets and is used as aplanning tool to deal wit a cassu"plus(de#cit positions.

1. So"t te"m cas su"plus

%. So"t te"m cas de#cit

*. ong te"m cas su"plus+. ong te"m cas de#cit

Cash Budgets

7/23/2019 CIMA C1 Unit 10 2012(2)


7/23/2019 CIMA C1 Unit 10 2012(2)


olden "ules4 Cas items onl! DO )E&@ECIA6IOD 6iming ? wen cas impacts

Exe"cise - L td Const"ucting a CasBudget

&"oduce a &"o?Fo"ma: tat is te $estapp"oac

Constructing a CashBudget

7/23/2019 CIMA C1 Unit 10 2012(2)


Set up !ou" g"id: @ows ' Columns: Columnsfo" eac mont – anua"! to Ap"il.

ou need "ows fo" eac t!pe of "e3enue 'expense

)eal wit te eas!/ items #"st Macine – Cost N, in anua"! B6 &AI) ID

FEB@A@.

@ent N1 pe" mont: paid in AD ' A&@I @ates ? N1 pe" mont

*+ercise / 0 Ltd

7/23/2019 CIMA C1 Unit 10 2012(2)


Sala"ies – % pa"ts to tis4 2K paid in mont '%K paid next mont as tis is o3e"time

ou need an 24% split ie N2 ' N% pe" mont 6e "emaining issue to te diJcult one: Sales. Sales a"e made eac mont of4

1. an ? N,

%. Fe$ ? N-

*. Ma" ? N+

+. Ap"il ? N,

*+ercise / 0 Ltd

7/23/2019 CIMA C1 Unit 10 2012(2)


Eac mont: Sales @ECEI&6S in CASP a"epased in at4 -K afte" 1 mont: *K afte"% monts ' 1K afte" * monts.

ou a3e to p"oduce a model tat "e<ectstis position4

We also made Sales AS6 !ea"4 Some cas p"oceeds will fall into 6PIS !ea"

Wo"G tis t"oug also4 We can now BAADCE eac mont4

*+ercise / 0 Ltd

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6e MAS6E@ B)E6 is an additional ' 3italB)E6 p"epa"ed afte" te FDC6IODAB)E6S a"e Gnown

Fo" !ou" C1 exam: te maste" $udget willinclude4

1. Budgeted Income Statements =IS>

%. Budgeted Statement of Financial &osition

=SF&>

Master Budgets

7/23/2019 CIMA C1 Unit 10 2012(2)


6is is a &"o#t ' oss Account Students ma! $e gi3en a pa"tiall!

completed Income Statement on sc"een andasGed to complete wit missing #gu"es.

&"o?Fo"ma on page 2*

Budgeted Incometatements

7/23/2019 CIMA C1 Unit 10 2012(2)


A student ma! $e asGed to calculate Ge!$alance seet #gu"es.

6is could in3ol3e eite" updating a cu""ent$alance seet fo" a t"ading pe"iod o"d"afting a $alance seet fo" a new $usiness.

&"o?fo"ma on page 2+

Exe"cise 0 Budgeted Balance Seet

Budgeted Balance heet

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All we a3e looGed at to?date cent"e ofFixed/ Budgets.

We now a3e to conside" Flexi$le/ Budgets.

A Flexed/ $udget conside"s 3a"!ing le3elsof acti3it!. a $udget $! wic: $! "ecognising diQe"ent

cost $ea3iou" patte"ns: is designed to

cange as 3olume of acti3it! canges/

le+ile Budgets

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@elati3el! st"aigtfo"wa"d to p"oduce aste! use ma"ginal costing p"inciples.

Fixed ' a"ia$le Costs a"e st"aigtfo"wa"d

Ca"e needs to $e taGen wit Semi?a"ia$leCosts. ou ma! a3e to use te Pig?ow metod:

see ea"lie" sessions.

Exe"cise 2 Flexing a Budget

le+ile Budgets

cima c1 unit 10 2012(2)

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