Final Review - Ch22. Definition of Budget A budget is a...

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Ch22. Definition of Budget A budget is a quantitative (numerical) expression of a plan of action that helps managers coordinate and implement the plan. It forces us to plan. It brings us to controlling. It forces us to coordinating. Bench mark Operating, Financial, Capital budget – 3 component of Master budget Master Budget : expected level of volume. The set of budgeted financial statements and supporting schedules for the entire organization. Includes the operating budget, the capital expenditure budget, and the financial budget. Operating Budget: - Sales Budget (Purchase-merchandising, production-manufacturing) - Inventory, purchases, and cost of goods sold budget - Operating expenses budget - Budgeted income statement 1) Sales Budget : the detailed plan for sales revenue in a future period. Budgeted total sales for each product is Budgeted sales for each product = sales price per unit x Expected number of units to be sold 2) The Inventory, purchases, and cost of Goods Sold Budget - Cost of goods sold on the budgeted income statement - Ending inventory on the budgeted balance sheet - Purchases of inventory Beginning inventory + purchases - Ending Inventory = Cost of Goods Sold Purchases = Cost of Goods Sold + Ending Inventory – Beginning Inventory Beginning inventory is from last month’s balance sheet. What all of the components are -Operating Budget : is the sales budget , which forms the cornerstone. After projecting sales revenue, cost of goods sold, and operating expenses, management prepares the budgeted income statement. This document provides the organization’s goal for net income. the output of the operating -> budgeted income statement.
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- Capital Expenditure Budget : A company’s plan for purchases of property, plant, equipment, and other long-term assets. Why is this important? It’s huge, find out access capital. - Financial Budget : The cash budget combines figures from the budgeted income statement, the capital expenditures budget, and plans for raising cash and paying debts. The cash budget is a projection of the cash inflows and cash outflows for a future period. Cash budget- how much you need to spend, spent…. . What the sub components are, for example, what the first budget prepared is 1. The sales or revenue budget is usually the first component part of the budget prepared. It is considered the cornerstone of the master budget. (p.1107) 2. The inventory, purchases, and cost of goods sold budget is prepared next. Purchases = Cost of Goods Sold + Ending Inventory – Beginning Inventory 3. The operating expense budget is prepared next. Some expenses are based on the level of sales projected, while other expenses are fixed in amount each period. 4. All these parts of the budget together make up the budgeted income statement (p.1110).
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This note was uploaded on 06/04/2010 for the course ACC 202 taught by Professor Mirman during the Spring '08 term at University of Nevada, Las Vegas.

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Final Review - Ch22. Definition of Budget A budget is a...

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