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Chapter 9

Chapter 9 - Budgetin, Production, Cash and Master Budget
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Department
Accounting
Course
ACC 406
Professor
Vincent Cappelli
Semester
Winter

Description
ndWednesday February 22 2012 Chapter 9 Budgeting Production Cash and Master Budget Description of Budgeting all business should prepare budgets all large business do singleowner business partnerships and corporations even small business professional corporations like lawyers dentists and doctorsall can benefit from planning and control provided by budgetsBudgeting and Planning and Control planning is looking ahead to see what actions should be taken to realize particular goals control is looking backward determining what actually happened and comparing it with the previously planned outcomes budgets are financial plans for the future and are a key component of planning they identify objectives and the actions needed to achieve them before a budget is prepared an organization should prepare a strategic plan strategic plan identifies strategies for future activities and operations generally covering at least 5years the basis of budget is long and short term goalsAdvantages of Budgeting budgetary system gives an organization several advantagesForces mangers to planIt encourages managers to develop an overall direction for the organization foresee problems and develop future policiesProvides information that can be used to improve decision makingEX a restaurant owner who knows the expected revenue and costs of meat vegetables cheese etc might make menu changes that play up the less expensive items and reduce the use of more expensive ingredients these better decisions keep customers happy Provides a standard for performance evaluationBudgets set standards that can control the use of a companys resources and motivate employees vital part of budgetary system is control which is achieved by comparing actual results with budgeted results A large difference between actual and planned results is feedback revealing that the system is out of controlImproves communication and coordinationBudgets formally communicate the plans of the organizations to each employee Since budgets for various areas and activities of the organization must all work together to achieve organizational objectives coordination is promotedRole of communication and coordination becomes more significant as an organization increases in sizeThe Master Budget is the comprehensive financial plan for the organization as a whole master budget is for a one year period corresponding to the fiscal year of the company yearly budgets are broken down into quarterly and monthly budgets the use of smaller time periods allows managers to compare actual data with budgeted data more frequently so that problems may be noticed and resolved sooner
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