Accounting Business Reporting for Decision Making

406 Accounting: Business Reporting for Decision Making

9.5 Explain why it is important to link operational budgets to strategic plans. LO2

9.6 Discuss why the budget is prepared in a quantitative format. LO2

9.7 Explain why the sales budget is often referred to as the ‘cornerstone of budgeting’. LO3

9.8 State the different types of budgets that may be prepared to construct the master budget. LO3

9.9 For the budgets you identified in 9.8 above discuss the type of information provided in

each budget and who in the entity would provide such information. LO3

9.10 Discuss the differences in the type of budgets applicable for a manufacturer compared

to a government department. LO3

9.11 What is a chart of accounts and what is its role in the budgeting process? LO4

9.12 Explain the main steps in the budgeting process. LO4

9.13 ‘Budgets need to be reviewed in the light of actual performance.’ Discuss. LO6

9.14 Differentiate between authoritarian and participative styles of budgeting. LO7

9.15 Explain the benefits of preparing a cash budget for an entity. LO5

9.16 Explain the similarities and differences between the cash budget and the statement of

cash flows discussed in chapter 7. LO5

9.17 Explain the difference between planning and control. LO6

9.18 Discuss the typical role of the accountant in the budget process. LO6

9.19 Explain the meaning of the term ‘budgetary slack’. LO7

Exercises

 BASIC |   MODERATE |    CHALLENGING

9.20  LO4

Lawyers R Us operates in the local neighbourhood and has six solicitors who work on client

briefs. For the coming year, each solicitor is budgeted to work 1600 billable hours. The main areas

of law work that Lawyers R Us specialises in are conveyancing, litigation, and family law. The

breakdown of the billable hours per area of law is as follows.

Charge out rate

to clients

Percentage of billable hours per area of law

Solicitors Conveyancing Litigation Family law

B Byron

W Smith

Y Dixon

C Yang

W Wong

P Pham

$600 per hour

$1000 per hour

$500 per hour

$900 per hour

$1100 per hour

$1000 per hour

50%

100%

50%

100%

75%

100%

25%

100%

Required

Prepare a sales or fees budget for the coming year based on the information provided above.

9.21  LO5

From the following data for Acoustic Sales, calculate the receipts from accounts receivable for

September, October and November of 2018.

Actual Estimated

July August September October November

Credit sales $110 000 $95 000 $97 000 $111 000 $92 000

Credit sales are normally settled according to the following pattern: 20 per cent in the month of

the sale, 50 per cent in the month following the sale, and the remainder in the second month

following the sale.