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ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting

Which of the following is the main purpose of a budget manual?

A budget manual sets out the procedures, responsibilities, forms and timetable for preparing budgets. It guides those involved in the budget process. It is not a record of variances, a forecast statement of financial position or the identification of the limiting factor.

  1. ATo set out the procedures, responsibilities and timetable for preparing budgetsCorrect
  2. BTo record the actual results compared with budget each month
  3. CTo show the forecast statement of financial position at the year end
  4. DTo identify the single resource that limits the activity of the business

Explanation

A budget manual gives instructions on how budgets are prepared, who is responsible, the forms to use and the timetable. Recording variances is budgetary control reporting, a forecast statement of financial position is part of the master budget, and the limiting resource is the principal budget factor.

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