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On question 8 part iii) the answer states:
In some budget systems expenditure which has passed through the budget review procedure
automatically becomes approved for commitment without additional formality. In other words,
the identification of an expense for a particular budget centre is the formal approval that the head of the centre may go ahead and incur such an expense. No further detailed control in relation to this would occur until the actual expenditure was reported as part of the financial control system.I don’t fully understand what this means? Please can you explain it to me?
Many thanks
One use that is often made of budgets is that once the budget is finalised, then it gives managers the authority to act as per the budget.
For example, if we budget to spend $10,000 a month on wages, then the manager responsible has permission to spend $10,000 a month without getting any more approval.Oh ok, thanks. I’ve got another question this time on 10 Zatler plc part b) the statement of variances which reconciles the actual with the budgeted profit.
For the Sales Volume total of $11460 how is this treated?
This is adverse but I don’t think it is included in the Adverse Total column of $192776, however it must be deducted off of the Original Budget profit of $219200 in order to get the Actual profit of $29825 otherwise if you deducted the total of $177915 off of the Original Budget profit you would get $41285 not $29825. Perhaps I am missing something here?
In future you must start a new thread when you are asking about something else.
It is so that everyone can better from answers – we cannot give simply free private tuition.The answer to your question is true – there is a typing mistake and the total of the adverse column is not correct. However if you add up the variances correctly, then it all works.
I’ve only just realised that you can do a search that brings up the same information from the thread so I can understand how this will benefit others if it is done separately.
I will make sure that I do this going forwards.Thanks for confirming this as I can see how the variances do add up correctly.
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