Budget

1.1 Budget

Budget is one of common things that used in day-to-day life, but in accounting position, budget is one of managerial accounting tools to assist directors to pull off good companies through the manner of accounting itself. Based on day-to-day position, budget can be defined as figure of disbursals or addition that reserved by person, through calculating the possibility the sum of money. Through direction accounting position, Drury ( 2008 ) , define budget as elaborate programs for organizing and program of action for assorted activities in the hereafter. Harmonizing to Rajasekaran ( 2010 ) , budget is fiscal programs for the future actions, or it can be defined as future programs that expressed in pecuniary footings. Other than that, CIMA nomenclature ( 2005 ) defines budgeting as the procedure of create, implement and run the budget until the terminal of the budget period.

Changing Role of Budget and Organizational Structure

As the changing of environment from industrial ages to information ages, the function of direction accounting was altering either. This means that budget as one of direction accounting tools is altering in return. Changing function of budget can be seen from the psychological science position. Budget was used non merely as planning and control tools for a company, but besides as motivational consequence for the workers, even from different organisational degree ( Parker D.L. , 2002, Hoque, 2003, Birnberg J. G. , Luft J. , Shields M. D. , 2007 ) . This motive might assist workers and company to run into the end congruity and the best public presentation of both workers and company. Some research workers besides link the so called relationship with another function, which is information sharing between superior and subsidiaries. Another function of budget in sharing the information to the subsidiaries might increase the public presentation of single worker ( Chong V. and Kar M. C. , 2002, Parker J. and Kyj L. , 2006, Leach-Lopez M. , Stammerjohan W. and McNair F. M. , 2007, Heath R. and Brown J. , 2007, Su J. T. and Lin W.L, 2007 ) , since they have adequate information related to the occupation itself.

Besides, non merely function of budget, but besides the formation of organisational construction, that changed due to environmental alterations. Parker D. L. ( 2002 ) stated that most of companies are traveling to more flexible signifier of organisational construction. Decision-making and budgeting procedure within companies are developing with decentralized and participatory direction manner. This means that workers at different degree of organisational hierarchy can impact the determination in the company, although the power in engagement might be differ for each degree of hierarchy. This can be seen from the research of Majovski I.P. ( 2007 ) , about the direction manner in northern Europe. The consequence proven that most of companies in the part are implementing the flexible and decentralised direction manner.

Budget Process Approach

The alterations in direction manner might impact the degree of engagement of the budgeting procedure attack in return. Harmonizing to Drury ( 2008 ) , in puting up budget there are three ( 3 ) attack of engagement degree, there are top-down budget, bottom-up budget, and blended attack.

Top-down budget is the budget scene that has no or less influence participatory by the subsidiaries or budgetees. Imposed budget is normally used to replace the name of top-down budget. Besides, the low degree directions besides have low power in the engagement and involved in the computations of budget for the top direction. Top-down budget has one chief advantage, which top direction can ever guarantee the end congruity and scheme alliance with the operation. Other than that, top-down budget can cut down the complexness and time-consuming of budgeting procedure. On contrary, it has disadvantages to the budgetee, for illustration, if the budget degree is excessively high and impossible to accomplish, the workers can be de-motivated and create inauspicious public presentation. Disadvantages might besides impact the organisation as a whole, for illustration if the budget degree is excessively easy to achieve, the worker can handle the budget as a box-ticking.

Bottom-up budget is the budget scene procedure that allows full engagement from operational degree. Participatory budget is used for replacing the name of bottom-up budget. Normally, top direction give a general budget guideline for the lower director and subsidiaries, so the flows of budget scene development will be started from the lowest degree. Information will be gathered and grouped along the manner to the higher-level director until approved by both of top direction and budget commission. Bottom-up budget may incur extremely complexness and time-consuming for the overall budget scene procedure. Therefore, it might guarantee the committedness of all degree of company ‘s worker.

The last attack is the blended attack, which is combination of both imposed budget and participatory budget. This blended attack normally called as negotiated budget. This attack starts with the puting up the fiscal public presentation aim by the top direction and it will be distributed down to lower-level workers. Then, runing directors might roll up informations and make the budget based on the aim every bit good as the lower-level workers. After the budget created, it will be reviewed by top direction to make up one’s mind whether the budget is appropriate and approved. This attack might be insistent, if the budget disapproved by top direction until the concluding credence of budget is reached. Negotiated budget might give the budgetee to work hand in glove and within the end congruity of the company. Slack in budget besides can be reduced, due to the appropriate degree of the budget. This attack requires extremely engineering environment companies in puting up the budget.

