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ch6 - Chapter6: Abudgetis(a) specifiedperiod(b)

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Chapter 6: Master Budget and Responsibility Accounting  Budgets and the Budgeting Cycle: budget  is: (a) The quantitative expression of a proposed plan of action by management for a  specified period (b) An aid to coordinate what needs to be done to implement that plan.  Includes both financial and nonfinancial aspects of the plan and it serves a  blueprint for the company to follow in the upcoming period.  The  budget   period:  Operating budgets ordinarily cover a one-year period corresponding to a company’s fiscal year.  Many companies divide their annual budget into four quarters.  Budgeting process involves Planning and Control: Planning  involves developing objectives and preparing various budgets to achieve those  objectives Control  involves investigating the deviations from the budgets and taking corrective actions for  future.  Advantages of Budgeting: Convert firm’s strategy into short term goals to be achieved during the next year
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