Term
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Definition
| preparing numerous budgets, which, when brought together, form an integrated business plan known as the master budget |
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Term
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Definition
| a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period |
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Term
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| The act of preparing a budget |
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Term
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| The use of budgets to control an organizations activities |
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Term
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Definition
| developing objectives and preparing various budgets to achieve those objectives |
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Term
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Definition
| the steps taken by management to increase the likelihood that the objectives set down at the planning stage are attained and that all parts of the organization are working together toward that goal. |
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Term
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Definition
Communicate managements plans throughout organization.
Force managers to think about and plan for the future.
Allocates resources for max efficiency.
Can uncover potential bottlenecks before they occur.
Coordinate the activities of the whole company by integrating the plans of its various parts.
Define goals and objectives and can serve as benchmarks for evaluating. |
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| Responsibility Accounting |
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Definition
Managers should be held responsible only for those items that they can control to a significant extent.
Allows organizations to react quickly to deviations and to learn from feedback obtained by comparing actual budget to budget goals. |
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Term
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| Cover a one-year period corresponding to a company's fiscal year. Many companies divide the annual budget into four quarters. |
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| Continuous/Perpetual Budget |
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Definition
| a 12 month budget that rolls forward one month (or quarter) as the current month/quarter is completed. This approach keeps managers focused on the future at least one year ahead. |
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| Self-Imposed/Participative Budget |
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Definition
| Prepared with the full cooperation and participation of managers at all levels. Particularly useful approach if the budget will be used to evaluate managerial performance |
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| Advantages of self imposed budgets |
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Definition
1. Individuals at all levels are looked at as members of a team.
2. Front-line managers often have more knowledge of day to day activities than top management
3. Motivation is generally higher when individuals set their own goals
4. Managers cannot claim their budget was unreasonable when they were involved in its planning |
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| Factors to budgetary success |
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Definition
1. Top management must be enthusiastic and committed to the budgeting process.
2. Top management can not use the budget to pressure or blame employees. This breeds hostility and mistrust.
3. Highly achievable budget targets are preferred. |
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Term
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Definition
| responsible for the overall policy relating to the budget program for coordinating the preparation of the budget, for resolving disputes related to the budget, and for approving the final budget. |
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| Consists of a number of separate but interdependent budgets |
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Term
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Definition
| shows expected sakes for the budget period expressed in dollars and units. It is usually based on a company's sales forecast. All other parts of the master budget are dependent on the sales budget |
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Term
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Definition
| is prepared after the sales budget. It lists the number of units that must be produced during each budget period to meet sales needs and to provide for the desired ending inventory. The production budget directly influences the direct materials/labo and manufacturing overhead budgets, which in turn enable the preparation of the ending finished goods inventory budget. |
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Term
| Selling and Administrative Budget |
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Definition
| A combination of the Sales and Products Budgets that is used to put together the cash budget |
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Term
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Definition
| a detailed plan showing how cash resources will be acquired and used over a time specified period. All of the operating budgets have an impact on the cash budget. |
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