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Study Guide

ACC 406- Final Exam Guide - Comprehensive Notes for the exam ( 33 pages long!)

33 pages164 viewsSpring 2017

Department
Accounting
Course Code
ACC 406
Professor
Alison Beavis
Study Guide
Final

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Ryerson
ACC 406
FINAL EXAM
STUDY GUIDE
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Budgeting, Production, Cash and Master Budget CH9
Budgets
- 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alize aagers’ expectatios regardig sales, prices, and costs
Budgeting, Planning, and Control
- Planning and control are linked together
- Planning
o Looking ahead to see what actions should be taken to realize goals
- Control
o Looking backwards, determining what actually happened and comparing it with
previously planned outcomes
Budgets
- Financial plans for the future and a key component of planning
- Identify objectives and actions needed to achieve them
- Before a budget is prepared, a strategic plan should be developed
o The strategic plan identifies strategies for future activities and operations,
generally covering at least five years
Advantages of Budgeting
- Planning
o Budgeting forces managers to plan for the future
- Provide information to improve decision making
- Set a standard for performance evaluation
- Improve communication and coordination
Master Budget
- 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
o Allows for frequent comparison of actual and budgeted data
- A continuous budget is a moving 12-month budget
o As a month expires in the budget, an additional month in the future is added so
that the company always has a 12-month plan on hand
Budget Committee
- Reviews the budget
- Provides policy guidelines and budgetary goals
- Resolves differences that arise as the budget is prepared
- Approves the final budget
- Monitors actual performance as the year unfolds
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Major Components of the Master Budget
- Operating budgets
o Describe the income-generating activities of a firm
E.g. sales, production, finished goods inventory
o Budgeted income statements
- Financial budgets
o Detail the inflows and outflows of cash and the overall financial position
o Budgeted balance sheet
- Operating budget is prepared first
Operating Budget
Sales Budget
- Describes expected sales in units and dollars
- Preparation steps
o Develop a sales forecast
Responsibility of marketing department
Salespeople submit sales projections (bottom-up approach)
o Forecast is reviewed by the budget committee and recommends changes prior
to approval
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