Budgeting and Standard Costing (Accounting for Non-Accountants Book 5)

The Book:

Chapter 11: Budgeting

In this chapter I introduce budgeting, including out-turn/year's forecast, and show how it ties into the management process. I do believe in budget, budget, budget. From a financial point of view, budgeting results in a set of financial documents in the form of an income statement, balance sheet and cash flow forecast. These statements are prepared, and approved prior to a defined future period, for the purpose of attaining specific objectives. I will also introduce the concept of preparing an out-turn or year's forecast at set times during the year. Here the focus is on the expected year end position.

One example will take you through the preparation of a Cash Budget followed by interpreting the results. A second example will take you through the preparation of a Cash Budget, Income Statement and Balance Sheet.

Chapter 12: Standard Costing

Standard costing is similar to budgeting in many ways. Instead of looking a whole business, standard costing basically sets "budgets" for products or services. These can then be used to compare actual results or each product/service. We all set personal standards, e.g. how long it takes to get to work; will depend on road conditions, performance of vehicle and the abilities of the driver. Through to standards for personal behaviour.

Following an introduction I will then provide worked example on the analysis of variances with suitable comments on the results. I will show both a tabular method for variance analysis and a formula method.