Budgeting and Cost Management Concepts

This assignment delves into various aspects of budgeting and cost management, including budget composition, operating budgets, cost centers versus profit centers, and variance analysis. It provides detailed explanations and examples to illustrate these concepts, making it a valuable resource for students and professionals alike.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Nature of Budgets of Accenture............................................................................................1
1.2 Budget Centres of Accenture................................................................................................2
Source: (Cost Center vs Profit Center,2018)...................................................................................4
1.3 Budget Period of Accenture..................................................................................................4
1.4 Budget Committee of Accenture...........................................................................................5
Budget manual of Accenture.......................................................................................................7
Budgetary process stages............................................................................................................8
Variance analysis of budget of Accenture..................................................................................9
Types of operational budgets....................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Management accounting is the process of preparation of monthly or weekly reports and
books of accounts which provide precise and timely financial information so that managers can
make daily or short term decisions. Accenture is a UK based global management consultation,
technology services and outsourcing, with clients over 120 countries. It requires a good
management in accounting to ensure smooth performance.
This report will cover nature of budgets, their centres, periods, committee and manual. It
will analyse the stages of budgetary process, variance analysis and different types of operational
budgets that Accenture prepares (Hall, 2016).
TASK 1
1.1 Nature of Budgets of Accenture
Budgets are blueprints of plans that are to be followed for a period of time for the
purpose of achieving a goal of Accenture. It is usually expressed in financial terms and helps
with management accounting of company. It shows planned expenditure that may occur or
income may be generated for that time period.
Budget of Accenture is planned and created by using program cost development and
strategy with standards and policy and implementation. This creates a formulation and helps in
creating a budget for the company to ensure better financial performance management.
Budgets are financial in nature. It is prepared priory on the basis of future plans which
have to be put into action. It shows the capital that has to be employed during the particular
period. It helps in coordination of various activities of company so as to perform an efficient
manner. It provides a way of measuring and controlling performances and take necessary
corrective actions, wherever required(Strategic Management,2018).
Accenture uses budget tools, model development and its implementation while preparing
budgets. They use rapid web based budget system development and deployment. Budget
forecasting and 'what if' analysis is also done by the company.
Assessment of previous year budgets is been done and gaps are identified. They find
their areas of strengths and weaknesses and conduct feedback sessions and analysis to create
future budget needs and focus areas.

1.2 Budget Centres of Accenture
Budget centre is an area of an organisation, in which, the manager is responsible for
preparing budgets. The budgets will be compared with actual performance of Accenture under
the budgetary control process.
The budget centre can be a department, section, function, individual or cost centre. It can
be a combination of all of the above as well. Each budget centre is required to create and present
regular financial statements, so that manager of each centre is aware of budgeted and actual
performance of Accenture(Budgets and cost centers example,2018).
Following are the different types of budget centres:
 Cost Centre
Illustration 1: Budgeting system
Source: (Strategic Management. 2018)

This budget centre takes care of all costs of the company. It analyses the costs and check,
if there any, unwanted costs, with help of the budget prepared.
 Revenue Centre
Revenue centre analyses revenue earned by Accenture. It checks whether actual revenues are
meeting the budget revenues..
 Expense centre
 This centre checks expenses incurred by the company. It ensure that there are no
occurrence of excess expenses.
 Profit centre
Profit centre is the reason why company runs in first place. It measures the earned profits and
checks if it is equivalent to estimated profits.
Illustration 2: Cost centre
Source: (Budgets and cost centres example, 2018)
Text 1: expense centre
Source: (Budgets and cost centers example, 2018)