Problem Statement

Traditional budgeting is a common pattern in the corporate universe

Research workers are reasoning about the rightness of budget in the current environment in information ages. Hope & A ; Fraser ( 2003 ) argue the utility of budget in the current environment state of affairs. They suggest that budget should be abolished and supersedes by another type of managerial accounting tools, viz. beyond budgeting. Thus, based on explorative surveies from several parts around the universe, traditional direction accounting tools are still adopted by bulk of companies. The grounds of the use of traditional tools like budgeting are due to the higher benefit, simpleness, exchanging cost, and so on ( Pavlatos O. & A ; Paggios I. , 2009, Libby T. , Lindsay M. R. , 2009, Uyar A. , Bilgin N. , 2010 ) . Due to the study of those research workers, it means that budgeting is still implemented and adopted in the current environment today, although the function of it could be changed.

Problem arises within the organisation to in puting up the budget degree to the lower director until the operational degree in the hierarchy. Research workers and theoretician in direction accounting are reasoning each other about the engagement in puting up budgets in impacting motive of the workers every bit good as the sharing of information. Company ‘s directions are besides seeking the best attack in the execution of the budget to actuate and accomplish the best public presentation of all workers and directors in every degree of organisation.

Most of research in engagement in budget scene with public presentation done in developed states

Based on one of literatures that have been reviewed, Leach-Lopez M. , Stammerjohan W. and Kyoo S.L. , ( 2007 ) , conclude that there is positive relationship between budget engagement on public presentation ( Brownell P. and McIness M. , 1986, Kren, 1992, Kennis I. , 1979, Searfoss A. and Monczka R. , 1973 ) . Leach-Lopez et Al. ( 2007 ) has done this research in different range and samples. The first research range on the Korean directors in US companies and the 2nd research range on the Mexican directors in US companies. In contrast, the former research merely uses the job-relevant information, whereas the latter research uses both job-relevant information and occupation satisfaction as intervening variables. Even though there were so many researches about the relationship between those two, Brownell P. and McIness M. , ( 1986 ) argue that there is no specific proving on this country, although most of the researches give the same relationship.

Incompatibility found in the intervening function of motive between the relationship between budget engagement on public presentation

Several research workers in the old surveies besides found the positive relationship between budget engagement on public presentation through motive ( Merchant K. 1981, Kennis I. , 1979, Searfoss A. and Monczka R. , 1973 ) . Other than that, Brownell P. and McIness M. , ( 1986 ) did non happen any relationship between the budget engagement with public presentation through motive variable. Kren L. ( 1992 ) besides supports this statement through her research. After Kren ‘s survey, there are several research workers ( Parker J. and Kyj L. 2006, Wong B. , Guo L. and Lui G. 2010, Eker M. , 2006, Chong V. and Kar M. C. , 2002 ) , who try to concentrate on this relationship. The consequence from old researches found an incompatibility of the motive as step ining variable.

Result spread in the relationship of job-relevant information as step ining function between budget engagement on public presentation

Incompatibilities besides found in the function of information sharing through job-relevant information that found in several literatures. Some research workers based on their findings shows that the consequence on job-relevant information in the relation between budget engagement with public presentation is non excessively important. Thus, some said it might give bravery for the workers to execute good in the plants. Analyze on this country, motive and information sharing, might be required in order to see the cogency of the old surveies.

Research Question

Most of the researches have been done in the US, there is no important research about this country in Asia part. In order to see the old findings in this country, this research will scope in the Asiatic part, peculiarly South-East Asia part, although some factors are impacting in this surveies, for illustration the difference in civilization, life style, communicating, and so on. Therefore these are chief two inquiries driven from this survey:

Is there any relationship between engagement of budget on public presentation within Asiatic workers?

Is there any relationship between budget engagement with public presentation through motive?

Is there any relationship between budget engagement with public presentation through information sharing?

Make the consequence of past researches still valid for current environment?

Aim of Study

To cognize whether is at that place any relationship between budget engagement with public presentation within Asiatic workers.

To find relationship between budget engagement on public presentation through motive.

To find relationship between budget engagement on public presentation through information sharing.

To compare the consequence of current research with past researches.

Significance of Study

This survey will give part to concern practicians, particularly top direction of company to put up whether to give power to lower-level workers in engagement on budget scene. Therefore, appropriate degree of engagement and budget degree can be met in the operation, so that company and workers could work in line with the end congruity of the company to accomplish better public presentation. Management will besides cognize the specific relationship of motive and information sharing as step ining variable in the significance with public presentation. Therefore, directors can take whether to use the budget engagement in budget scene or non.

Other than that, this survey besides can convey part to academician on the country of behavioural accounting in pattern. Through this research, academicians can see whether the theories on books and other literatures can be applied in Asia part, with other factors impacting the human resource itself.

Outline of Dissertation

This thesis will be divided into five ( 5 ) chief chapters: Introduction, Literature Review, Methodology, Findings & A ; Analysis, in conclusion Conclusion and Recommendations.

