ACTG 2300 Study Guide - Midterm Guide: Opportunity Cost, Business Process, Sunk Costs

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Budget a detailed plan for the future that is usually expressed in formal quantitative terms. Used for two distinct purposes: planning & control. Good planning without effective control is a waste of time and effort. Planning involves developing goals and preparing various budgets to achieve these goals. Control involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. Advantages of budgeting: budgets communicate management"s plans throughout the organization, budgets force managers to think about and plan for the future. Budgeting helps 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. Master budget consists of a number of separate but interdependent budgets that formally lay out the company"s sales, production, and financial goals: culminates in a cash budget, a budgeted income statement, and a budgeted balance sheet.

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