ACCT 2102 Chapter Notes - Chapter 9: Operating Expense, Income Statement

• School: University of Georgia
• Department: Accounting
• Course: ACCT 2102
• Professor: Farmer

Document Summary

Budgets are quantitative plans used by managers to plan for resource requirements and to control operations. The majority of businesses now use a participative approach to budgeting. This approach relies on the knowledge of multiple levels of management within the company. Participative budgeting is beneficial for companies because the information gathered is more accurate and the involvement of multiple levels of management results in increased motivation. On the down side, participative budgeting increases the complexity of the budgeting process and the likelihood of budgetary slack. Budgetary slack is the intentional overbudgeting of expenses or underbudgeting of revenue. Slack is built into budgets to overcome inevitable budget cuts, to account for uncertainty in the market, and to improve the appearance of operational results. If slack causes a budget to be too loose, employee motivation will suffer because the goals will be easy to achieve.