Chapter One – Introduction

Introduction gives reader about overview of current issue in budgeting, the changing of environment that affect function of budgeting and organisational construction in the common concern pattern today. Problems that developed under new function of budgeting are assessed through some literatures. Research inquiries and aims of surveies built in this chapter besides. In the terminal, significance of surveies will be given, to guarantee that this survey contributes for specific readers.

Chapter Two – Literature Reappraisal

In this chapter, literatures from old researches will be assessed in order to give clear image about the specific issue that happened. The issue about the behavioral budget, motive, will be explained in item, along with the relationship with other independent variables. Each of literature will be reviewed in item from its methodological analysis, informations, analysis, consequence, and decisions.

Chapter Three – Methodology

In this chapter, elaborate method in developing this survey will be explained in item, from type of informations, population, samples, instrument, measuring, hypothesis and the informations analysis program.

Chapter Four – Data Analysis, Results & A ; Discussion

Data collected will be analyzed with the statistical bundle for societal scientific discipline ( SPSS ) . The consequence from analysis will be discussed exhaustively.

Chapter Five – Conclusions & A ; Recommendations

This last chapter will reason all the findings and treatment between the consequences that gathered in informations aggregation. Restriction of the survey will be given, along with the recommendation for other research workers. Future research countries, which non covered in this survey, will be given either.

Chapter 2

LITERATURE REVIEW

This chapter will depict all the literature gathered under the budget engagement, information sharing, motive and public presentation, along with its relationship from the past researches. Number of research under this country, budget engagement with public presentation has been done in the past clip, during the twentieth century ( Merchant K. 1981, Kennis I. , 1979, Searfoss A. and Monczka R. , 1973, Brownell P. and McIness M. , 1986 and Kren L. 1992 ) . But still, so many research workers replicates those surveies, but with different step ining variables, measuring every bit good as informations analysis.

This literature reappraisal consists of three ( 2 ) sub-titles, viz. : Budget Participation on Performance through and Budget Participation on Motivation and Performance through Information Sharing. In the last portion of this chapter, decision and theoretical model of this survey will be provided.

Relationship between Budget Participation on Performance through Motivation

Number of literatures found in this country is from the past old surveies and less figure of research worker that focal point in this country. Based on literature found, Searfoss D. and Monczka R. ( 1973 ) do this research to analyze the relationship of budget engagement with the motive of the budgetee to courage the public presentation, along with other step ining variables, need for independency and authorianism. This survey uses the primary informations based on questionnaire that distributed to 365 samples with different degrees of workers and directors. Result found that there is a positive relationship between budget engagement on motive. Positive relationship besides found in the organisational place or degree with the degree of budget engagement. But, there is no relationship between other two step ining variables from the findings of the research.

Kennis I. ( 1979 ) supports the old research on this country, by keeping the research about the budget engagement, lucidity, feedback, attitudes, and self-rated public presentation between 169 operational directors through questionnaire. Result found that engagement in the budget scene could give the motivational consequence to the workers to accomplish better public presentation.

Merchant K. ( 1981 ) has done research to analyze the difference in the budgeting system sing to corporate size, diverseness and decentalisation to be related with motive and attitude toward the budget. Sample size of 170 directors from the companies is collected and responded the questionnaire. Result found that size of corporate give different consequence for each of relationship of the variables. But, by and large positive relationship is found between the engagement toward the attitude of the budget.

Eker M. ( 2006 ) established the extend survey of budget engagement on public presentation, with the step ining variable of organisational committedness. Convenience sampling is chosen to pick the samples of 150 companies between top 500 companies in Turkey. Companies were sent a questionnaire consist of three measuring of those variables. The informations were analyzed by utilizing correlativity analysis, factor analysis, multiple arrested development analysis and t-test. Result found that, organisational committedness is a important step ining variable between the relationships of budget engagement with the managerial public presentation.

Chong V. and Kar M. C. ( 2002 ) conduct the survey within the directors in Australian companies to analyze the relationship between budget engagement and public presentation, with budget committedness and job-relevant information as intervening variables. Samples of 84 directors were asked to make full up the questionnaire and informations were collected. Result found that, budget engagement can heighten the motive in perpetrating the budget. It besides gives the informational consequence to heighten the job-relevant information to back up the public presentation in the terminal. It supports the past surveies about the double function of budget engagement. The former is motivational effects and the latter is informational consequence.

Wong B. , Guo L. and Lui G. ( 2010 ) use the self-government theory ( SDT ) as their footing of research. SDT suggest that engagement needed in the budgeting procedure for the interest of motive, morale, public presentation and occupation satisfaction. In this survey, motive divided into several types, intrinsic, extrinsic, independent and controlled motive. Study has been done in Hongkong by sample size of 101 bank directors through voluntary seminar and questionnaire. Result found that through engagement in budgeting public presentation in the occupation can be increased.

