Financial Planning andBudgetsBASTRCSX Module 5 Show LEARNING OUTCOMES:Add a footer21.Explain why organizations budget andthe processes they use to createbudgets.2.Prepare a sales budget, including aschedule of expected cash collections.3.Prepare a production budget.4.Prepare a direct materials budget,including a schedule of expected cashdisbursements for purchases ofmaterials.5.Prepare a direct labor budget.6.Prepare a manufacturing overheadbudget. Explain whyorganizations budgetand the processesthey use to createbudgets.Learning Outcome 13 PROFIT PLANNING•Involve the steps taken by the management to achieve their plannedlevel of profits.•Profit planning is accomplished by preparing a number of budgets thattogether form an integrated business plan known asMaster budget.•TheMaster budgetis an essential management tool thatcommunicates management’s plans throughout the organization,allocates resources and coordinates activities. The Basic Framework of BudgetingAbudgetis a detailed quantitative plan foracquiring and using financial and other resourcesover a specified forthcoming time period.1.The act of preparing a budget is calledbudgeting.2.The use of budgets to control anorganization’s activities is knownasbudgetary control. Master Budget•Refers toa summary of a company’s plans including specific targetsfor sales, production, and financing activities.•Themaster budget– which culminates in a cash budget, a budgetedincome statement, and a budgeted balance sheet – formally lays outthe financial aspects of management’s plans for the future and assistsin monitoring actual expenditures relative to those plans. Purpose of Budgeting: Planning andControlPlanning–involves developingobjectives and preparingvarious budgets toachieve thoseobjectives.Planning–involves developingobjectives and preparingvarious budgets toachieve thoseobjectives.Control–involves the steps takenby management toincrease the likelihoodthat the objectives setdown while planning areattained and that allparts of the organizationare working togethertoward that goal.Control–involves the steps takenby management toincrease the likelihoodthat the objectives setdown while planning areattained and that allparts of the organizationare working togethertoward that goal. Advantages of BudgetingAdvantagesDefine goalsand objectivesUncover potentialbottlenecksCoordinateactivitiesCommunicateplansThink about andplan for the futureMeans of allocatingresources Classification of Budget according toits time line coverage:•Master budget, including the operating budget andfinancial budgets (e.g. 12 months or less)•Capital budgets or capital investments budgets (e.g. Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document End of preview. Want to read all 119 pages? Upload your study docs or become a Course Hero member to access this document Tags Budget Committee, organizations budget Which of the following budgets shows the company's planned profit quizlet?The budgeted income statement is one of the key schedules in the budget process. It shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured.
Which of the following budgets uses information from all the other budgets?The cash budget uses information from all of the other budgets: cash receipts from the sales budget, cash disbursements from direct materials budget, cash disbursements from the direct labor, manufacturing overhead and selling administrative expense budget.
Which section of the cash budget summarizes all cash payments that are planned for the budget period?Typically, a cash budget is divided into three sections: cash receipts, cash payments, and financing. The cash receipts section summarizes all cash expected to flow into the business during the budget period.
What is the first step in budgeting?The first and foremost step in budgeting is developing a list of the goals for the arrangement and allocation of financial resources. It is necessary to plan the various objectives for undertaking the budgeting activity.
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An integrated business plan that formally lays out the companys goals is called the ______ budget.
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