ACCOUNTING PROCEDURE AND BUDGET CONTROL
ACCOUNTING PROCEDURE AND BUDGET CONTROL
International Consultancy
WHAT ARE ACCOUNTING METHODS?
There are two types of Accounting Methods. They are:
Cash Accounting
Accrual Accounting
1. Cash Accounting
Cash Accounting is the simplest form of accounting. This type of accounting is used by small businesses. In cash accounting, transactions are only recorded when there is cash spent or received.
2. Accural Accounting
Accrual Accounting is an accounting method in which revenue and expenses are recorded whenever a transaction takes places and it depicts the true financial condition of the Company. Thus, where a bill is raised it is depicted in record even when the payment is yet to be received. In the same way expenses are recorded even when payment is yet to be made.
What is Cost Accounting?
Cost Accounting is the process of analyzing of the Company’s Cost Structure incurred in obtaining of raw materials to the formation of the finished goods and placing the same in the market for the supply of the same to the end user. It helps in understanding the Company’s financial standpoint in the market. It depicts where the company has incurred expenses of the company. This further helps in creating standardization of the product created by the Company and also in understanding were expenditure is to be minimized and where the investment is to be done.
Legallands provides the professional accounting services including financial statement preparation, return filing, accounting documentation and compliances.
What is Budgetary Control?
Budgetary control is the process of analyzing the income and expenditure of the company. This includes daily comparison of the actual income and expenditure of the Company with the planned income and expenditure. The main reason for doing so is to have a clear picture about the position of the Company in the market. If there is deviation for the same then the analysis of Budgetary Control helps in taking corrective measures to solve the issues.
What is Budgetary Control Process?
The process is as follows:
- Analyzing Actual Position of the Company
- Comparison of Actual Budget with Planned Budget
- Understanding Reasons for Variance
- Corrective Measures
- Implementation of the Corrective measures
1. Analyzing Actual Position of the Company
The First Step of the Budgetary Control Process includes analyzing the actual position of the company. It includes the studying of the expenditure and income of the company in the manufacturing of the finished goods and providing of services to the end consumer.
2. Comparison of Actual Budget with Planned Budget
When the analysis of the actual position of the company is complete then the next step comes into purview. The comparison of Actual income and expenditure and the planned income and expenditure. This is the most significant step in the complete process of budgetary control. This step explains where the company should focus on so to have lower the expenditure and to have higher income/profits. Thus, a budget is planned explaining how much cost should be incurred in forming the finished goods so that the same can be strictly followed for deriving the same. On a regular basis it is checked whether planned income and expenditure matches with the actual income and expenditure and if the same is lagging behind corrective measure are been determined to fix the issue.
3. Understanding Reasons for Variance
It is crucial to know the reasons for variance. The deviation clarifies where more attention is to be needed. Regular checks brings in close scrutinization of each task taking place thus, variation at the initial stage can be analyzed and resolved which is a very effective method in saving resources of the company.
4. Corrective Measures
After the step of understanding the reasons for variance the next step is to take corrective measures. Proper corrective measures can be taken only if the earlier stages are followed accurately. Corrective measure includes taken of necessary steps for avoiding the lagging of the actual income and expenditure from the planned income and expenditure. Certain corrective measures that can be taken are:
- Check on transportation services
- Human Resource analysis
- Halting expenditure on sectors which is not bringing profit
- Analysis of funding
- Redefining of objectives
- Resource assessment
5. Implementation of the Corrective measures
After the corrective measures are determined, this is the final step where the corrective measures are implemented in accordance to issue raised. Such corrective measures are to be implemented strictly. For example: If the issue is with transportation services. It is to be understood whether there should be an increase or decrease in requirement of transportation services. How much has been invested for transportation services. Whether or not such investment incurred have provided with positive result. Determining transportation mode and to know which mode is more cost efficient with better and effective result. Further which transportation method is less time consuming.
Legallands provides with an efficient team in providing the best financial planning and budgeting services and further assists the Company in moving forward to profit maximization.
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