Chapter 8 Performance reports Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Budgeting, second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

Performance reports Responsibility accounting: Performance reports: A management accounting system that encourages individuals to work together towards the achievement of organisational goals. Performance reports: A yardstick which compares actual results with the budget. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Budgeting, second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

Responsibility accounting Where each division, branch or other sub-unit is known as a responsibility centre, the manager of which is accountable for the performance of the sub-unit. Responsibility centers: Cost centre Revenue centre Profit centre Investment centre Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Budgeting, second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

Performance reports show any variance that may arise when actual figures are compared with budget figures. Favourable variance (F) means that actual income is >budgeted income or actual cost is <budgeted cost. Unfavourable variance (U) means that actual income is <budgeted income or actual cost is >budgeted cost. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Budgeting, second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

Significant variances (exceed an acceptable limit) are investigated by the manager of the organisational sub-unit.What is considered significant varies from business to business. Reasons for variances are numerous but fall into two main groups: 1. are a result of external factors that management have no control over, and 2. are a result of internal factors that management maybe able to change. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Budgeting, second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

Objective of responsibility accounting Management by exception means that an appropriate person is notified when there is a significant deviation from plan. Performance reports highlight the areas that need attention. Major objective is to ensure that the set targets are achieved at all costs, not trying to find who is to blame. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Budgeting, second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld