Textbook Notes (363,141)
Canada (158,218)
York University (12,357)
Accounting (236)
ACTG 2020 (73)
Ben Kelly (11)
Chapter 9

Chapter 9-Actg.docx

4 Pages
Unlock Document

York University
ACTG 2020
Ben Kelly

Jessica Gahtan Chapter 9 Actg2020 Chapter 9: Budgeting - 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 The Basic Framework of Budgeting Definition of Budgeting - 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 Budgets’ Dual Role: Planning and Control - Planning involves developing objectives and preparing budgets to achieve these objectives - Control involves the steps taken by mgmt. to increase the likelihood that the objectives developed at the planning stage are attained – this makes sure that all parts of the org function in a manner that’s consistent with the org’s policies Advantages of Budgeting - 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 Responsible Accounting Responsible Accounting is a system of accountability in which managers are held responsible for those items of revenue and cost over which they can exert significant influence – i.e. the differences b/w budgeted and actual results Continuous or perpetual budget Continuous or perpetual budget is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed Participative budget Participative budget is a method of preparing budgets in which managers prepare their own budget estimates. These estimates are reviewed by the manager’s supervision and any issues are resolved by mutual agreement – leading to a completed budget Budgetary slack is the difference between the revenues and expenses a manager believes can be achieved and the amounts included in the budget. Page 1 Jessica Gahtan Chapter 9 Actg2020 - Slack exists when revenue budgets are intentionally set below expected levels and expense budgets are set above expected standards. This results in misallocation of resources, inefficiencies, waste and lack of effort Budget committee is a group of key personnel responsible for overall policy matters related to the budget program, coordinating the preparation of the budget, handling disputes related to the budget and approving the final budget Behavioral Factors in Budgeting - Stretch budget is a budget that is highly difficult to achieve. Attainment of stretch budgets often requires considerable changes to the way task activities are performed Zero-base budget Zero-base budget is a method of budgeting in which managers are required to justify all costs as if the programs involved were being proposed for the first time The Master Budget: An Overview Sales budget is a detailed schedule showing the expected sales for coming periods; these sales are typically expressed in both dollars and units Cash budget is a detailed showing how cash resources will be acquired and used over a specified period of time Sales Forecasting – A Critical Step - Sales budget is typically based on sales forecast - Based on prior years sales, unfilled orders, etc. Preparing the Master Budget - A sales budget, including a schedule of expected cash collections - A production budget - A direct materials purchases budget, including a schedule of expected cash disbursements for raw materials - A direct labour budget - A manufacturing OH budget - An ending finished goods inventory budget - A selling and admin expense budget - A cash budget - A budgeted income statement - A budgeted balance sheet Production budget is a detailed plan showing the number of units that must be produced during a per
More Less

Related notes for ACTG 2020

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.