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MALNBREWERCH7 - BUDGETING Definition A budget is a detailed...

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BUDGETING Definition: A budget is a detailed plan for acquiring and using resources in a specified time period. It is part of the operational planning process in an organization. Budgeting involves two stages: Planning: developing objectives and preparing detailed budgets to achieve those objectives. Control: the steps taken by management to attain the objectives set out in the planning stage. PURPOSES OF BUDGETING 1. Budgeting forces managers to give planning top priority. 2. Budgets communicate management’s plans throughout the organization. 3. Budgets provide a means of allocating resources to their most effective uses. 4. Budgeting uncovers potential bottlenecks /constraints 5. Budgeting coordinates activities. 6. Budgeting provides goals that serve as benchmarks for evaluating performance.
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THE MASTER BUDGET The master budget is a set of budgets and supporting schedules. The end output is: A cash flow budget, A budgeted income statement, and A budgeted balance sheet. The set of schedules and supporting budgets will vary depending on the type of organization Manufacturers, merchandisers, and service providers all will have budgets for revenue/sales and related cash collections, and budgets for selling and administrative expenses and related cash payments.
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