question

Most companies prepare long-term strategic plans spanning _____________. They then fine-tune them in preparing medium-term and short-term plans.

answer

5 to 10 years

question

The _______________ can be inexact, given its long-term focus. Medium- and short-term plans are more operational and translate strategic plans into actions. These action plans are fairly concrete and consist of defined objectives and goals.

answer

strategic plan

question

Short-term financial plans are called _______ and typically cover a _______ period.

answer

budgets, one-year

question

A ______ is a formal statement of a company's future plans usually expressed in monetary terms.

answer

budget

question

_____________ is the process of planning future business actions and expressing them as formal plans.

answer

Budgeting

question

Budgeting makes planning an explicit ________________ responsibility.

answer

management

question

Evaluation involves comparing actual results against one of two usual alternatives: (1) ____________________ or (2) _______________________.

answer

past performance, expected performance

question

An _______________ assists management in identifying problems and taking corrective actions if necessary.

answer

evaluation

question

Evaluation using expected, or ______________, performance is potentially superior to using past performance to decide whether actual results trigger a need for corrective actions. This is so because past performance fails to consider several changes that can affect current and future activities.

answer

budgeted,

question

_________________ provides standards for evaluating performance and can affect the attitudes of employees evaluated by them.

answer

Budgeting

question

Budgeted levels of performance must be realistic to avoid ______________ employees.

answer

discouraging

question

Personnel who will be evaluated should be consulted and involved in preparing the budget to increase their ______________ to meeting it. Performance evaluations must allow the affected employees to ___________ the reasons for apparent performance deficiencies.

answer

commitment, explain

question

The practice of involving employees in the budgeting process is known as ________________________.

answer

participatory budgeting

question

The budgeting process has three important guidelines: (1) Employees affected by a budget should be _____________ when it is prepared (participatory budgeting), (2) goals reflected in a budget should be ____________, and (3) evaluations should be made carefully with opportunities to _______ any failures.

answer

consulted, attainable, explain

question

Under participatory budgeting, some employees might understate sales budgets and overstate expense budgets to allow them a cushion, or __________________, to aid in meeting targets.

answer

budgetary slack

question

Pressure to meet budgeted results might lead employees to engage in _________________ or commit _______.

answer

unethical behavior, fraud

question

Some employees might always spend their budgeted amounts, even on unnecessary items, to ensure their budgets aren't _________ for the next period.

answer

reduced

question

A company's budget, or operating plan, is based on its ___________.

answer

objectives

question

A company's operating plan starts with the ____________, which drives all other budgets including production, materials, labor, and overhead. The budgeting process coordinates the activities of these various departments to meet the company's overall goals.

answer

sales budget

question

A _________ budget is preferred and can inform employees in all types of organizations about management's plans. The budget can also communicate management's specific action plans for the employees in the budget period.

answer

written

question

Budget figures and budget estimates developed through a _____________ process usually are more useful. Without active employee involvement in preparing budget figures, there is a risk these employees will feel that the numbers fail to reflect their special problems and needs.

answer

bottom-up

question

Most budgets should be developed by a _________ process, but the budgeting system requires ________________.

answer

bottom-up, central guidance

question

The budget period usually coincides with the _______________ period.

answer

accounting

question

Managers can compare actual results to budgeted amounts in a report a difference is called a __________.

answer

variance

question

Management examines ____________, particularly large ones, to identify areas for improvement and corrective action.

answer

variances

question

Many companies apply continuous budgeting by preparing _______________.

answer

rolling budgets

question

____________________: Practice of preparing budgets for a selected number of future periods and revising those budgets as each period is completed.

answer

Continuous budgeting

question

__________________: New set of budgets a firm adds for the next period (with revisions) to replace the ones that have lapsed.

answer

Rolling budget

question

For large companies, three groups usually determine or influence the budgets:

answer

creditors, directors, management

question

The annual budget process often begins _____________ or more before the budget is due to the board of directors.

answer

six months

question

__________________: Comprehensive business plan that includes specific plans for expected sales, product units to be produced, merchandise (or materials) to be purchased, expenses to be incurred, plant assets to be purchased, and amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet.

answer

Master budget

question

A __________________ is a formal, comprehensive plan for a company's future.

answer

master budget

question

A ________________ contains several individual budgets that are linked with each other to form a coordinated plan.

answer

master budget

question

The master budget typically includes

answer

individual budgets for sales, purchases, production, various expenses, capital expenditures, cash

question

Some budgets require the input of ________________. For example, the merchandise purchases budget cannot be prepared until the sales budget has been prepared because the number of units to be purchased depends on how many units are expected to be sold.

answer

other budgets

question

Order of budget preparation:

answer

Operating Budgets (Sales budget, Production or Purchases budget, Mfg/Selling/G&A budgets) => CapX Budget => Financial Budgets (Cash budget, Budgeted Income statement, Budgeted balance sheet)

question

________________: Plan showing the units of goods to be sold or services to be provided; the starting point in the budgeting process for most departments.

answer

Sales budget

question

A company's sales personnel are usually asked to develop predictions of sales for each territory and department because people normally feel a greater commitment to goals they help set. Another advantage to this participatory budgeting approach is that it draws on knowledge and experience of people _____________ in the activity.

answer

involved

question

The number of units added to inventory depends on _________________________.

answer

budgeted sales volume

question

Managers of just-in-time (JIT) inventory systems use sales budgets for short periods (often as few as one or two days) to order ________________ merchandise or materials to satisfy the immediate sales demand.

