Create an account
the cornerstone of good management; involves developing objectives and goals for the organization, as well as the actual preparation of budgets
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
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
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
used in planning the cash needs for manufacturing, merchandising, and service companies
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
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
budgets that are set at the beginning of the period and remain constant throughout the budget period
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