On contrary, Brown and McIness ( 1986 ) , did non happen the same thing like above. Through the empirical survey within 224 middle-level directors in Australia, they did non happen any strong relationship between these two variables.

Kren L. ( 1992 ) examined the relationship about those variables with other step ining variables in the research. By carry oning interview 80 directors of 500 top companies in USA. She found that there was unobvious relationship between public presentations through motive of budget. Therefore, relationship between budget engagement has positive relationship with public presentation itself.

Parker J. and Kyj L. ( 2006 ) develop the survey of the relationship between the budget engagement with public presentation, with the perpendicular information sharing theoretical account between supervisors with subsidiaries in the budgeting procedure. Other than information sharing, organisational committedness and function ambiguity were tested in this survey as step ining variables. Data aggregation within sample size of 70 directors with subsidiaries has been done through questionnaire. The informations were tested with the way analysis with a consequence of the important relationship between the budgetary engagement with public presentation, through step ining variable of information sharing. Other step ining variables were found non important with the chief variables.

Relationship between Budget Participation on Performance through Information Sharing

Chong V. and Kar M. C. ( 2002 ) in the same survey like explained in the old sub-chapter were reasoning that the budget engagement through information sharing of job-relevant information might assist the subsidiaries to work good and accomplish better public presentation.

Parker J. and Kyj L. ( 2006 ) in the surveies like explained in the old sub-chapter besides examine the informational sharing consequence of job-relevant information in the budget engagement that could increase the public presentation of the worker that can non be found in the other intervening variables.

Leach-Lopez M. , Stammerjohan W. and McNair F. M. ( 2007 ) follows and spread out Kren L. ( 1992 ) past surveies on this country. They distinguish the consequence of the budget engagement with public presentation straight and indirectly. Other than that, other step ining variables, occupation relevant information and occupation satisfaction, besides introduced here. The survey conducted within 143 Mexican and American mid-managers in US companies. The analysis was utilizing the past research workers theoretical account, like way theoretical account correlativity, t-test, robustness trial and p-value trial. Findingss show that, there is strong relationship between public presentations in budget engagement. The difference that the writers research than the past researches is the causal mechanism that associating those two variables. The intervening variables, job-relevant information that affects the relationship between independent and dependent variables is alterations with the degree of bilingual ability of the Mexican directors. However, another step ining variable, occupation satisfaction did non give a important relation with those variables.

Leach-Lopez M. , Stammerjohan W. and Kyoo S. L. ( 2007 ) survey is a reproduction of the surveies of old literature by Leach-Lopez M. , Stammerjohan W. and McNair F. M. ( 2007 ) with the same variables and informations analysis in the surveies. The difference in this survey is the samples, by utilizing Korean directors in the US companies, respondents of 71 directors respond for the questionnaire. The findings show the same things as old research, but causal mechanism in the intervening variables is different with the past samples. In this survey, consequence shows that there is important function of the occupation satisfaction as step ining variable between budget engagement with public presentation between Korean directors.

Heath R. and Brown J. ( 2007 ) conducted an drawn-out survey from old research Kren L. ( 1992 ) within 259 workers through questionnaire to analyze the relationship between budget engagement with personal public presentation. But, they manage to associate other variables, job-relevant information and self-efficacy, as step ining variable. Arrested development analysis, coefficient analysis every bit good as t-test have been done for the analysis of the information gathered. Result found that, all those variables are related each other with positive relationship within all degrees of direction in the organisation.

Su J. T. and Lin W.L ( 2007 ) clears the spread of the incompatibility in several accounting literatures about the consequence of public presentation in the budget engagement with step ining variable, information dissymmetry. This survey was held in Taiwan, with a sample size of 168 employees, through questionnaire. Path analysis and correlativity analysis used for analysing the information of the respondents. Based on the findings, the past surveies about the positive relationship between budget engagement on public presentation were proven. Information dissymmetry besides establishes positive relationship as an intervening variable. If the variable is present, public presentation will increase and frailty versa.

Adler R. W. and Reid J. ( 2008 ) survey about the wider range of the consequence of non merely the budget engagement, but besides leading manner on occupation public presentation and satisfaction. Through questionnaire, 40 middle-level director in New-Zealand companies answer the inquiry. Consequence after the information analysis of dependability testing and stepwise arrested development shows that there is relationship between all variables that tested. However, the leading manner shows no relationship as chairing variable with the occupation public presentation of the worker.

Decision

Majority of the past researches done by making cross-sectional surveies in this country, so causal relationship can non be found in all of the surveies. This is could be the unfavorable judgments that occur in the survey. Low generalizability besides being an restriction on the survey. Since most of the surveies about the relationship between engagement in budget scene on public presentation have been done in USA and give the same consequence, survey in the other part might be needed to research in other part. Other than that, information sharing and motive as an intervening variable could be needed answer the incompatibilities in the past surveies.

