Budgeting Principles and Practices

A financial plan that outlines the resources needed to achieve organizational goals and objectives.

The process of creating a detailed financial plan for the future.

The overall or master budget encompasses all aspects of a company's financial plan for a future period.

The technique of using budgets to monitor and control company activities.

A committee responsible for developing and overseeing the budget process, including budget planning, reviewing, and approval.

Budgets that focus on the operational aspects of the business, such as sales, production, and expenses, ensuring successful daily operations.

Budgets that deal with financial aspects like cash flow, financing, and investments, ensuring the company stays financially healthy.

The process of aligning resources, systems, strategies, and methods to achieve organizational goals and objectives.

The phase where plans are put into action and resources are organized to support them.

The stage where activities are monitored, evaluated, and adjusted to ensure that plans stay on track.

A group of top executives responsible for developing and overseeing the budget process.

The process of ensuring that all executives are aligned with organizational objectives.

A measure of an executive's ability to guide and direct their team effectively.

A feeling of ownership and responsibility for achieving organizational goals.

Open and honest communication between executives and the CEO.

A group of top executives from various operational areas (e.g., Sales, Production, Finance) responsible for developing and approving the budget.

A document outlining the schedule and instructions for creating and distributing the budget.

A timeline outlining the key activities and deadlines for developing and finalizing the budget.

Quantifiable plans that represent the company's financial goals and strategies.

The overall budget that encompasses all financial aspects of the organization, starting with the sales projections.

The process of using the budget to monitor and control company performance, ensuring that plans are being met.

Budgets that focus on the operational aspects of the business, such as sales, production, and expenses.

Budgets that deal with financial aspects, such as cash flow, financing, and investments.

The starting point for the Master Budget, it projects future sales revenue based on market demand and company goals.

A budget outlining the production requirements based on the projected sales, including the cost of materials, labor, and factory overhead.

A projection of a company's financial position at the end of a budget period, including assets, liabilities, and equity.

A detailed plan outlining the anticipated cash inflows and outflows for a specific period, helping manage cash flow and ensure financial stability.

A budget that focuses on long-term investments, such as purchasing new equipment or buildings, essential for growth and expansion.

The standard cost is used as a foundation for budgeting various expenses, including direct materials, direct labor, variable overhead, fixed overhead, selling expenses, and administrative expenses.

A method for calculating the cost of direct materials purchases, taking into account beginning and ending material inventory levels.

The expected quantity of materials used in production, calculated by multiplying budgeted production by the standard materials needed per unit.

The expected total cost of direct materials purchases, calculated by multiplying the budgeted purchase quantity by the standard material cost per unit.

The expected direct labor cost, computed by multiplying budgeted production by the standard direct labor hours per unit, then multiplying by the standard direct labor rate per hour.

The anticipated cost of factory overhead, broken down into two components: fixed and variable overhead.

The cost of fixed overhead, which remains constant regardless of the level of production within a given budget period.

The cost of variable overhead, which fluctuates directly with changes in production volume during a budget period.

Factors like past sales, economic conditions, and relationships of sales to economic indicators can influence the sales forecast.

A method of calculating sales forecasts using data analysis and statistical models, considering factors like market conditions and product growth.

Estimating sales by gathering opinions from company executives and sales staff, providing an internal perspective.

Analyzing factors influencing sales revenue, such as consumer demand and market trends, to predict future outcomes.

The expected number of units to be sold, based on various factors and estimations.

The financial projection of total sales revenue, factoring in potential uncollectible accounts.

A method of estimating sales based on various economic scenarios, accounting for different probabilities of occurrence.

A sales forecast is an estimate of future sales performance. It is a crucial component of business planning.