1.3 Budget Period of Accenture
A budget period has to be decided before preparation of budget of company. It is
required, as it helps controlling costs, and makes it easy for finance department to prepare
reports for the management. There should be a specific period of time for the budget. It is
decided on the basis of nature of business, type of industry, their product life and production
cycle, time interval of budget preparation and implementation and accounting period of
Accenture (Kamal, 2015).
Budgets are either capital or operating based. Capital budgets are generally long term
while operational can be either both. Budget periods can be either long or short term. Depending
on the type of budget, the period is decided. In a monthly cycle,the budget period in generally
starts on the 1st of month and ends on 30th. In quarterly cycles, the budget period covers January
to March, April to June, July to September and October to December. Annual budget periods are
either from 1st January to 31st December or 1st July to 30th June.
The budget period in Accenture has been decided, either quarterly on annually.
Illustration 3: Profit centre
Source: (Cost Center vs Profit Center,2018)

1.4 Budget Committee of Accenture
Budget committee of Accenture is group of employees that work together to prepare
budget and exercise control over company. They are completely responsible for implementing
the budgets that have been prepared.
Accenture's budget officer leads budget committee with chief executive of company and
line managers in committee as well. They decide policies and objectives of company. The line
managers forecast budget with help of historical data provided by the officer. Individual budget
of different centres estimates are received and reviewed as well as suggestions are modifications
are done and approved(McLean,McGovern and Davie,2015) .
Once budget period is over, the committee receives and investigates the implementation
of budgets and identifies its errors and poor performances and take corrective measures, if
necessary. Suggestions are given to improve efficiency to achieve the budgetary goals. They are
the ones who keep company on track to ensure smooth operation and financial stability.
Illustration 4: Operating budget
Source: (Operating budget,2018)

budget committee of Accenture looks after yearly budget preparation of every
department in the company and approves them. The committee is only team that can see entire
financial picture of company. They maintain budget manual and ensure that departments stick to
their budgets(Accenture Analysis,2013).
The work done by the budget committee are
 Listening to suggestions.
 Identifying and discussing issues.
Illustration 5: Budget Analysis
Source : (Accenture Analysis, 2013)

 Future planning.
 Adjustments and corrections.
Budget manual of Accenture
A budget manual is a list of instructions created by the company, that has to be followed
while preparing the budget. It contains the routine procedures and programs that have to be
followed, the duties and responsibilities of the budget committee. Budgets are drawn while
keeping the objectives of Accenture in mind(McLellan,2014).
The budget manual is to be clear and divided into sections according to each department,
so that it can be easy for the managers to follow it. A schedule is created with the entire
budgeting program process mentioned. It contains the procedure to be followed, methods of
accounting, control of expenditure, outline of main budgets and accounting relationships.
Budget manuals make the task of preparation of a budget easier. Accenture, being a large
company, requires a budget manual. A single person will not be able to prepare a budget. It
needs to be coordinated among a group of people. Each group works closely together, to gather
data and information, so that they get a basic idea of the budget that they will have to prepare. It
is a tool for making decisions and creating a forecast of income and expenditure. It helps in
monitoring the company's performance as well.
Illustration 6: Budget composition
Source: (Budget Manual,2018)

Budgetary process stages
Stages of budgetary process has to be followed to ensure the proper preparation if the
budget of the company. Accenture follows a budgetary process with the following stages:
 Communication of policy guidelines
The manager responsible for the preparation and communication of the budget
policies has to call meetings and communicate and delegate the work that has to
be done. He will have to address the important guidelines that will help create the
budget.
 Determination of output restricting factors
Accenture's performance can be restricted at times due to external or internal
factors. The budget committee has to determine these restrictions,which cause a
decrease in performance ,so that the budget can be planned accordingly.
 Preparation of budgets
Forecasts are done with the information provided by the managers and the
preparation of budgets commence. It is important that forecasting be done,
because the budget is dependent on them. Standards and policies are followed as
well(Van der Stede, 2015).
 Initial Preparation
Once the forecasting is done and all the rules and policies are adhered to, and are
sent to the senior managers, they prepare the budget with Accenture's goals and
objectives in mind.
 Coordination of budgets
The budget that has been created will be reviewed by each manager in every
department. If there is some disagreement, it is informed to the person in charge.
Revision of the budget is done, suggestions are made and the balance sheet
statement and cash budget are prepared for the final jury.
 Acceptance
Summarization of the budgeted profit and loss, balance sheet and cash budget are
done and a master budget is created. Once approved by all the managers, it is
accepted and put into action.
 Budget review