Theoretical Model

Based on the past literatures, theoretical model between the variables in the survey can be developed as a diagram as follows:

Engagement in budgeting procedure as independent variable will impact positively to public presentation as dependent variable. Motivation could work as step ining variable in this model. From the past findings, motive that related by engagement in budget procedure can impact positively to the public presentation. But still, some research workers found different consequence in the survey. Motivation in this survey can be in signifier of budget committedness. Other than that, function of budget engagement as information sharing could be in signifier of job-relevant information, merely like the old surveies. A spread was found in this function of engagement in budgeting, nevertheless most of research workers treat the job-relevant information as a positive related with the public presentation.

T6Rendell Company * Divisional controllers report to general managers from 1985 onwards * 7 Distinct business units with their own profits, sales * 1980 corporate controllers responsible for 1) financial accounting 2) internal auditing 3) analysis of capital budget * Reports went directly to top management from divisions * Mr.

Hodgkin wanted to play a more active role in establishing budgets and analyasing performance (would personally review budgets and study divisional performance and hired analysts to help) * Divisional managers discussed their budget with top management with divisional controller present * Divisional controllers primary responsibility was to divisional managers as opposed to corporate controllers so Bevins thought he wasn’t getting enough clear info on performance of units * Harrigan: Divisional controllers shouldn’t be “front office spies” if they want to have good working relationships with managers and help them with the control functions * Corporate controllers shouldn’t put divisional controllers in awkward positions regarding more data/opinions on financials. Questions: 1. What is the organizational philosophy of Martex with respect to the controller function? What do you think of it? Should Rendell adopt this philosophy? * Divisional controllers report to corporate controllers Responsible for establishing cost and profit standards and ensure follow through * Not intended to take initiative away from DMs * More formal line relationships as controllers work physically separate from division managers * Set of formal policies, goals, practices that employees (managers) are aware of before beginning in the orgnization * Accounting system controlled by controller division so systems are not tailored to each BU * Divisional managers at Martex like this system because it gives them an unbiased partner with relevant information, controller can do better analysis and there is little argument about cost reports I think this model works for Martex because of the existing culture that has been developed around this model.

People in the organization are comfortable with this type of hierarchy. At Rendell the firm culture gives more power to divisional managers and gives them dedicated staff working under them. The feelings towards corporate are more adversarial so any change in the controller function will feel like a corporate spy as opposed to better communication. This philosophy will not work with Rendell’s culture. It will lead to more reliance on informal organization and poorer communication with corporate. 2. Who should the divisional controllers report to in the Rendell Company? Divisional controllers should report to both management and corporate controllers while ensuring DM are aware of this responsibility. 3.

What should the relationship be between the corporate controller and the divisional controllers. DC should report to CC to the extent that it ensures corporate directives are implemented properly without harming DCs and DMs. DCs should communicate that corporate initiatives are being followed/met within their divisions. 4. Would you recommend major changes in the basic responsibilities of either the corporate controller or the divisional controller? Divisional controllers need to play a stronger role as opposed to being a staff like assistant to DMs. However, having them as a direct report to CCs would conflict with the existing culture between DMs and DCs.

RESPONSIBILITY ACCOUNTING Management Accounting – Responsibility Accounting Planning & control are essential for achieving good results in any business. Firstly, a budget is prepared and, secondly, actual results are compared with budgeted ones. Any difference is made responsibility of the key individuals who were involved in (i) setting standards, (ii) given necessary resources and (iii) powers to use them. In order to streamline the process, the entire organization is broken into various types of centers mainly cost centre, revenue centre, profit center and investment centre.

The organizational budget is divided on these lines and passed on to the concerned managers. Actual results are collected and displayed in the same form for comparison. Difference, if any, are highlighted and brought to the notice of the management. This process is called Responsibility Accounting. RESPONSIBILITY CENTRE A FORMAL DEFINITION OF RESPONSIBILITY ACCOUNTING Responsibility accounting involves the creation of responsibility centres. A responsibility centre may be defined as an organization unit for whose performance a manager is held accountable.

