ACCT 2101 Chapter Notes - Chapter 9: Budget, Income Statement
Document Summary
A budget is a formal written statement of management"s plans for a specified time period, expressed in financial terms. The role of accounting during the budgeting process is to provide historical data on revenues, costs and expenses; express management"s plans in financial terms; and prepare periodic budget reports. 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. In order to be effective management tools, budgets must be based upon the following (essentials of effective budgeting): A sound organizational structure in which authority and responsibility are clearly defined. Research and analysis to determine the feasibility of new products, services and operating techniques. Management acceptance which is enhanced when all levels of management participate in the preparation of the budget, and the budget has the support of top management.
