ACTG 2020 Chapter Notes - Chapter 9: Budget, Income Statement, Profit Motive
Document Summary
Budgets are an important tool that management uses to communicate financial objectives for the coming years, allocate resources, and coordinate activities across different functional areas w/in an org. A budget is a quantitative plan for the acquisition and use of financial and other resources over a specified future time period. Master budget is a summary of a company"s plan in which specific targets are set for sales, production, distribution, and financing activities. Generally culminates in a cash budget, a budgeted income statement, and a budgeted balance sheet. Planning involves developing objectives and preparing budgets to achieve these objectives. Facilitates future planning, communication of management"s plans throughout the org. Bottlenecks is when a machine, activity, or process limits total output b/c it"s operating at capacity; budgets help identify bottlenecks. Budgeting can help coordinate activities of the org by integrating plans. Defines goals and objectives that can serve as benchmarks.