Better T1 Doyle Ch11 Pg 189 - 191 Flashcards
What is one key benefit of a budget?
Provides a business with clear objectives to be met.
How does budgeting help identify potential financial problems?
It highlights future cash shortages before they happen.
How does budgeting improve coordination in a business?
Ensures all sections work together to implement the budget.
How can a budget motivate employees?
Gives them clear goals to achieve.
How does a budget help evaluate performance?
Actual vs. expected results can be compared, and areas of poor performance can be corrected.
Example: A1 Driving School expected to spend $3100 on insurance but spent $5900. What should they do?
Investigate the expense, find a cheaper insurer, or adjust the future budget.
What is a master budget?
A full set of budgets prepared for a specific period.
What are the two main areas of a master budget?
Operating budget and financial budget.
What do operating budgets help prepare?
A budgeted income statement.
❓ What are some examples of operating budgets in a manufacturing business?
Sales budget
Production budget (products to be manufactured)
Raw materials budget
Direct labor cost budget
Cost of sales budget
Other expenses budget
What is a capital expenditure budget?
Lists non-current assets that must be purchased to meet business objectives.
What does a cash budget show?
Current cash balance, future inflows and outflows, and expected cash at the end of a period.
How long can a cash budget be prepared for?
How long can a cash budget be prepared for?
