ACCTG 102 Lecture Notes - Lecture 15: Capital Expenditure, Indian Railways, Budget
Document Summary
The master budget: the budget really refers to a variety of budget documents combined into the master budget. 2 classes of budgets: 1) operating budget: culminate in preparation of budgeted i/s: financial budget: cash and b/s, focus on cash resources needed to fund expected operations and capital expenditures. Operating budgets prepared first, starting with sales budget, after these then financial budget is done. Preparing the operating budgets: eg. company starts budget process in september of preceding year and completes by december 1. If optimistic, may result in excess inventory that has to be sold off at reduced prices. See amazon and madison square garden examples in text. Expected unit sales x unit selling price = total sales. Production budget: what has to be produced to meet anticipated sales. Budgeted sales in units + desired ei in units beginning fg in units = required production units. A realistic estimate of ei is essential in scheduling production requirements.
