Chapter 9

A budget is a quantitative plan for acquiring

and using financial and other resources over a
specified forthcoming time period.

The act of preparing a budget is called

budgeting.

The use of budgets to control an

organizations activities is known as budgetary
control.
Planning
involves developing objectives and preparing
various budgets to achieve those objectives.

Control
involves the steps taken by management to
increase the likelihood that the objectives set
down while planning are attained and that all
parts of the organization are working together
toward that goal.
1) Communicate Plans

2) Think about and plan for the future

3) Means of allocating Resources

4) Uncover potential Bottlenecks

5) Coordinate activities

6) Define goals and objectives

 Operating Budget

2008 2009 2010 2011

Operating budgets ordinarily

A continuous budget is a
cover a one-year period
12-month budget that rolls
corresponding to a companys
forward one month (or quarter)
fiscal year. Many companies
as the current month (or quarter)
divide their annual budget
is completed.
into four quarters.
A standing committee responsible for

Overall policy matters relating to the

budget

Coordinating the preparation of the budget

Resolving disputes related to the budget

Approving the final budget

 Sales
Sales budget
budget

Selling
Selling and
and
Ending
Ending inventory
inventory administrative
administrative
Production
Production budget
budget
budget
budget budget
budget

Direct
Direct materials
materials Direct
Direct labor
labor Manufacturing
Manufacturing
budget
budget budget
budget overhead
overhead budget
budget

Cash
Cash Budget
Budget

Budgeted
Budgeted Budgeted
Budgeted
income
income balance
balance sheet
sheet
statement
statement