Final Accounting 22 Flashcards
What is planning?
The process of establishing company-wide objectives, a successful organization, makes both long-term and short-term plans. These plans establish the objectives of the company and the proposed approach to accomplish them.
What is a budget?
A formal written statement of management’s plans for a specific future time period expressed in financial terms.
It represents the primary method of communicating agreed upon objectives throughout the organization
Important faces for evaluating performance
Promotes efficiency and serves as a deterrent to waste.And inefficiency
Considered.
As a control device.
An aid to management not a substitute
Can’t operate or enforce itself
What do accountants do?
Responsible for presenting managements , budgeting goals and financial terms
Translate managements plans and communicate the budget to employees throughout the company
Prepare periodic budget reports that provide the basis for measuring performance and comparing actual results with planned objectives.
What are benefits of budgeting
Requires all levels of management to plan ahead and two formalized goals on A recurring basis
Provides definite objectives for Evaluating Performance at each level of responsibility
Creates an early warning system for potential problems so that Management can make changes before things get out of hand.
Facilitates the coordination of activities within the business. It does this by coordinating the goals of each segment with overall company objectives. Thus, the company can integrate production and sales promotion with expected sales.
Results in greater management awareness of the entities overall operations and the impact on operations of external factors such as economic trends
Motivates personnel throughout the organization to meet planned objectivesMotivates personnel throughout the organization to meet planned objectives.
How do you achieve effective budgeting
Depends on a sound organization.
Authority and responsibility for all phases of operation are clearly defined.
Budgets are based on research and analysis That contribute to profitability and growth.
Acceptance by all levels of management.
What factors affect the length of a budget period
A budget may be prepared for any period of time
The type of budget , the nature of the organization , the need for periodic appraisal prevailing business conditions Most common budget period is one year Supplemented by monthly budgets
What is a sales forecast?
Shows potential sales for the industry and the company’s expected share of such sales
General economic conditions , industry trends , market research studies Anticipated advertising impromotion previous market share Is changes in prices technological developments
Input of Sells personnel and top
Management is essential to The sales forecast.
What is participative budgeting?
Bottom to top approach.
Lower level managers have more detailed knowledge of their specific area and are able to provide more accurate budgetary estimates
Goal is to reach achievement on a budget that managers consider Fair and achievable, but also meets corporate goals set by top management.
What are disadvantages of participative budgeting?
The given take of participating budgeting Is time consuming and more costly? Under top-down approach, the budget can be more quickly developed by top management and then dictated to lower level managers.
Can foster gaming through budgetary? Slack, which occurs when managers intentionally underestimate budget revenues and overestimate budget expenses in order to make it easier to achieve budgetary goals for their division.
What are the three differences in budgetting and Long range planning
The time period involved budgeting is usually Maximum one year and prepared for shorter Periods of times like months or quarters long Range planning encompasses a period of at least five years
Budgeting focuses on specific short term goals like meeting annual profit objectives
Long-range planning identifies long-term goals.Selects strategies to achieve those goals develops policies And plans to implement the strategies.
Budgets can be very detailed. Long-range plans contain less detail.
Long-range planning is to develop the best strategy to maximize the company’s performance over an extended period of time.
What?
Is a master budget
A set of interrelated budgets that constitutes a plan of action for A specific time period
What two classes of budget does the master budget contain
Opera.
Ting budget , which are the individual budgets that result in the preparation of the budgeted Income statement these budgets established goals For the company sale And production personnel.
Financial budgets, which focus primarily on the cash resources, needed to fund expected operations and planned capital expenditures, including the capital expenditure budget. The cash budget and budgeted balance sheet.
What is a sales budget
The budget is prepared first
It is derived from the sales forecast it represents Management’s best estimate of sales revenue for the budget period andaccurate sales budget may adversely affect Net income.
What is a production budget
Shows the number of units of a product. To produce to me anticipated sales demand
An accurate estimate of the amount of ending inventory required to meet demand is essential in scheduling production requirements.
In turn, provides the basis for the budgeted costs for each manufacturing costs component.
What is the direct materials budget
Shows both the quantity and cost of direct materials to be purchased.
Is the first step toward computing. The cost of direct materials purchases is to compute the direct materials units required for production.