answer

just enough

question

________________: Quantity of inventory or materials over the minimum needed to satisfy budgeted demand.

answer

Safety stock

question

_____________________________: Plan that shows the units or costs of merchandise to be purchased by a merchandising company during the budget period.

answer

Merchandise purchases budget

question

General Formula for a Merchandise Purchases Budget:

answer

Inventory to be purchased = Budgeted Ending Inventory + Budgeted cost of sales for the period - Budgeted beginning inventory

question

Assume Hockey Den adopts a JIT system in purchasing merchandise. How will its sales budget differ from its merchandise purchases budget? Answer: The two budgets will be similar because future inventory should be near _______.

answer

zero

question

_____________________: Plan that lists the types and amounts of selling expenses expected in the budget period

answer

Selling expense budget

question

The _____________________ is normally created to provide sufficient selling expenses to meet sales goals reflected in the sales budget. Its initial responsibility usually rests with the vice president of marketing or an equivalent sales manager.

answer

selling expense budget

question

_________________________________: Plan that shows predicted operating expenses not included in the selling expenses budget.

answer

General and administrative expense budget

question

General and administrative expenses can be either ____________ or _______ with respect to sales volume.

answer

variable, fixed

question

The office manager responsible for general administration often is responsible for preparing the initial _______________________________.

answer

general and administrative expense budget

question

Interest expense and income tax expense are often classified as ____________________________ in published income statements but normally cannot be _____________ at this stage of the budgeting process.

answer

general and administrative expenses, planned

question

The prediction of interest expense follows the preparation of the ____________ and the decisions regarding debt. The predicted income tax expense depends on the budgeted amount of __________.

answer

cash budget, pretax income

question

Both ________ and _____________ are not used in comparison to the budget to evaluate that person's performance.

answer

interest, income taxes

question

_________________________: Plan that lists dollar amounts to be both received from disposal of plant assets and spent to purchase plant assets.

answer

Capital expenditures budget

question

Since a company's plant assets determine its productive capacity, the capX budget is usually affected by _____________ plans for the business.

answer

long-range

question

_____________________ is the process of evaluating and planning for capital (plant asset) expenditures. This is an important management task because these expenditures often involve long-run commitments of large amounts, affect predicted cash flows, and impact future debt and equity financing.

answer

Capital budgeting

question

The capital expenditures budget is often linked with management's evaluation of the company's ability to ________________________.

answer

take on more debt

question

After developing budgets for sales, merchandise purchases, expenses, and capital expenditures, the next step is to prepare the _____________

answer

cash budget

question

_________________: Plan that shows expected cash inflows and outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans.

answer

Cash budget

question

By preparing a cash budget, management can prearrange loans to cover _______________________ before they are needed.

answer

anticipated cash shortages

question

A cash budget also helps management avoid a cash balance that is too large. Too much cash is undesirable because it earns a __________________ return.

answer

relatively low

question

General formula for the cash budget:

answer

Beginning Cash Balance + Budgeted Cash Receipts - Budgeted Cash Disbursements = Preliminary Cash Balance

question

When preparing a cash budget, we add __________________________ to the _____________________________ and deduct _____________________________.

answer

expected cash receipts, beginning cash balance, expected cash disbursements

question

If the expected (preliminary) ending cash balance is too low, additional cash requirements appear in the budget as planned increases from ______________________.

answer

short-term loans

question

If the expected ____________________ exceeds the __________________, the excess is used to repay loans or to acquire short-term investments.

answer

ending cash balance, desired balance

question

Information for preparing the cash budget is mainly taken from the _____________ and _______________________ budgets.

answer

operating, capital expenditures

question

A _________________ provides "flexibility and security," important in navigating uncertain economic times.

answer

cash cushion

question

The ___________________________ is a managerial accounting report showing predicted amounts of sales and expenses for the budget period.

answer

budgeted income statement

question

Information needed for preparing a budgeted income statement is primarily taken from __________________ budgets.

answer

already prepared

question

The final step in preparing the master budget is summarizing the company's financial position through the _________________________.

answer

budgeted balance sheet

question

The budgeted balance sheet shows _________________ for the company's assets, liabilities, and equity as of the end of the budget period.

answer

predicted amounts

question

In preparing a budgeted balance sheet, ______________ are determined by analyzing the capital expenditures budget and the balance sheet from the beginning of the budget period

answer

plant assets

question

Activity-based budgeting (ABB) is a budget system based on ____________________.

answer

expected activities

question

Unlike a merchandising company, a manufacturer must prepare a _____________________ instead of a merchandise purchases budget.

answer

production budget

question

A ______________________, which shows the number of units to be produced each month, is similar to merchandise purchases budgets except that the number of units to be purchased each month is replaced by the number of units to be manufactured each month.

answer

production budget

question

A production budget does not show costs; it is always expressed in ___________________.

answer

units of product

question

A manufacturing budget shows the budgeted costs for direct materials, direct labor, and overhead. It is based on the ____________________________ from the production budget.

answer

budgeted production volume

question

The manufacturing budget for most companies consists of three individual budgets: __________________ budget, _____________ budget, and _____________ budget.

answer

direct materials, direct labor, overhead

question

Budgeting is the process management uses to _____________ its plans.

answer

formalize

question

At least three aspects are important:

answer

budget committee, budget reporting, and budget timing

question

Activity-based budgeting requires management to identify _____________ performed by departments, plan necessary activity _________, identify _____________ required to perform these activities, and ____________ the resources.

answer

activities, levels, resources, budget

Accounting Ch. 20 – Flashcards

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