Budgeting

Question 1

a plan expressed in quantitative terms, on how to acquire and use the resources of an entity during a certain future period of time.

Answer 1

Budget

Question 2

the process of creating a formal plan and translating goals into a quantitative format

Answer 2

Budgeting

Question 3

also called as management or executive committee, is primarily responsible in developing and institutionalizing budgetary systems and processes. It is usually composed of sales manager, production manager, the chief engineer, and the contractor.

Answer 3

Budget Committee

Question 4

a detailed set of information and guidelines about the budgeting processes.

Answer 4

Budget Manual

Question 5

the length of time for which a budget is to be prepared and implemented.

Answer 5

Budget Period

Question 6

it represents the overall plan of the organization for a given budget period. It consists of all the individual budgets for each segment of the organization aggregated or consolidated into one overall budget for the entire firm.

Answer 6

Master Budget

Question 7

Master budget is composed of:

Answer 7

• Operating Budget
• Financial Budget
• Special Budget

Question 8

the budgeted income statement for a certain budget period

Answer 8

Operating Budget

Question 9

the budgeted balance sheet as of the end of a certain period

Answer 9

Financial Budget

Question 10

it includes performance and capital budgets.

Answer 10

Special Budget

Question 11

the activities to be incurred are to be prioritized based on its order of relevance in line with a defined goal in the coming period without regard to past experience or present condition.

Answer 11

Zero-based Budgeting

Question 12

this budgetary approach emphasizes the decentralization of budgetary decision-making. It places local managers and other staff at the center of the budget preparation process, making them responsible for both the preparation and the maintenance of the budget.

Answer 12

Site-based Budgeting

Question 13

a time framed is maintained (12 mos. or 6 mos.), and when a segment in a budgeted time frame expire and is dropped, a new segment is to be added to maintain the same time frame.

Answer 13

Continuous (Rolling) Budgeting

Question 14

it is done over the entire life span of a product starting from its period of conception, to infancy, to growth, expansion, up to maturity.

Answer 14

Life-cycle Budgeting

Question 15

budgets are developed through joint decision-making by top management and operating personnel.

Answer 15

Participatory Budgeting

Question 16

budgets are prepared by top management with little or no input from operating personnel.

Answer 16

Imposed Budgeting

Question 17

costs and expenses are not segregated to fixed and variable components and the budgeted costs, without the adjustments to actual capacity, serves as the basis in evaluating actual performance.

Answer 17

Static (fixed) Budgeting

Question 18

prepared for different level of activity, costs and expenses are segregated to fixed and variable components giving way to the determination of estimated costs based on actual capacity.

Answer 18

Flexible Budgeting

Question 19

expressed in units of materials, number of employees, or number of man hours or service units rather than in pesos.

Answer 19

Physical Budgeting

Question 20

identifying responsibility centers where revenues and costs are controlled by a responsible officer.

Answer 20

Responsibility Budgeting

Question 21

it is the practice of linking the allocation of resources to the production outcomes. The objective is to allocate government resources to those service providers or programs that use them most effectively.

Answer 21

Outcome-focused Budgeting

Question 22

it is referred to as the “historical” approach because administrators and chief executives often base their expenditure requests on historical expenditures and revenue data. It also offer flexibility in the amount of control established over the use of resources, depending on the level of expenditure detail (e.g., fund, function, and object) incorporated into the document.

Answer 22

Line-item Budgeting

Question 23

budgeted expenditures are based on a standard cost of inputs multiplied by the number of units of an activity to be provided in that time period. The total budget for an organization is the sum of all the standard unit costs multiplied by the units expected to be provided.

Answer 23

Performance Budgeting

Question 24

standards are established as a basis of actions and performance; also as a motivational factor.

Answer 24

Standard-setting

Question 25

concrete plans, targets and activities are develop

Answer 25

Planning

Question 26

goals and processes should be effectively communicated and coordinated to encourage participation, involvement, commitment, and ownership of the organizational plans.

Answer 26

Communication & Coordination

Question 27

actions are checked to assess conformity with plans and to make on-line corrections and adjustments.

Answer 27

Monitoring of activities

Question 28

Results are to be evaluated to determine what happened and make end-of-the-line corrections and adjustments. (ex. Feedback, performance, measurement, and variance analysis)

Answer 28

Evaluation of results

Question 29

nobody can predict what exactly will happen in the future. Hence, future situations may warrant revision or modification of plans.

Answer 29

Accuracy of estimates

Question 30

it requires cooperation and participation of all the members. If they lose enthusiasm in carrying out the plans, the entire budgetary system will fail.

Answer 30

Adverse reactions from employees

Question 31

the development and installation system maybe time consuming.

Answer 31

Amount of work involved in developing a good budget

Question 32

some managers think that budget restricts their movement and limit their decision-making power, afraid that such budgets maybe used against them if they fail.

Answer 32

Once the budget is developed, it limits flexibility

Question 33

too costly for some organizations, such that the benefits may be outweighed by its cost.

Answer 33

It is an expensive tool and implementation is not automatic –

Question 34

members of the organization are forced to plan on how to acquire and use the firm’s scarce resources. This results into a more efficient and effective utilization of such resources.

Answer 34

Compels management planning

Question 35

actual results of operations are compared with the budgeted figures to monitor the organization’s or the organizational segment’s performance.

Answer 35

Provides a good framework for judging subsequent performance

Question 36

members of the different organizational segments are enabled to exchange their ideas and objectives thereby giving them an opportunity to communicate with each other.

Answer 36

Promotes communication, coordination, and control

Question 37

knowing that these budgets are to be used as one of the bases for performance evaluation, the different unit managers will try to operate within this framework and should they be successful the result is attainment of the company’s goal according to plans.

Answer 37

Motivates members of the organization

Question 38

“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.”

Answer 38

William Feather

Question 39

a transitional form between traditional line-item and performance approaches

Answer 39

modified program budgeting