Responsibility accounting enables accountability for financial results and outcomes to be allocated to individuals throughout the organization. The objective is to measure the result of each responsibility center. It involves accumulating costs and revenues for each responsibility centre so that deviation from performance target (typically the budget) can be attributed to the individual who is accountable for the responsibility centre. (Colin Drury, Management and Cost Accounting, sixth edition) Chapter 12 I. CHARACTERISTICS OF RESPONSIBILITY ACCOUNTING

A. Definition. – an accounting system that collects, summarizes, and reports accounting data relating to the responsibilities of individual managers. – an accounting system which tracks and reports costs, expenses, revenues, and operational statistics by area of responsibility or organizational unit. – the system provides information to evaluate each manager on revenue and expense items over which that manager has primary control (authority to influence). – some reports contain only those items that are controllable by the responsibility manager. some reports contain both controllable and uncontrollable items; – in this case, controllable and uncontrollable]e items should be clearly separated. – the identification of controllable items is a fundamental task in responsibility accounting and reporting. B. Some Basic Requirements. – to implement a responsibility accounting system, the business must be organized so that responsibility is assignable to individual managers. – the various managers and their lines of responsibility should be fully defined. – the organization chart is usually used as a basis for esponsibility reporting. – if clear lines of responsibility cannot be determined, it is very doubtful that responsibility accounting can be implemented effectively. – while decision-making power may be delegated for many items, some decisions (related to particular revenues, expenses, costs or actions) may remain exclusively under the control of top management. 2 – several items will be directly traceable to a particular manager’s area of responsibility but not actually becontrollable by that manager. (Items such as property taxes. – Note: the controllability criterion is crucial to the content of performance reports for each manager. II. THE CONCEPT OF CONTROL. A. Absolute Control. – theoretically, a manager should have absolute control over an item to be held responsible for it. – absolute controllability is rare. – frequently, external or internal factors beyond a manager’s control may affect revenues or expenses under that manager’s responsibility. – the theoretical requirement regarding absolute control must often be compromised, since some degree of noncontrollability usually exists. the manager is therefore usually held responsible for items over which that manager has relative control. B. Relative Control. – relative control means that the manager has control over most of the factors that influence a given budget item. – the use of relative control as a basis for evaluation may lead to some motivational problems, since managers may be evaluated on results that may not reflect the manager’s efforts or decisions. – most budget plans assign control on a relative basis in order to develop and use segmental budgets. III. RESPONSIBILITY REPORTS. A.

Basic Features. – a feature of a responsibility accounting system is the varying amount of detail included in the reports issued to different levels of management. – although the amount of detail varies, reports issued under a responsibility accounting system are interrelated. – totals from the report on one level of management are carried forward in the report to the management level immediately above. 3 – data is appropriately summarized, filtered, and/or condensed as information flows upward to higher levels of management. – encourages or allows “management by exception. – two basic methods are applied to present revenue and expense data: (1) only those items over which a manager has direct control are included in the responsibility report for that management level. – any revenue or expense that the manager cannot directly control are not included. (2) include all revenue and expense items that can be traced directly or allocated indirectly to a particular manager, whether or not they are controllable. – in this approach, care must taken to separate controllable from noncontrollable items in order to differentiate those tems for which a manager can and should be held responsible. B. Desired Features. 1. Timely 2. Issued Regularly 3. Format should be relatively simple and easy to read. – confusing terminology should be avoided. – results should be expressed in physical terms where appropriate, since such figures may be more familiar and understandable to managers. – to assist management in quickly spotting budget variances, both budgeted and actual amounts should be reported. – a budget variance is the difference between the budgeted and actual amounts of an item. – because variances highlight areas which require nvestigation, they are helpful in applying the management by exception principle. – reports often include both current and year-to-date analyses. IV. RESPONSIBILITY REPORTS — SEE TEXT FOR AN ILLUSTRATION. V. RESPONSIBILITY CENTERS. 4 A. Basic Concepts. 1. A Segment. – is a fairly autonomous unit or division of a company defined according to function or product line. – function: marketing, production, finance, etc. – product line: shoe department, electrical products, food division. 2. A Responsibility Center. – is a segment of an organization for which a particular xecutive is responsible. – there are three types of responsibility centers: (1) expense (or cost) center. (2) profit center. (3) investment center. B. Expense (Cost) Centers. – a responsibility center incurring only expense (cost) items and producing no direct revenue from the sale of goods or services. – managers are held responsible only for specified expense items. – the appropriate goal of an expense center is the long-run minimization of expenses. – short-run minimization of expenses may not be appropriate. C. Revenue Centers – managers are held responsible for revenues (sales) only. managers of such centers also responsible for controlling expenses of unit as well. D. Profit Centers. – a responsibility center having both revenues and expenses. – the manager must be able to control both of these categories. 5 – controllable profits of a segment are shown when expenses under a manager’s control are deducted from revenues under that manager’s control. – an expense center can be converted into a profit center by the utilization of transfer prices. – i. e. , via the use of transfer prices, “artificial revenues” can be generated for an expense center as it harges other organizational units of the company for its services or product. E. Investment Centers. 1. Basic Characteristics. – a responsibility center having revenues, expenses, and an appropriate investment base. – the manager in charge of an investment center is responsible for and has sizable control over revenues, expenses, and the investment base. – the two most common ways for evaluating the performance of such a center are : (1) ROI (return on investment. ) (2) Residual Income. 2. Determining the Investment Base to be used in ROI calculations. – it is a tricky matter. two key issues which must be resolved in determining the value of the investment base are (1) which assets should be included, and – key question: are the included assets actual controlled by the division managers? (2) how those assets should be valued. – Major alternative: – Original Cost. – Book Value (original cost less accumulated depreciation to date. ) – Replacement Cost. 6 – Note: which ever choices are applied, managers will be motivated in some direction. – companies prefer to evaluate segments as investment centers because the ROI criterion facilitates performance comparisons between segments.

