ACCT 2101 Exam 2 with verified detailed answers || || || || || || ||
Budget - ✔✔A formal written statement of management's plans for a specified future time period,
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expressed in financial terms. Used as a planning and communication tool for management
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Planning - ✔✔The process of establishing company-wide objectives
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Benefits of Budgeting - ✔✔1. Plan ahead
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2. Definite objectives
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3. Early warning system
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4. Coordination of activities
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5. Management awareness
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6. Motivates personnel
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Essentials of Effective Budgeting - ✔✔1. Sound organizational structure
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2. Based on research and analysis
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3. Acceptance by all levels of management
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Budget Time Periods - ✔✔-A budget may be prepared for any period of time
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-Most common budget period is one year
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-Many companies use continuous 12-month budgets (rolling budget)
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-Should be long enough to provide an attainable goal under normal operating business conditions
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Human Behavior - ✔✔The impact of human behavior should always be considered
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, Participative Budgeting - ✔✔A budgetary approach that starts with input from lower-level
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managers and works upward so that managers at all levels participate
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Budgetary Slack - ✔✔Potential disadvantage; The amount by which a manager intentionally
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underestimates budgeted revenues or overestimates budgeted expenses in order to make it easier
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to achieve budgetary goals ("slush")
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Strategic Planning (Long-Range Planning) - ✔✔-Usually for five years or more
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-Emphasis on long-term goals, select strategies to achieve goals and develops policies and plans
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to implement strategies
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-Amount of detail is less || || || ||
Tactical Planning (Short-Term Planning)- called Budgeting - ✔✔-Usually not for more than a
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year
-Set on achieving short-term goals, and operations
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-Considerable amount of detail || || ||
Master Budget - ✔✔Set of interrelated budgets that constitute a plan of action for a specified time
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period
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Master Budget- Components - ✔✔Operating Budgets
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1. Sales Budget
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2. Production Budget
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3. Direct Materials Budget
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Budget - ✔✔A formal written statement of management's plans for a specified future time period,
|| || || || || || || || || || || || || ||
expressed in financial terms. Used as a planning and communication tool for management
|| || || || || || || || || || || || ||
Planning - ✔✔The process of establishing company-wide objectives
|| || || || || || ||
Benefits of Budgeting - ✔✔1. Plan ahead
|| || || || || ||
2. Definite objectives
|| ||
3. Early warning system
|| || ||
4. Coordination of activities
|| || ||
5. Management awareness
|| ||
6. Motivates personnel
|| ||
Essentials of Effective Budgeting - ✔✔1. Sound organizational structure
|| || || || || || || ||
2. Based on research and analysis
|| || || || ||
3. Acceptance by all levels of management
|| || || || || ||
Budget Time Periods - ✔✔-A budget may be prepared for any period of time
|| || || || || || || || || || || || ||
-Most common budget period is one year
|| || || || || ||
-Many companies use continuous 12-month budgets (rolling budget)
|| || || || || || ||
-Should be long enough to provide an attainable goal under normal operating business conditions
|| || || || || || || || || || || || ||
Human Behavior - ✔✔The impact of human behavior should always be considered
|| || || || || || || || || || ||
, Participative Budgeting - ✔✔A budgetary approach that starts with input from lower-level
|| || || || || || || || || || || ||
managers and works upward so that managers at all levels participate
|| || || || || || || || || ||
Budgetary Slack - ✔✔Potential disadvantage; The amount by which a manager intentionally
|| || || || || || || || || || || ||
underestimates budgeted revenues or overestimates budgeted expenses in order to make it easier
|| || || || || || || || || || || || ||
to achieve budgetary goals ("slush")
|| || || ||
Strategic Planning (Long-Range Planning) - ✔✔-Usually for five years or more
|| || || || || || || || || ||
-Emphasis on long-term goals, select strategies to achieve goals and develops policies and plans
|| || || || || || || || || || || || || ||
to implement strategies
|| ||
-Amount of detail is less || || || ||
Tactical Planning (Short-Term Planning)- called Budgeting - ✔✔-Usually not for more than a
|| || || || || || || || || || || || ||
year
-Set on achieving short-term goals, and operations
|| || || || || ||
-Considerable amount of detail || || ||
Master Budget - ✔✔Set of interrelated budgets that constitute a plan of action for a specified time
|| || || || || || || || || || || || || || || ||
period
||
Master Budget- Components - ✔✔Operating Budgets
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1. Sales Budget
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2. Production Budget
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3. Direct Materials Budget
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