ACCT 2000 Chapter : ACCT 2000 Ch 20 Notes
Document Summary
It requires all levels of management to plan ahead. It creates an early warning system for potential problems. It facilitates the coordination of activities within the business. It results in greater management awareness of the entity"s overall operations. It motivates personnel throughout the organization to meet planned objectives. The most common budget is one year, but a budget may be prepared for any period of time: the annual budget is often supplemented by monthly and quarterly budgets. A continuous 12-month budget results from dropping the month that just ended and adding the future month. The budget is developed within the framework of a sales forecast, which shows potential sales for the industry and the company"s expected share of such sales. The budget committee is responsible for coordinating the preparation of the budget: the budget committee ordinarily includes the president, treasurer, chief accountant (controller), and management personnel from each major area of the company.
