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19 Cards in this Set
- Front
- Back
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4 Ways Managers Use Budgets
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1. Develop Strategy
2. Plan 3. Act 4. Control |
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3 Benefits of Budgeting
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1. Forces Managers to Plan
2. Promotes Coordination and Communication 3. Provides a Benchmark |
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Benchmarking
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Motivates employees and helps managers to evaluate performace.
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Master Budget
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Set of budgeted financial statements and supporting schedules
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3 types of Master Budgets
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Operating
Capital Expenditures Financial |
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4 components of the operating budget
(Operating Budgets) |
1.Sales Budget
2.Purchases and Cost of Goods Sold Budget. 3.Operating Expeses Budget 4. Budgeted Income Statement |
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3 parts that makeup the financial budget
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Capital Expenditures Budget
Cash Budget Budgeted Balance Sheet Budgeted Statement of Cash Flows |
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Sales Budget
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-Forecast of Sales Revenues
- Cornerstone of master budget. Meaning level of sales affects all elements |
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Cost of Goods Sold (Formula)
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(Formula)
Beginning Inventory + Purchases - Ending Inventory |
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Purchases (Formula)
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(Formula)
Cost of Goods + Ending Inventory - Beginning Inventory |
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(Formula)
Budgeted Total Sales |
(Formula)
Sales Price * Expected Number of Units Sold |
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Operating Expense Budget
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Expenses can be either fixed or variable
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(4) Operating Expense Budget items
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Salaries
Rent Insurance Advertising |
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Cash Budget
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Details how business expects to go from the beginning cash balance to the desred ending balance
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4 major parts of the Cash Budget
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Cash Collection from customers
Cash payments for purchases Cash payments for operating expenses Cash payments for capital expenditures |
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4 parts of the cash budget
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1. Cash collections from customers
2. Cash payments for purchases 3. Payments fromOperating expenses 4. Payments from capital expenditures |
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Cash collections from customers
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1. Cash sales from the sales budget.
2.collections of previous months credit sales (Accounts Recievables) |
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Payments for Operating Expenses
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1. Use Data from operating expense budget
2. Do not include noncash expses such as depreciation |
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Payments for capital expenditures
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Uses Budgeted Data
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