Chapter 7 Flashcards
Activity-based budgeting
A budget system based on expected activities
Budget
A formal statement of a company’s future plans
Budgeted balance sheet
Shows predicted amounts for the company’s assets, liabilities, and equity as of the end of the budget period
Budgeted income statement
A managerial accounting report showing predicted amounts of sales and expenses for the budget period
Budgeting
The process of planning future business actions and expressing them as formal plans
Capital expenditures budget
Lists dollar amounts to be both received from plant asset disposals and spent to purchase additional plant assets to carry out the budgeted business activities
Cash Budget
Shows expected cash inflows and outflows during the budget period
Continuous budgeting
As the budgeting period comes to milestones the budget is constantly readjusted based on the new numbers available
General and administrative expense budget
Plans the predicted operating expenses not included in the selling expenses budget
Manufacturing budget
Shows the budgeted costs for direct materials, direct labor, and overhead
Master budget
A formal, comprehensive plan for a company’s future. It contains several individual budgets that are linked with each other to form a coordinated plan.
Merchandise purchases budget
Inventory to be purchased = Budgeted ending inventory + Budgeted cost of sales for the period - Budgeted beginning inventory
Production budget
Shows the number of units to be produced each month (similar to the purchases budget, but you’re making them not buying them)
Rolling budgets
Budgets are revised for each budgeted period (which is called continuous budgeting)
Safety stock
A quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers or delays in shipments from suppliers
