ACCT 116 Lecture Notes - Lecture 6: Total Absorption Costing, Common Stock, Accounts Payable

• School: Drexel University
• Department: Accounting
• Course: ACCT 116
• Professor: Jones Kevin

Document Summary

The master budget is an essential management tool that communicates management"s plans throughout the organization, allocates resources, and coordinates activities. A budget is a detailed plan for the future that is usually expressed in formal quantitative terms. Once the budget is established, actual spending is compared to the budget to make sure the plan is being followed. Budgets are used for two distinct purposes planning and control. Planning involves 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. To be effective, a good budgeting system must provide for both planning and control. Good planning without effective control is a waste of time and effort. Organizations realize many benefits from budgeting, including: budgets communicate management"s plans throughout the organization, budgets force managers to think about and plan for the future.