After completing this chapter you should be able to: Describe the importance and benefits of budgeting and the process of budget administration, describe a master budget and the process of preparing it, analyze expense planning using activity-based budgeting, prepare each component of a master budget and link each to the budgeting process. | MASTER BUDGETS AND PLANNING Chapter 23 Chapter 23: Master Budgets and Planning Communicates management plans throughout the organization. Provides a benchmark for evaluating performance. Promotes analysis and a focus on the future. Converts long-term strategic plans into short-term financial plans. C 1 Motivates employees through participation in the budgeting process and the establishment of attainable goals. Enhances coordination so that activities of all units contribute to meeting the company’s overall goals. Budget Process Part I. Most companies prepare long-term strategic plans spanning 5 to 10 years. Then they prepare shorter-term financial plans, called budgets, to guide their actions toward achieving the goals set forth in the strategic plan. Budgets are most often prepared on an annual basis, but can be prepared for any period of time. The budget process: Part II. Converts long-term strategic plans into short-term financial plans, and promotes analysis and a focus on the future. Part III. Provides a benchmark for evaluating performance, and communicates management plans throughout the organization. Part IV. Enhances coordination so that activities of all units contribute to meeting the company’s overall goals, and motivates employees through participation in the budgeting process and the establishment of attainable goals. MASTER BUDGET COMPONENTS Sales budget Merchandise Purchases Prepare financial budgets: cash income balance sheet Prepare capital expenditure budget Prepare selling and general administrative budgets C 3 The master budget typically includes individual budgets for sales, purchase, production, various expenses, capital expenditures, and cash. A company’s budgeting process begins with a sales budget. The success of all subsequent steps in the process depends on an accurate sales forecast. This slide describes the components of the master budget for a merchandiser. The final result of the budgeting process is a set of budgeted . | MASTER BUDGETS AND PLANNING Chapter 23 Chapter 23: Master Budgets and Planning Communicates management plans throughout the organization. Provides a benchmark for evaluating performance. Promotes analysis and a focus on the future. Converts long-term strategic plans into short-term financial plans. C 1 Motivates employees through participation in the budgeting process and the establishment of attainable goals. Enhances coordination so that activities of all units contribute to meeting the company’s overall goals. Budget Process Part I. Most companies prepare long-term strategic plans spanning 5 to 10 years. Then they prepare shorter-term financial plans, called budgets, to guide their actions toward achieving the goals set forth in the strategic plan. Budgets are most often prepared on an annual basis, but can be prepared for any period of time. The budget process: Part II. Converts long-term strategic plans into short-term financial plans, and promotes analysis and a focus on .
