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Оглавление2. Survey of the Contents
“Management Accounting.” covers the range:
- from the effects of business activities regarding the aspects of profit/loss, liquidity or solvency respectively (presented through surplus of or demand for cash) and balance sheet,
- via the central elements of accounting/controlling: Balance Sheet, Profit/Loss Account, Profit Plan, Finance Plan and Budgeted Balance Sheet,
- as well as to their development from a time-wise point of view – from the past over the current situation (each presented through Balance Sheet and Profit/Loss Account, possibly also through a Cash Flow Statement) to the future (presented through Profit Plan, Finance Plan and Budgeted Balance Sheet).
The following short overview of the elements and connections used is meant to make the structure of “Management Accounting.” easier for the reader and also to help with assigning the contents.
The following elements are presented in this overview:
The presentation of all details of the elements and connections mentioned here happens in the two main parts: Balance Sheet | Profit/Loss Account and Profit Plan | Finance Plan | Budgeted Balance Sheet.
2.1. Balance Sheet
A balance sheet is always a look at the enterprise at a certain point in time. It contains permanently stock values.
The balance sheet presents – referring to a certain point in time – the goods or assets an enterprise has available at exactly this moment and in what way the enterprise is financed at this moment (with equity or debt capital / liabilities).
Figure 1: Balance Sheet
On the left side of the balance sheet, the assets side, the assets of an enterprise are presented, structured into fixed assets (non-current assets) and current assets. On the right side of the balance sheet, the liabilities side, the source of the financial means of the enterprise is presented, differentiating between equity and debt capital.
Detailed explanations concerning the balance sheet follow in chapter 3 - Balance Sheet | Profit/Loss Account.
2.2. Profit/Loss Account
The profit/loss account, in contrast to the balance sheet, is a period of time-oriented reflection of an enterprise, a consideration of the economic development of an enterprise in the course of time. The profit/loss account contains permanently flow values.
In the profit/loss account the result of the business activity (the profit or loss of the enterprise respectively) is presented – in form of the difference between expense and income. The income or turnover/sales which are achieved by selling products, goods or services are compared to the arising expense in the enterprise and the result of the comparison leads to the profit or loss of the enterprise.
Figure 2: Profit/Loss Account
Detailed explanations concerning the profit/loss account follow in chapter 3 - Balance Sheet | Profit/Loss Account.
2.3. Balance Sheet | Profit/Loss Account
The connection between balance sheet and profit/loss account can be seen in the result of the profit/loss account – in the profit or loss.
A profit which has been compiled in the profit/loss account increases the equity in the balance sheet of the enterprise, a possible loss reduces the equity in the balance sheet of the enterprise.
Figure 3: Balance Sheet and Profit/Loss Account
2.4. Balance Sheet | Profit/Loss Account | Profit Plan | Finance Plan | Budgeted Balance Sheet
In the transition from the past-oriented to the future-oriented consideration of an enterprise, the elements mentioned before, Balance Sheet and Profit/Loss Account are replaced by the elements Profit Plan, Finance Plan and Budgeted Balance Sheet.
The Profit/Loss Account is replaced by the Profit Plan.
The Balance Sheet is replaced by the Budgeted Balance Sheet.
The Cash Flow Statement (which has not been presented here) is replaced by the Finance Plan.
Profit plan, finance plan and budgeted balance sheet present the future economic or financial development of an enterprise.
2.5. Profit Plan
The profit plan which is presented here based on the structure of a results statement or contribution margin costing respectively, represents the future-oriented consideration of the expected or planned profit situation of an enterprise. With reference to the contents or the result which must be compiled (profit or loss) the profit plan equals the profit/loss account which is used for assessing the profit situation of an enterprise in a past-oriented way.
The result of both calculating schemes leads to the profit or loss of the enterprise which is denominated with various specific terms depending on the structure it is based on.
Figure 4: Profit Plan and Profit/Loss Account
Detailed explanations concerning the profit plan follow in chapter 5 - Profit Plan | Finance Plan | Budgeted Balance Sheet.
2.6. Finance Plan
The compilation of the profit plan is followed by the finance plan. Based on the planned profit/loss after tax from the profit plan, the development of the liquidity or solvency of the enterprise respectively is planned in the finance plan. The result of the finance plan is the planned surplus of cash or demand for cash of the enterprise.
The planned profit from the profit plan is converted into cash flows in the finance plan.
Figure 5: Finance Plan
Detailed explanations concerning the finance plan follow in chapter 5 - Profit Plan | Finance Plan | Budgeted Balance Sheet.
2.7. Profit Plan | Finance Plan
Profit plan and finance plan are closely linked in various ways. There are links and connections in both directions, from profit plan to finance plan and also back from finance plan to profit plan.
The profit after tax from the profit plan forms the basis for the finance plan. The result of the finance plan, the surplus of liquidity or the demand for liquidity, must be financed or can be invested and so – through the resulting interest payment (interest paid or interest income) – affects the profit plan again.
Figure 6: Profit Plan and Finance Plan
2.8. Budgeted Balance Sheet
The same as the balance sheet, the budgeted balance sheet is a presentation of the enterprise at a certain point in time.
The budgeted balance sheet presents the planned amount of assets that are available to an enterprise at the end of a planned year and also reflects the planned financing of the enterprise at that moment – whether through equity or debt capital respectively.
Figure 7: Budgeted Balance Sheet
A presentation of the budgeted balance sheet follows in chapter 5 - Profit Plan | Finance Plan | Budgeted Balance Sheet.
2.9. Finance Plan | Budgeted Balance Sheet
Under consideration of the items presented in the finance plan, the budgeted balance sheet – for the end of the planned year – is derived from the opening balance sheet at the beginning of the planned year. Each of the figures presented in the finance plan changes one item of the balance sheet from the opening balance sheet to the budgeted balance sheet.
Figure 8: Opening Balance Sheet, Finance Plan and Budgeted Balance Sheet
2.10. Profit Plan | Finance Plan | Budgeted Balance Sheet – The Big Picture
The combination of the two connections described: Profit Plan | Finance Plan and Opening Balance Sheet | Finance Plan | Budgeted Balance Sheet results in a totally closed planning system which represents the central overall connection in accounting/controlling of an enterprise – the Big Picture.
Figure 9: Big Picture
