Topic 4 ENGLISH ACCOUNTING

Master Budget Topic 8-2 The Basic Framework of Budgeting A budget is a detailed quantitative plan 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 8-3 Planning and Control Planning – involves developing objectives and preparing various budgets to achieve those objectives Control – involves the steps taken by management to gather feedback to ensure that a plan is being properly executed or modified as circumstances change 8-4 Choosing the Budget Period Operating Budget 2014 2015 2016 2017 Operating Operating budgets budgets ordinarily ordinarily A continuous budget is aa A continuous budget is cover cover aa one-year one-year period period 12-month budget that rolls 12-month budget that rolls corresponding to a company’s corresponding to a company’s forward one month (or quarter) forward one month (or quarter) fiscal year Many companies fiscal year Many companies as the current month (or quarter) as the current month (or quarter) divide their annual budget divide their annual budget is is completed completed into four quarters into four quarters 8-5 Developing the Budget Budgets are prepared for a Departments b Divisions c Company as a whole The Budget Committee is responsible for overall budgeting policy and for coordinating the preparation of the budget a b c d e Senior managers President CFO Various vice-presidents Controller 8-6 Self-Imposed Budget (Participative Budget) A self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at all levels 8-7 The Master Budget: An Overview Sales Sales budget budget Ending Ending inventory inventory budget budget Direct Direct materials materials budget budget Production Production budget budget Direct Direct labor labor budget budget Selling Selling and and administrative administrative budget budget Manufacturing Manufacturing overhead overhead budget budget Cash Cash Budget Budget Budgeted Budgeted income income statement statement Budgeted Budgeted balance balance sheet sheet 8-8 The Sales Budget Detailed schedule showing expected sales for the coming periods expressed in units and dollars Budgeted   sales (units) Selling price   per unit Total sales April May June Quarter 20,000 50,000 30,000 100,000 $ 10 $200,000 $ 10 $500,000 $ 10 $300,000 $ 10 $1,000,000 8-9 The Production Budget Budgeted sales Add desired ending   inventory Total needed Less beginning   inventory Required production April 20,000 10,000 30,000 4,000 26,000 May 50,000 June 30,000 Quarter 100,000 8-10 The Direct Materials Budget 8-11 The Direct Labor Budget 8-12 Manufacturing Overhead Budget 8-13 Ending Finished Goods Inventory Budget 8-14 Selling and Administrative Expense Budget 8-15 The Cash Budget 8-16 End of Topic ... plan is being properly executed or modified as circumstances change 8 -4 Choosing the Budget Period Operating Budget 20 14 2015 2016 2017 Operating Operating budgets budgets ordinarily ordinarily... Overhead Budget 8-13 Ending Finished Goods Inventory Budget 8- 14 Selling and Administrative Expense Budget 8-15 The Cash Budget 8-16 End of Topic ...   inventory Total needed Less beginning   inventory Required production April 20,000 10,000 30,000 4, 000 26,000 May 50,000 June 30,000 Quarter 100,000 8-10 The Direct Materials Budget 8-11 The Direct