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balance sheet

one of the four major financial statements, representing a snapshot in time of an organization's assets, liabilities, and owner's equity

cash budget

plan that helps manage cash flows by identifying budgeted cash receipts and disbursements for a period

cash disbursements

section of the cash budget that lists each type of cash outflow that is expected during the period

cash payments for materials budget

plan that calculates each period's cash payments for purchases of goods, based on production schedules and payment practices

cash receipts budget

plan that shows when and how much cash the organization expects to collect from the sale of products or services

cost of goods manufactured (COGM)

amount spent to produce a product from start through completion and entry into finished goods inventory

cost of goods sold (COGS)

total money spent to purchase or produce the products that were sold during an accounting period


gradual loss of an asset's value due to normal wear and tear over time

direct labor

hours spent producing a product or providing a service that can easily be traced to the product or service

direct materials

raw goods that can be traced directly to or easily identified with a specific product

finished goods inventory

number and types of manufactured items that are ready for customers to buy; contains the direct materials, direct labor, and overhead costs required to produce those units

manufacturing overhead

indirect, factory-related production costs that come from making an item

master budget

collection of operating plans that organizations use to develop pro forma (budgeted) financial statements


operating costs or expenses, such as rent, electricity, and taxes

pro forma financial statements

documents that report the organization's activity if all the parts of a budget are achieved as planned

production budget

plan that calculates the level of output required to meet expected sales and maintain desired ending levels of finished goods inventory

sales budget

plan that forecasts the number of units expected to be sold multiplied by the prices expected to be charged, resulting in the anticipated revenue from sales

selling and administrative expense budget

plan that estimates when and how much a company's sales and management expenses will be

short-term financing

brief loans that organizations make to cover periods of cash deficits