Accountancy Budgeting AAT level 4

Year 1

You will develop a range of skills within the context of planning and control. These include management accounting; statistical analysis; written communication; and variance analysis. The application of standard costing, and its links to budgeting, is also included, although the topic is covered in detail in the Management Accounting: Decision and Control unit.

You will also develop your business awareness. In particular, you will gain an elementary understanding of production planning (efficiency, adjusting for changing inventory levels, material control, staff planning, plant scheduling) and aspects of marketing (competition, promotion, product life cycle and so on). In this context, performance measures are used to set targets and monitor performance. These are not high-level financial indicators, such as return on net assets as learned in other units, but detailed measures relevant to specific budgets. As an example, average hourly labour rate would be relevant to the control of a direct labour cost budget.

Budgeting could be described as the art of the possible. Budgets are constructed from forecasts and plans. Forecasts relate to external factors, over which management may have very little influence. Plans relate to the organisation’s activities and must be managed.