Sales Budget

The sales budget is the basis for all other budget components.
Units to be sold are a function of the forecasted selling price.
The budget requires a forecast of sales, typically involving sales staff and market research.  Various statistical techniques may also be used.  Sales may be forecasted in units and in dollars.
Budgeted revenues can be computed as:

• Forecasted sales (in units) x Forecasted selling price.

What is a Budget?

A budget is a detailed plan for the acquisition and use of financial and other resources over a specified period of time.  Good budgeting practice should provide for both planning and control.

Types of Fixed Costs

Committed fixed costs - relate to the investment in facilities, equipment, and the basic organizational structure of the firm.  Examples include depreciation of buildings and equipment, taxes on real estate, insurance, etc.

What is Value Chain Analysis?

The value chain for any firm in any business is the linked set of value-creating activities all the way from basic raw material sources for component suppliers through to the ultimate end-use product delivered into the final customers’ hands.

The value-chain focus of management today is largely internal to the firm (its purchases, its processes, its functions, its products, its customers).  This perspective is too narrow if considered in a strategic context.

Strategic/competitive advantage is gained through managing the entire value chain from raw material supplier to the end user.

Definition of Management Accounting

Management needs detailed information on different aspects to arrive at meaningful decisions. Financial accounting provides some information but these are not adequate. Management accounting removes these limitations of financial accounting. 

What is Cost Drivers

Cost driver - any factor whose change causes a change in the total cost of a related cost object; more simply, any factor that causes costs.

We assume a causal relation exists between the use of the cost driver and the incurrence of the cost.

Functions of Management Accounting

Functions of Management Accounting include followings:

• Provides data
• Modifies Data
• Analysis and interpretation of data
• Use of Qualitative Information also
• To help in Planning
• To help in Organising
• To help in Motivation
• To help in Co-ordination
• Communication
• To help in Control
• To help in Decision Making

Objectives of Management Accounting

• Providing managers with information for decision making and planning.
• Assisting managers in directing and controlling operational activities.
• Assisting managers in motivating employees toward the organization’s goals.
• Measuring the performance of subunits, managers, and other employees within the organization.

The Fact in Accounting Career

In open economic era, business enterprises are growing in size and complexity faces high competition. The demand of accountants is increasing day by day to provide accounting information for making accurate and effective decision within short period. Now-a-day accounting is used in business enterprise as well as in socioeconomic development.

International Accounting Standards (IAS)

International Accounting Standards has developed a set of standards for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial item.  From 1973 to 2000, international accounting standards (IAS) were issued by the Board of the International Accounting Standards Committee (IASC). IAS has developed 39 principles for stating how particular types of transactions and other events should be reflected in financial statements. In 2001, IASC was replaced by International Accounting Standards Board (IASB) and is now responsible to issue the international financial reporting standards (IFRS).

IAS 1    Presentation of Financial Statements

IAS 2    Inventories

IAS 7    Cash Flow Statements

IAS 8    Accounting Policies, Changes in Accounting Estimates and Errors

IAS 10    Events After the Balance Sheet Date

IAS 11    Construction Contracts

IAS 12    Income Taxes

IAS 16    Property, Plant and Equipment

IAS 17    Leases

IAS 18    Revenue

IAS 19    Employee Benefits

IAS 20    Accounting for Government Grants and Disclosure of Government Assistance

IAS 21    The Effects of Changes in Foreign Exchange Rates

IAS 23    Borrowing Costs

IAS 24    Related Party Disclosures

IAS 26    Accounting and Reporting by Retirement Benefit Plans

IAS 27    Consolidated and Separate Financial Statements

IAS 28    Investments in Associates

IAS 29    Financial Reporting in Hyperinflationary Economies

IAS 31    Interests in Joint Ventures

IAS 32    Financial Instruments: Presentation

IAS 33    Earnings per Share

IAS 34    Interim Financial Reporting

IAS 36    Impairment of Assets

IAS 37    Provisions, Contingent Liabilities and Contingent Assets

IAS 38    Intangible Assets

IAS 39    Financial Instruments: Recognition and Measurement

IAS 40    Investment Property

IAS 41    Agriculture