n08 - Chapter 9 Notes Page 1 Budgeting In this chapter we...

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Chapter 9 Notes Page 1 Please Send Comments and Corrections to me at [email protected] Budgeting In this chapter we discuss the process of budgeting. A business needs to plan for future contingencies, and it needs to make sure that it can handle them. A budget is an expression of a business’ plans and goals using dollar amounts. You begin by forecasting sales (in dollars and units) and from there you calculate: (i) the expenses that you will need in order to support your sales forecast, (ii) the capital expenditures that you will need to make to support your operations, and (iii) the cash inflows and outflows that your anticipated sales, expenses and expenditures will generate. By engaging in this process you can help make sure that you have the resources that your business will need in the future The budget process is also a tool that can be used in evaluating a business’ personnel. If sales are estimated to be a set amount and fewer sales are generated, then you can ask the personnel responsible for sales to explain why the sales fell short of expectations. Similarly, if expenses or expenditures are higher than anticipated, you can ask the personnel responsible for those outlays to explain why they were above expectations.
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Chapter 9 Notes Page 2 Please Send Comments and Corrections to me at [email protected] The Master Budget The master budget is a comprehensive financial plan for a business. It is made up of the Operating and Financial budgets, which are in turn made up of supporting schedules (budgets).
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This note was uploaded on 01/13/2012 for the course ACCT 201 taught by Professor John during the Fall '08 term at CSU Long Beach.

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n08 - Chapter 9 Notes Page 1 Budgeting In this chapter we...

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