Accouting Chapter 8 - Professor Gregory Tanzola PDF

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Professor Gregory Tanzola...

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3/18/19:

Chapter 8- Master Budgeting

➢ The Basic Framework of Budgeting ○ A budget is a detailed quantitative plane for acquiring and using financial and other resources over a specified forthcoming time period ■ The act of preparing a budget is called budgeting ■ The use of budgets to control an organization’s activities is known as budgetary control ○ Difference between Planning and Control ■ Planning involves developing objectives and preparing various budgets to achieve those objectives ■ Control involves the steps taken by management to increase the likelihood that the objective set down while planning are obtained and that all parts of the organization are working towards that goal ○ Advantages of Budgeting ■ Define goals and objectives ■ Communicate plans ■ Coordinate activities ■ Uncover potential bottlenecks ● (somewhere along process that slows things down) ■ Means of allocating resources ■ Think about and plan for the future ○ Responsibility Accounting ■ Managers should be held responsible for those items and only those items that that actually control ○ Choosing the Budget Period ■ Operating budgets ordinarily cover a one-year period corresponding to a company’s fiscal year ■ Many divide budgets into four quarters ■ A continuous budget (or rolling budget) is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed ○ Self-Imposed Budget/ Participative Budget ■ A budget prepared with the full cooperation and participation of managers at all levels ■ Passed through all levels of management

■ Top management may make changes (add 10% to sales make it happen) can become frustrating

○ Advantages of Self-Imposed Budgets ■ Individuals at all levels are viewed as members of the team whose judgement are valued by top management ■ Proven to be more accurate ■ Motivation is generally higher ■ Unable to claim it was unrealistic ○ Self-Imposed budgets must be monitored by higher levels to prevent budgetary slack ■ Budgetary Slack ● Purposely budgeting sales at a lower number than what can actually be achieved ● Purposely budgeting expenses higher that what will be spent ➢ Human Factors in Budgeting ○ Depends on three important factors ■ Must be enthusiastic and committed to the budget process ■ Highly achievable budget targets (having an unattainable budget is almost as bad as not having one)

■ Top management must not use the budget to pressure employees or blame them when something goes wrong

4/1/19: QUIZ ➢ 21 multiple choice, 4 true/false ➢ Focus on ○ Powerpoint ○ Exercises 8.1-8.8 ➢ Responsibility Accounting (Powerpoint) ➢ Cash Collections Budget ➢ Manufacturing Overhead Budget ○ Two answers!!! Expense and Cash Disbursement ➢ Cash Budget ➢ Production Budget

➢ Sales Budget ➢ Raw/Direct Materials Budget ➢ Selling and Admin Budget ➢ Continuous Budget (Powerpoint) ➢ Advantages of Budgeting (Powerpoint) ➢ Order of Budgets (Powerpoint) ➢ Cash Disbursements Budget ➢ Direct Labor Budget...