The federal Omnibus Budget Reconciliation Act (OBRA) of 1987; established regulations for nursing homes receiving federal funding that includes reimbursements from Medicare or Medicaid programs. It was signed by President Ronald Reagan, and it was the first major revision to the federal standards for nursing home care since the creation of both Medicare and Medicaid in 1965. This legislation changed the legal expectations of nursing homes and their care. If nursing homes do not comply with these regulations they cannot receive federal reimbursement.

By the OBRA regulations nursing homes are not allowed to have working nurse aides for more than four months unless they are certified. In order to keep working longer than that aides need to go through a training and competency program. The nursing home will be responsible to verify that the aide is registered in their state. Under OBRA a nurse aide registry must consist of aides who have completed a nurse aide training and have successfully passed the competency evaluation program.

The registry must make available the full name of the person, the date his/her training were completed and all the information of any improper conduct. If the person has not practiced in two years he/she may be removed from the registry. OBRA requires that all nursing facilities keep all employees up to date in their trainings. Annual education requires a minimum of 12 hours of training that specially address any weaknesses or areas of concerns that the group may be having.

If the facility holds mentally ill patients the aid needs to be able to show that they have the proper skills to handle situations involving those mentally ill patients. The states can have their own training and competency program, for a program to be approves it must meet OBRA regulations. Such training must have a minimum of 75 hours of training of which 16 need to be supervise practical training hours. There are specific requirements under OBRA for a training curriculum.

Students need to learn proper communication skills and interpersonal skills, they need to learn how to control infections, the appropriate emergency procedures, appropriates safety procedures. They need to learn how to be able to help patients be independent and to respect the patient’s rights. Students need to learn the needed nursing skills, such as how to correctly take vital signs and how to identify abnormal changes in a patient. They need to be able to know the needs needed when working with patients with mental health problems, and how to give care to patients for cognitively mpaired patients. Some requirements under OBRA are: * To provide services that will help promote each resident’s quality of life to the fullest capacity * To maintain the dignity and respect each resident deserves * To develop a care plan for each resident * To conduct an accurate assessment of each resident upon admission to the center and at any required interval in regards to his overall health * To prevent any decline in regards to daily activities, that includes the ability to east, using the toilet, bathing and walking.

The staff of the facility must provide daily living activity care when necessary * To prevent any pressure sores from developing, and if a patient has a sore, to provide any necessary treatment and services to promote healing of such sores, prevent infection, and to prevent any new sores from developing. * To provide the right care for those residents that have urinary incontinence and if it’s possible to try and restore bladder function.

It includes also the use of urinary catheters when appropriate, according to the regulations to prevent any adverse consequences related to the use of them * To prevent any type of accidents, this includes any falls, accidental poisonings or any incident that may cause injuries to the residents * To maintain proper nutrition for residents and to prevent any unnecessary weight loss * To provide the residents with sufficient fluid intake as to prevent any dehydration * To ensure that the resident feel free from any medication errors * To make sure the center has enough nursing staff to take proper care of all the resident’s needs * To make sure that all the residents have the right to choose activities, schedules, and healthcare need and that everything is maintained as it should be * To provide all medication services that appropriately meet the physical and psychological needs for each and every resident * To maintain an accurate, complete, and easily accessible clinical record for every resident OBRA became a law because of all the public growing concern with the very poor quality of care in many nursing homes and due to all the concerted advocacy of advocates, consumers, provider associations, and health care professionals. OBRA changed the care and lives of nursing home residents all across America. Many improvements have improved the care planning of the residents in the nursing home system.

References

FEderal and MA Long term care laws and regulations. (2008). Retrieved July 1, 2013, from MANHR: http://www.manhr.org/fed_ma_laws_regs.aspx State Operation Manual. (2011, January 7). Retrieved July 1, 2013, from Appendix PP: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/som107ap_pp_guidelines_ltcf.pdf Hawes C, M. V. (1997, August). The OBRA-87 nursing home regulations and implementation. Retrieved July 1, 2013, from PUB MED.gov: http://www.ncbi.nlm.nih.gov/pubmed/9256852

Being a mayor of my city, Long Beach, CA, and having some money left after making planned budget expenses, I would primarily think about the opportunities to invest it into a project, which would bring some income into municipal budget in the future. Long Beach is a known tourist attraction, which every year welcomes thousands of tourists and has highly developed infrastructure for entertainment and leisure. That is why my idea can be the following.

