ACC 406 Lecture Notes - Lecture 1: Operating Budget, Income Statement, Finished Good

• School: Ryerson University
• Department: Accounting
• Course: ACC 406
• Professor: Alison Beavis

Document Summary

Help business owners and managers to plan ahead and exercise control by comparing what actually happened to what was expected according to the budget. For(cid:373)alize (cid:373)a(cid:374)agers" expectatio(cid:374)s regardi(cid:374)g sales, prices, and costs. Planning: looking ahead to see what actions should be taken to realize goals. Control: looking backwards, determining what actually happened and comparing it with previously planned outcomes. Financial plans for the future and a key component of planning. Before a budget is prepared, a strategic plan should be developed. Identify objectives and actions needed to achieve them: the strategic plan identifies strategies for future activities and operations, generally covering at least five years. Planning: budgeting forces managers to plan for the future. Comprehensive financial plan for the organization as a whole. Typically, it is for a one year period, corresponding to the fiscal year of the company. Yearly budgets are broken down into quarterly and monthly budgets: allows for frequent comparison of actual and budgeted data.