ACCT-241 Lecture Notes - Lecture 8: Budget, Income Statement

• School: American University
• Department: Accounting And Taxation
• Course: ACCT-241
• Professor: teto

Document Summary

A budget is a detailed plan for the future that is usually expressed in formal quantitative terms. Budgets are used for two distinct purposes planning and control. Planninginvolves developing goals and preparing various budgets to achieve those goals. Control involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Organizations realize many benefits from budgeting, including: budgets communicatemanagement"s plans throughout the organization, budgets force managers to think about and plan for the future. Budgeting helps to ensure that everyone in the organization is pulling in the same direction: budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance. The basic idea underlying responsibility accounting is that a manager should be held responsible for those items and only those items that the manager can actually control to a significant extent. Operating budgets ordinarily cover a one-year period corresponding to the company"s fiscal year.