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CHAPTER 10 NOTES - Budgeting Basics A budget is a formal written statement of management's plans for a specified time period, expressed in financial terms. Benefits of Budgeting 3. (S.O. 1) The primary benefits of budgeting are as follows: a. It requires all levels of management to plan ahead. b. It provides definite objectives for evaluating performance. c. It creates an early warning system for potential problems. d. It facilitates the coordination of activities within the business. e. It results in greater management awareness of the entity's overall operations. f. It motivates personnel throughout the organization. Essentials of Effective Budgeting 4. (S.O. 2) In order to be effective management tools, budgets must be based upon: a. A sound organizational structure in which authority and responsibility are clearly defined. b. Management acceptance , which is enhanced when all levels of management participate in the preparation of the budget, and the budget has the support of top management. 5. The most common budget period is one year. A continuous twelve- month budget results from dropping the month just ended and adding a future month. The annual budget is often supplemented by monthly and quarterly budgets. 6. The responsibility for coordinating the preparation of the budget is assigned to a budget committee. The budget committee usually includes the president, treasurer, chief accountant (controller), and management personnel from each major area of the company. 7.
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This note was uploaded on 03/03/2012 for the course ACCT 2460 taught by Professor Farrar during the Winter '12 term at Conestoga.

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