Chapter 22 Terminology and Facts Flashcards
Budgets play an important role for?
Organizations of all sizes and forms
Budgeting involves
1) establishing specific goals
2) executing plans to achieve the goals
3) periodically comparing actual results with the
goals
What are the 3 ways Human Behavior Problems can arise in the Budgeting process?
1) Budgeted goals are set too tight, which are very hard or impossible to
achieve
2) Budgeted goals are set too loose, which are very easy to achieve
3) Budgeted goals conflict with the objectives of the company and employees
What is budget “padding” aka budgetary slack?
Managers may plan slack in their budgets to provide a “cushion” for unexpected events
Goal conflict occurs when?
Employees’ or managers’ self-interest differs from the company’s objectives or goal
A variation of fiscal-year budgeting called continuous budgeting:
Maintains a 12-month projection into the future
How does continuous budgeting work?
The 12-month budget is continually revised by replacing the data for the month that recently ended with the budget data for the same month in the next year
What is zero-based budgeting?
Requires managers to estimate sales, production, and other
operating data as though operations are being started for the first time
What is incremental budgeting?
start with last year’s budget and revise it for actual results and expected changes for the next year
What is Static Budget and its significance?
Definition: The expected results of a responsibility center for
only one activity level
Significance: Once the budget has been determined, it is not
changed, even if the activity changes
What is Flexible Budget?
The expected results of a responsibility center for several activity levels that has a series of static budgets for different levels of activity
What is master budget?
An integrated set of operating and financial budgets
for a period of time
When is a master budget prepared?
on a yearly basis
How does the master budget begins? What does it form?
preparing the operating budgets, which
forms the budgeted income statement
Financial Budgets provide what?
information for a budgeted balance sheet
