Accounting Ch8
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Supahdan32 on March 12, 2012
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8 terms
Terms | Definitions |
|---|---|
 What is a budget? | A budget is the quantitative expression of a plan of action for a specified period and an aid to coordinating and implementing that plan. |
| What is responsibility accounting? | Responsibility accounting is a system in which a manger is held responsible for those revenues, costs and investments that the manager can control to a significant extent. |
| What is a master budget? | A master budget represents a summary of all management's plans and goals for a specified period in the future, usually one year. It is made up of smaller budgets and usually contains a budgeted income statement, budgeted balance sheet and cash budget. |
| What effect does the level of sales have on a firm? | The level of sales impacts all firm activities. It determines production budget, cash collections, cash disbursements and SG&A budget, which then determine cash budget, budgeted income statement and balance sheet. |
| Are planning and control the same? | No, planning involves developing goals and budgets to achieve those goals. Control involves means by which management attempts to ensure that the goals set down are attained. |
| What is a self-imposed budget? | A self-imposed budget is one in which person with responsibility over cost control prepare their own budget. |
| What are advantages of a self-imposed budget? | 1) Members feel valued, which increases self-esteem. 2) Budgets by front-line managers are often more accurate. 3) Motivation is generally higher. 4) Managers can't claim unrealistic budgets. |
| What is the purpose of a cash budget? | The purpose is not to see how much cash they have, but to provide information on probable cash needs during the budget period so that financing can be arranged. |
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