Chapter 14 - Basic Elements of Control

Nonmonetary budget

A budget expressed in nonfinancial terms, such as units of output, hours of direct labor, machine hours, or square-foot allocations. Nonmonetary budget are used by managers at the lower levels of an organization.

Financial budget

A financial budget indicates where the organization expects to get its cash for the coming time period and how it plans to use it.

bureaucratic control

A form of organizational control characterized by formal and mechanistic structural arrangements.

Budget

A plan expressed in numerical terms.

Controller

A position in organizations that helps line managers with their control activities.

financial statement

A profile of some aspect of an organization's financial circumstances.

income statement

A summary of financial performance over a period of time, usually one year.

control standard

A target against which subsequent performance will be compared.

What are the purposes of control?

Adapting to Environmental Change Limiting the Accumulation of Error Coping with Organizational Complexity Minimizing costs

decentralized control

An approach to organizational control based on informal and organic structural arrangements.

Audit

An independent appraisal of an organization's accounting, financial, and operational systems.

preliminary control

Attempts to monitor the quality or quantity of financial, physical, human, and information resources before they actually become part of the system.

Why were budgets developed>

Budgets were traditionally developed by top management and the controller and then imposed on lower-level managers.

Structural control

Concerned with how elements of the organization's structure are serving their intended purpose.

Strategic control

Concerned with how the elements of the organization's structure are serving their intended purpose.

Operating budget

Concerned with planned organizations within the organization. Financial -where you get cash and how you use it.

Financial control

Concerned with the organization's financial resources.

financial control

Concerned with the organization's financial resources.

strategic control

Control aimed at ensuring that the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic goals.

What are the steps in the control process?

Establishing standards Measuring Performance Comparing Performance against standards Considering corrective action

What are the types of budgets?

Financial, operating, nonmonetary.

operations control

Focuses on the processes that the organization uses to transform resources into products or services.

balance sheet

Lists of assets and liabilities of an organization at a specific point in time.

postaction control

Monitors the outputs or results of the organization after the transformation process is complete.

screening control

Relies heavily on feedback processes during the transformation process.

ratio analysis

The calculation of one or more financial ratios to assess some aspect of the organization's financial health.

control

The regulation of organizational activities in such a way as to facilitate goal attainment.