AFM102 Chapter Notes - Chapter 9: Investment, Income Statement, Budget
Document Summary
Budget: detailed quantitative plan for the future for acquiring and using financial and other resources over a specified future period of time. Budgetary control: the use of budgets to control a firm"s activities. Master budget: summarizes a company"s plans, setting specific targets for sales, production, distribution, administrative, and financial activities. Includes cash budget, budgeted income statement, budgeted balance sheet. Using a budget for planning, controlling & motivation. Control involves developing objectives and preparing various budgets to achieve these objectives gathering feedback to ensure that objectives developed at the planning stage are being attained. Motivating budgets provide goals that can motivate employee effort. Responsibility accounting: system of accountability where managers should be held responsible for. Only those items that they can actually influence to a significant extent. Each revenue/cost item in the budget is the responsibility of a manager who is held responsible for subsequent deviations between budgeted goals and actual results.