chapter 7 Flashcards
what is a budget
a formal written statment of the managments plans for a specific future time period expressed in finacial terms
what are the goals and benefits of a budget
to promote efficiency
maintain / reduce costs
creates a early warning system
greater awareness of the entities overall operations and the impact of external factors
common budgeting errors
should account for accounts payable
staff equipment and materials takes time
account for depriciation
what are the two classes of budgets
operating budgets and finacial budgets
what is a operating budget
an individual budget that resluts in the preperation of the budgeted income statement and establish goals for sales and production
what is a finacial budget
monitors capital expenditure and focuses on the cash needed to fund operations and capitla expenditures
What is a disadvantage of the “bottoms-up” approach to budgeting?
It is time consuming and therefore more costly.
what is bottom up budgeting
starting at the lowest levels of the roganization and moving to the higher levels
Which one of the following would most likely cause an unrealistic budget to result?
top down budget
