Chapter 23 - Budgetary planning. The objectives of this chapter are: State the essentials of effective budgeting and the components of the master budget; prepare budgets for sales, production, and direct materials; prepare budgets for direct labor ,manufacturing overhead, and selling and administrative expenses, and a budgeted income statement; prepare a cash budget and a 4 budgeted balance sheet; determine a transfer price using the negotiated, cost-based, and market-based approaches. | 23-1 23 Budgetary Planning Learning Objectives 23-2 1 State the essentials of effective budgeting and the components of the master budget. 2 Prepare budgets for sales, production, and direct materials. 3 Prepare budgets for direct labor ,manufacturing overhead, and selling and administrative expenses, and a budgeted income statement. 4 Prepare a cash budget and a 4 budgeted balance sheet. 5 Determine a transfer price using the negotiated, cost-based, and market-based approaches. LEARNING OBJECTIVE 1 State the essentials of effective budgeting and the components of the master budget. Budget: a formal written statement of management’s plans for a specified future time period, expressed in financial terms. 23-3 Primary method of communicating agreed-upon objectives throughout the organization. Promotes efficiency. Control device - important basis for performance evaluation once adopted. LO 1 Budgeting and Accounting 23-4 Historical accounting data on revenues, costs, and expenses help in formulating future budgets. Accountants normally responsible for presenting management’s budgeting goals in financial terms. The budget and its administration are the responsibility of management. LO 1 The Benefits of Budgeting Primary benefits of budgeting: 1. Requires all levels of management to plan ahead. 2. Provides definite objectives for evaluating performance. 3. Creates an early warning system for potential problems. 4. Facilitates coordination of activities within the business. 5. Results in greater management awareness of the entity’s overall operations. 6. It motivates personnel throughout organization to meet planned objectives. 23-5 LO .
