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Lecture 2

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									Management Accounting

Atiq ur Rahman
Mardan Institute of Management Studies

Lecture 2 Budgets
• Fixed and Flexible Budgets Do not Change with the level of activity Change with the level of activity

Rolling Budgets

A rolling budget is one that is kept continuously up to date by adding another accounting period (e.g. month or quarter) when the earliest accounting period has expired.

Rolling Budgets

To keep tight control and always have an accurate budget for next 12 months.

Rolling Budgets

1 2 3

4

The Budgeting Process is more accurate. Much better information for performance management. More relevant by the end of the traditional budgeting period. Forces management to take the budgeting process more seriously

Rolling Budgets

1 2 3

More Costly and Time Consuming. An increase in budgeting work may lead to less control of the actual results. There is a danger that the budget may become ~ {Last Budget +/- a bit}.

Rolling Budgets
A Company using rolling Budgeting and Sales Budget is as follows: Actual sales for Qtr-1 were Rs 123,450. The adverse variance is fully explained by competition being more intense than expected and growth being lower than anticipated. The budget committee has proposed that the revised assumption for sales growth should be 3% for Quarter 2, 3 and 4

Qtr-1 Rs

Qtr-2 Rs

Qtr-3 Rs

Qtr-4 Rs

Qtr-5 Rs

Sales

125,750

132,038

138,640

145,572

542,000

Rolling Budgets
The revised budget should incorporate 3% growth starting from the actual sales figure of Q-1 and should include a figure of Qtr-1 of the following year (say Q-5)

Qtr-2 Rs Sales 127,154

Qtr-3 Rs 130,969

Qtr-4 Rs 134,898

Qtr-5 Rs 531,966

Budget ===Rs Budget =Rs Budget RsRs Budget 123,450 X X103% 130,969 103% 542000 X 123,450 / 125,750 127,154 X103%


								
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