U34 ACC

Budget

• A formal statement of the financial resources set aside for carrying out specific activities in a given period of time

• A control technique whereby actual results are compared with budgets

• any functional unit headed by a manager who is responsible for the activities of that unit.

• Organisational units in which outputs are measured in monetary terms but are not directly compared to input costs.

A responsibility center 

• A formal statement of the financial resources set aside for carrying out specific activities in a given period of time

• A control technique whereby actual results are compared with budgets

• any functional unit headed by a manager who is responsible for the activities of that unit.

• Organisational units in which outputs are measured in monetary terms but are not directly compared to input costs.

Revenue centers

• A formal statement of the financial resources set aside for carrying out specific activities in a given period of time

• A control technique whereby actual results are compared with budgets

• any functional unit headed by a manager who is responsible for the activities of that unit.

• Organisational units in which outputs are measured in monetary terms but are not directly compared to input costs.

Expense centers

• Units where inputs are measured in monetary terms but outputs are not.

• Where performance is measured by the difference between revenues (outputs) and expenditure (inputs)

• Where outputs are compared with the assets employed in producing them, i.e. ROI

• Where outputs are measured in monetary terms but are not directly compared to input costs.

Profit centers

• Units where inputs are measured in monetary terms but outputs are not.

• Where performance is measured by the difference between revenues (outputs) and expenditure (inputs)

• Where outputs are compared with the assets employed in producing them, i.e. ROI

• Where outputs are measured in monetary terms but are not directly compared to input costs.

Investment centers

• Units where inputs are measured in monetary terms but outputs are not.

• Where performance is measured by the difference between revenues (outputs) and expenditure (inputs)

• Where outputs are compared with the assets employed in producing them, i.e. ROI

• Where outputs are measured in monetary terms but are not directly compared to input costs.

Advantage of budgeting

• bad labour relations

• Promotes coordination and communication

• inaccurate record-keeping

• disables remedial action to be taken as variances emerge

Advantage of budgeting

• bad labour relations

• deteriorate the allocation of scarce resources.

• inaccurate record-keeping

• Help monitor the performance

Disadvantage of budgeting

• bad labour relations

• improves the allocation of scarce resources.

• accurate record-keeping

• enables remedial action to be taken as variances emerge

Disadvantage of budgeting

• Promotes coordination and communication

• improves the allocation of scarce resources.

• Managers may overestimate costs so that they will not be blamed in the future should they overspend.

• enables remedial action to be taken as variances emerge