20 terms

Chapter 11 Accounting

plans dealing with the acquisition and use of resources over a specified time period
the cornerstone of good management; involves developing objectives and goals for the organization, as well as the actual preparation of budgets
involves day-to-day decision making by managers, which is often facilitated by budgeting
involves ensuring that the objectives and goals developed by the organization are being attained; often involves a comparison of budgets to actual performance and the use of budgets for performance evaluation purposes
Zero-based budgeting
requires managers to build budgets from the ground up each year
Participatory budgeting
a budgeting process that starts with departmental managers and flows up through middle management and then to top management. Each new level of management has responsibility for reviewing and negotiating any changes in the proposed budget
Master budget
consists of an interrelated set of budgets prepared by a business
Sales forecast
combines with the sales budget to form the starting points in the preparation of production budgets for manufacturing companies, purchases budgets for merchandising companies, and labor budgets for service companies
Sales budget
used in planning the cash needs for manufacturing, merchandising, and service companies
Operating budgets
used to plan for the short term
Production budget
used to forecast how many units of product to produce in order to meet the sales projections
Material purchases budget
used to project the dollar amount of raw materials purchased for production
Direct labor budget
used to project the dollar amount of direct labor cost needed for production
Manufacturing overhead budget
used to project the dollar amount of manufacturing overhead needed for production
Cash receipts budget
used to project the amount of cash expected to be received from sales and cash collections from consumers
Cash disbursements budget
used to project the amount of cash to be disbursed during the budget period
Summary cash budget
Consists of three sections: (1) cash flows from operating activities, (2) cash flows from investing activities, and (3) cash flows from financing activities; these three sections are the same as those used in the cash flow statement prepared under generally accepted accounting principles
Pro forma financial statements
budgeted financial statements that are sometimes used for internal planning purposes but more than often are used by external users
Static budgets
budgets that are set at the beginning of the period and remain constant throughout the budget period
Flexible budgets
budgets that take differences in spending owing to volume differences out of the analysis by budgeting for labor based on the actual number of units produced