ACC 406 Chapter Notes - Chapter 9: Income Statement, Finished Good
28 Jun 2018
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ACC Chapter 9 – Budgeting, Production, Cash and Master Budget
Budgets are financial plans for the future and are a key component of planning
The strategic plan identifies strategies for future activities and operations, generally covering
the last five years
Advantages of budgeting
Its forces managers to plan
It provides information that can be used to improve decision making
Provides a standard for performance evaluation
Improves communication and coordination
A vital part of the budgetary system, control is achieved by comparing actual results with
budgeting results on a periodic basis
The master budget is the comprehensive financial plan for the organization as a whole (one
year period)
Continuous budget is a moving 12 month budget, as a month expires another month is added
The budget committee reviews the budget, provides policy guidelines and budgetary goals,
resolves differences that arise as the budget is prepared, approves the final budget, and
monitors the actual performance of the organization as the year unfolds
Budget director – the person responsible for directing and coordinating the organization’s
overall budgeting process
Operating budgets – describe the income generating activities of a firm; sales, production, and
finished good inventories
Financial budgets detail the inflows and outflows of cash and the overall financial position
The operating budget consists of a budgeted income statement accompanied by the following
support schedules
Sales budget
oApproved by the budget committee and describes expected sales in units and
dollars
oOne approach to forecasting sales is the bottom up approach – requires
individual salespeople to submit sales predictions
Production budget
oHow many units must be produced to meet sales needs and to satisfy ending
inventory requirements
oUnits to be produced = expected unit sales + units in desired ending inventory
(EI) – units in beginning inventory (BI)
Direct materials purchases budgets
oTells the amount and cost of raw materials to be purchased in each time period
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Acc chapter 9 budgeting, production, cash and master budget. Budgets are financial plans for the future and are a key component of planning. The strategic plan identifies strategies for future activities and operations, generally covering the last five years. It provides information that can be used to improve decision making. A vital part of the budgetary system, control is achieved by comparing actual results with budgeting results on a periodic basis. The master budget is the comprehensive financial plan for the organization as a whole (one year period) Continuous budget is a moving 12 month budget, as a month expires another month is added. The budget committee reviews the budget, provides policy guidelines and budgetary goals, resolves differences that arise as the budget is prepared, approves the final budget, and monitors the actual performance of the organization as the year unfolds. Budget director the person responsible for directing and coordinating the organization"s overall budgeting process.
