WVU ACCT 202 - Chapter9Student2017 (15 pages)

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Chapter9Student2017



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Chapter9Student2017

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Pages:
15
School:
West Virginia University
Course:
Acct 202 - Principles of Accounting

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Chapter 9 The Master Budget 9 1 Strategic Planning Setting long term goals for the company May extend 5 10 years into the future Budget Quantifies management s plans Helps management determine how best to use resources Used in planning directing and controlling Budget Periods Usually prepared for an ANNUAL period o Further broken down into quarters or months Continuous rolling budget continuously updated so that a 12 month period is always budgeted Budget Process On going process reviewed and revised during year as needed Top Down Imposed top management determines the budget Not used by many companies Detrimental to motivation Participative participation at many levels of management Benefits o Lower level managers have better information o Enhances motivation Disadvantages o More complex process and time consuming o Budget slack intentionally overestimating expenses or underestimating revenues Make performance look better Guard against cuts Budget Committee Cross functional team that reviews and approves final budget Starting Point Last year s budget and or actual results modified for New products customers strategies Competitive changes General inflation and expected changes in costs fuel raw materials etc ZERO BASED budgeting Begin with budget of zero and justify every dollar Time consuming and labor intensive Often used for certain sensitive or high dollar line items Benefits of Budgeting Forces managers to plan Promotes coordination and communication o Across the entire value chain Provides a benchmark for performance measurement o Budget performance report Master Budget Comprehensive planning document for the entire organization Includes all supporting budgets in the o Operating Budget Budgets needed to run daily operations Starts with the sales or revenue budget Ends with budgeted income statement o Financial Budget Projects collection and payment of cash including capital expenditures Forecasts budgeted balance sheet Operating Budget Capital Expenditure



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