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Budgeting - Budgeting Basics One of management's major...

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Budgeting Basics One of management's major responsibilities is planning . As explained in Chapter 14 , planning is the process of establishing enterprise-wide objectives. A successful organization makes both long-term and short-term plans . These plans set forth the objectives of the company and the proposed way of accomplishing them. A budget is a formal written statement of management's plans for a specified future time period, expressed in financial terms. It normally represents the primary method of communicating agreed-upon objectives throughout the organization. Once adopted, a budget becomes an important basis for evaluating performance. It promotes efficiency and serves as a deterrent to waste and inefficiency. We consider the role of budgeting as a control device in Chapter 21 . Budgeting and Accounting Accounting information makes major contributions to the budgeting process. From the accounting records, companies can obtain historical data on revenues, costs, and expenses . These data are helpful in formulating future budget goals.
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