ACCT 210 1st Edition Lecture 16 Outline of Current Lecture I Chapter 5 II E9 1 Current Lecture I Chapter 5 a In preparing budget begin with revenue sales then determine costs b Budgets are done in 2 ways i Bottoms up 1 People at lower levels and each department prepares own budget 2 Head CEO reviews them ii Top down 1 CEO starts budget process 2 Bottom layers departments prepare budgets based upon that 3 More aggressive method c Zero based budgeting vs incremental budgeting i Zero based assume zero as baseline build cost base from scratch More common difficult time consuming method ii Incremental used by federal government Based upon last year s budget II E9 1 a Feb sales 230 000 20 Feb 70 March 10 April March sales 260 000 20 March 70 April 10 May April sales 300 000 20 April 70 May 10 June May sales 500 000 20 May 70 June 10 July June sales 200 000 20 June 70 July 10 August Total cash collections April 23 000 May June Total 23 000 182 000 26 000 60 000 210 000 30 000 300 000 100 000 350 000 450 000 40 000 40 000 420 000 1 021 000 265 000 336 000 208 000 b i Accounts receivable 10 of May paid in July 70 of June paid in July 10 of June paid in August ii A R 10 500000 70 200000 10 200000 iii A R 50000 140000 20000 iv A R 210 000
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