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Chapter_20_student - CHAPTER 20 Budgetary Planning...

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Chapter 20-1 CHAPTER 20 Budgetary Planning Accounting, Fourth Edition
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Chapter 20-2 Study Objectives 1. Indicate the benefits of budgeting. 2. State the essentials of effective budgeting. 3. Identify the budgets that comprise the master budget. 4. Describe the sources for preparing the budgeted income  statement. 5. Explain the principal sections of a cash budget.
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Chapter 20-3 Budgeting Basics Budget A formal written statement of management’s plans for a specified  future time period, expressed in financial terms. Primary way to communicate agreed-upon objectives to all parts of  the company. Promotes efficiency. Control device - important basis for performance evaluation  once adopted.
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Chapter 20-4 Budgeting Basics – Role of Accounting Historical accounting data on revenues, costs, and expenses help in  formulating future budgets. Accountants normally responsible for presenting  management’s budgeting goals in  financial terms. The budget and its administration are, however,  entirely management’s responsibility.
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Chapter 20-5 Budgeting Basics - Benefits Requires all levels of management to  plan ahead   and formalize  goals on a recurring basis. Provides   definite objectives   for evaluating performance at  each level of responsibility. Creates an   early warning system   for potential problems. LO 1: Indicate the benefits of budgeting.
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Chapter 20-6 Budgeting Basics - Benefits Facilitates   coordination of activities   within the business. Results in   greater management awareness   of the entity’s  overall operations and the impact of external factors. Motivates personnel   throughout organization to meet planned  objectives. LO 1: Indicate the benefits of budgeting.
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Chapter 20-7 Budgeting Basics - Benefits LO 1: Indicate the benefits of budgeting. A budget is an aid to management not a substitute for management.
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Chapter 20-8 Effective Budgeting Depends on a  sound organizational structure  with  authority and responsibility for all phases of operations clearly  defined. Based on  research and analysis with realistic goals. Accepted by all levels of management. LO 2: State the essentials of effective budgeting.
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Chapter 20-9 The Budget Period May be prepared for   any period of time. Most common  -   one year. Supplement with monthly and quarterly budgets. Different budgets may  cover different time periods. Long enough  to provide an attainable goal and minimize  seasonal or cyclical fluctuations. Short enough  for reliable estimates. Continuous twelve-month budget  . Drop the month just ended and add a future month.
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