Once put into action, the budget gets reviewed from time to time to check the
actual and pre planned performance. If there seems to be a negative result,
investigations are done and corrective measures are taken(Budget Manual,2018).
Variance analysis of budget of Accenture
Variance analysis of budget is the valuable tool of management that helps keep track of
the company's goal and make sure that the budget is being followed accordingly. It is the
investigation in quantitative form in which the difference between the actual and planned
behaviour of performance are measured. This helps maintain control over the company.
The types of variances are material, labour, variable overhead, fixed overhead and sales
variance. Variance analysis is done to study the fluctuations that occur and try to find a solution
for it. Accenture's managers examine the variances in each part of the budget and evaluate it's
significance. If there are any problems found, they talk to the supervisors and employees to
determine the root cause of the problems that have occurred. Once the problem is discovered, the
budget is revised accordingly(Variance Analysis, 2018).
Variance analysis is important in budgeting. It helps in the controlling of budgeted vs.
actual costs, finds out the materiality of the company, build relationships between different pairs
of variables and most importantly help in the forecasting of Accenture.
Illustration 7: Budgeting Process
Source: (Fields action science report,2014)

Types of operational budgets
Operational budgets are statements that present the financial plan for each responsibility
centre in the budget period and reflects the operating activities that involve revenues and
expenses. It is prepared in advance with the goals of Accenture kept in mind(What is an
operating budget, 2018).
There are mainly three types of operational budget:
 Expense Budget
This is an operating budget that records the expected expenses during the budget period.
There are generally three kind of expenses that are evaluated; fixed, variable and
discretionary expenses.
 Revenue budget
Revenue budget identifies the revenues required by the company and projects the future
sales of Accenture.
 Profit budget
Illustration 8: Budget vs Actual costs
Source : (Variance Analysis, 2018)

This is a combination of expense and revenue budgets. It shows the gross and net profits
of the company. Profit budgets are used to make the final resource allocation, control
various activities, check adequacy of expense budgets and assign managers their share of
responsibility.
CONCLUSION
From the above report on management accounting of Accenture, it can be conclude that
the company's budgeting system for planning and controlling, that their budgets have been made
in a systematic format, with proper arrangements of budget centres of each department and
proper budget periods, which are quarterly and annually made. The budget manual consists of
the correct rules, polices and instructions that are required in order to prepare the budget.
The stages in budgetary process of Accenture is well followed and implemented. The
variance analysis helps in keeping track of the actual and planned budgets and determination and
corrections of the causes of any downfall in performance.

REFERENCES
Books and journals
Hall, M., 2016. Realising the richness of psychology theory in contingency-based management
accounting research. Management Accounting Research.31. pp.63-74.
Kamal, S., 2015. Historical Evolution of Management Accounting. The Cost and Management.
43(4). pp.12-19.
McLean, T., McGovern, T. and Davie, S., 2015. Management accounting, engineering and the
management of company growth: Clarke Chapman, 1864–1914. The British Accounting
Review. 47(2). pp.177-190.
McLellan, J.D., 2014. Management Accounting Theory and Practice: Measuring the Gap in
United States Businesses. Journal of Accounting, Business & Management.21(1).
Van der Stede, W.A., 2015. Management accounting: Where from, where now, where to?.
Journal of Management Accounting Research.27(1).pp.171-176.
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UQjCPkQjxx6BAgBEAI&url=https%3A%2F%2Fdocs.servicenow.com%2Fbundle
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%2Fconcept
%2Fc_BudgetsAndCostCentersExample.html&psig=AOvVaw0Y89FLQUe_e-
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