I would find a strong financial partner or partners (not more than 2-3) and offer them to build something like a recreation center. We would find some territory, preferably close to the seashore, construct a small 1-2 stored building and open a spa for offering such services as massage, various cosmetic procedures, fitness services, including facilities for physical training, like gym and swimming pool, and so on. It would be a cozy fitness center, which will definitely find its market in Long Beach due to such competitive powers as affordable prices, advantageous location, various high-quality services and stable reputation.

There are several important reasons why I would choose such way of investing 1 million dollars from municipal budget. First of all, such a center would be a new place for our citizens and, especially, for numerous guests of our city to recreate, become fit and beautiful. Besides, it would have a great social significance for our community, because a lot of new workplaces would be opened for people of Long Beach.

Also, as it was mentioned before, certain part of income from this enterprise will constantly flow into municipal budget, giving me (as a mayor) opportunity to spend more money for urgent needs of the city. Finally, it is also important that recreation center is a very prospective project, which can be transformed in the future into a large community center.

Certainly, in that situation, as a potential investor, I will not be concentrated only on this very idea. I will remain absolutely opened for other interesting investment projects, and if someone offers me another profitable and secure business proposal, I would gladly support it and give the money for its implementation. The main criteria are to receive permanent income into city’s budget and to initiate a project with high social significance, which would contribute into positive reaction of local community on this idea and strengthen reputation of city’s authorities.

Firstly, accounting is the measurement, statement or provision of assurance about financial information primarily used by managers, investors, tax authorities and other decision makers to make resource allocation decisions within companies, organizations, and public agencies. The terms derive from the use of financial accounts.

Accounting is the discipline of measuring, communicating and interpreting financial activity. Financial accounting is one branch of accounting and historically has involved processes by which financial information about a business is recorded, classified, summarized, interpreted, and communicated; for public companies, this information is generally publicly-accessible.

Budgeting is the specific plans for saving and spending income and these plans, or budgets, are essential for developing spending and saving priorities. Properly preparing a budget also serves as a reference to check how well money is being managed during a period by allowing managers to see actual revenues and expenses compared to budgeted revenues and expenses. Corrective action can be taken earlier in a period when revenue shortfalls or expense excesses are identified..

Budgets and proper accounting, allow businesses to better utilize the financial resources available to them. To begin with, budgets and proper books of accounts help businesses operate within their means; that is, over the long term, budgets assist businesses in spending less money than they earn. Next, budgets help businesses achieve their financial goals by planning for the future and organizing money into categories such as income, expenses, and savings.

Conclusively, accounting and budgeting roles and benefits in planning and operation of an organization or business is not negotiable. Failure to adhere to the policy, procedure and management of a business through proper accounting and budgeting will lead to disastrous end of such a business

BIBLIOGRAPHY

1. Accounting, budgeting and policies and procedures. (by Edward J. Mcmillan).

Managerial Accounting 222 Week 1 Questions 1-1 How does managerial accounting differ from financial accounting? Managerial accounting and financial accounting differs in who the reporting is for and for what purpose. Managerial accounting is for company managers to use to plan, control, and make decisions regarding specific strategies. Financial accounting is prepared for owners, stakeholders, creditors, and government authorities and is used to verify information regarding the economic stability of a company.

There are also specific guidelines that are used (GAAP) in financial accounting and is mandatory whereas there are no guidelines in managerial accounting and is not mandatory. 1-4Why do companies prepare budgets? Preparing budgets gives a company a quantitative plan that will be used to complete a project or strategy. A budget is a guideline for which resources are used and can be compared for performance reports when determining the effectiveness and profitability of a strategy. 1-13Why do companies that implement Lean Production tend to have minimal inventories?

Companies that implement Lean Production have minimal inventories because they usually implement a just-in-time production strategy where production is only triggered by customer demand. Therefore, the amount of inventory is usually close or equal to customer orders creating minimal, if any, leftover inventory. 8-2Discuss some of the major benefits to be gained from budgeting. Budgets are beneficial because they can show the organization what strategies management is using to accomplish their business goals.

They provide direction for employees to accomplish job duties towards the final result and allows them to understand which strategy is more important through the amount of resources that is allocated towards it. Budgets also ensure that the entire organization is working towards the same goal and provides a starting point for performance evaluations. 8-5Why is the sales forecast the starting point in budgeting? Sales forecasting is the first step in determining the required needs for future production.

In order to create a budget that includes all costs related to producing a product for sale, management must determine how many units are forecasted to sell so that an adequate amount of product is produced to meet demand without excessive costs. 8-9How can budgeting assist a company in planning its workforce staffing levels? When a budget is created, the amount of work and units to be produced is also calculated. With this information, a company can plan for its labor workforce without having unexpected labor overages or shortages at any given time.