ACCT1022 Chapter Notes - Chapter 9: Income Statement, Cash Flow, Financial Statement

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Chapter Nine: Financial Planning and Analysis The Master Budget
Financial Planning and Analysis (FP&A) Systems
System that helps managers assess the company’s future and know if they are
reaching their performance goals
o Planning
o Measuring and recording results
o Evaluating performance
Purpose of Budgeting
Budget: a detailed plan, expressed in quantitative terms that specifies how
resources will be acquired and used during a specified period of time
o Planning
o Facilitating communication and coordination
o Allocating resources
o Controlling profit and operations
o Evaluating performance and providing incentives
Types of Budgets
Master budget/profit plan: comprehensive set of budgets covering all phases of an
organization’s operations for a specified period of time
Budgeted financial statements/forma financial statements: show how the
organization’s financial statements will appear at a specified time if operations
proceed according to plan
Capital budget: a plan for the acquisition of capital assets
Financing budget: a plan that shows how the organization will acquire its
financial resources
Rolling budgets/revolving budget/continuous budget: continually updated by
periodically adding a new incremental time period
The Master Budget: A Planning Tool
Sales of Services or Goods
Budget is based on the forecasts of what goods/services will be sold that period
Sales Forecasting
Critical step in the budget and difficult to do accurately
Starting point is generally the level of sales in the prior year
Operational Budgets
Specifies how its operations will be carried out to meet the demand for its goods
or services
Operational budgets differ because they are adapted to the operations of
individual companies in various industries
Financing Budgets
Project their cash flow and identify likely cash shortfalls and surpluses
Cash receipts budget provides information about the cash flows into the company
based on sales of its services or products
Activity Based Budgeting
1. Specify the products or services to be produced and the customers to be served
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Document Summary

Chapter nine: financial planning and analysis the master budget. Financial planning and analysis (fp&a) systems: system that helps managers assess the company"s future and know if they are reaching their performance goals, planning, measuring and recording results, evaluating performance. Sales of services or goods: budget is based on the forecasts of what goods/services will be sold that period. Sales forecasting: critical step in the budget and difficult to do accurately, starting point is generally the level of sales in the prior year. Operational budgets: specifies how its operations will be carried out to meet the demand for its goods or services, operational budgets differ because they are adapted to the operations of individual companies in various industries. Financing budgets: project their cash flow and identify likely cash shortfalls and surpluses, cash receipts budget provides information about the cash flows into the company based on sales of its services or products.

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