ACCT FINAL

• Budgeted income statement


  Helps the boss see how much money the company might make and where it could make or spend less
• Budgeted balance sheet


  Shows what the company's money situation might look like at the end of a planning period including what it owns, what it owes, and what's left over for the owners
• Advantages of Budgets

  • Self-impose or participative budgets allow for managers to collaborate and feel included
  • When people are able to set their own goals they feel more motivated to achieve it
  • They're not able to make the excuse that the budget was impossible to achieve
  • Budget estimates prepared by the frontline managers are usually more accurate than the estimates made by top managers
• Responsibility accounting; human factors in budgeting

  • Top management needs to be enthusiastic and committed to the budget process
  • Top management must not use the budget to pressure employees or blame them if something goes wrong
  • Highly achievable budget targets are preferred when managers are rewarded based on meeting budget targets
• The Master Budget: Components and the order in which they are produced


  1. Sales budget is made first (this also feeds into the selling and administrative budget)

  2. Then the production budget

  3. Then the ending inventory

  4. From the production budget comes direct materials, direct labor, and manufacturing overhead

  5. From these three comes the cash budget

  6. All of these factors go into the budgeted income statement or the budgeted balance sheet
• Sales Budget

  Sales=Units sold x Price per Unit
• Production Budget


  Units to Produce = Current period sales + desired Ending inventory - Beginning Inventory
• Direct Materials Purchase Budget


  1. Quantity Purchase Budget = (Units to Produce x material requirement per unit) + desired Ending inventory of material - Beginning inventory of material
• how to find COGS?


  beginning inventory + purchased inventory - ending inventory
• Spending variances are usually closed to COGS at the end of the accounting period.
• A balanced scorecard is a strategic management performance metric that helps companies identify and improve their internal operations to help their external outcomes. It measures past performance data and provides organizations with feedback on how to make better decisions in the future.
• Centralization offers better control, efficiency, and standardization, while decentralization provides greater flexibility, responsiveness, and innovation. In practice, many organizations adopt a hybrid approach, combining elements of centralization and decentralization to optimize their AP function's performance.
• Cost centers, profit centers and investment centers

  A cost center has control only over costs.

  The objective of a profit center is to hit and exceed profit targets set by upper management. To do this, managers of profit centers can make decisions to generate revenues and control costs.

  investment centers have control over profit, cost, and investment
• The 4 perspectives of a balanced scorecard Financial, Customer, Internal Process, and Learning and Growth.
• RI = Net Operating Income – (Required Rate of Return * Average Operating Assets)
• Capital budgeting and capital expenditures: characteristics of eachmethod including advantages and disadvantages

  capital expenditure is the spending of funds for large expenditures like purchasing fixed assets and equipment, repairs to fixed assets or equipment, research and development, expansion and the like. Budgeting is setting targets for projects to ensure maximum profitability
• What is a Capital Budgeting Decision?

   typically a go or no-go decision on a product, service, facility, or activity of the firm.