Chapter 21 Accounting 102

zero-based budgeting

budget approach where each expenditure item must be justified for each new budget period

top-down mandated budget

budget approach where upper level management establishes parameters under which the budget is to be prepared

bottom-up participative budget

budget approach driven by the direct participation of lower-level employees

budget committee

group of senior managers from each business unit charged with leading the budget preparation and review process

budget slack

influence of behavior to "pad" a budget via misstating expected revenues and/or expenses; to create more favorable budget vs. actual performance appraisals

cash budget

essential budget component detailing planned cash receipts, disbursements, and financing actions

continuous budget

budget that is constantly updated; as one month/quarter is completed another is added to the set the projections

direct labor budget

budget that details expected direct labor needs, along with the related costs of labor

direct material purchases budget

budget that details expected direct material purchases, along with the related cash payments

encumbrance

budgetary restriction occurring in advance of a related expenditure

factory overhead budget

budget that details the anticipated factory overhead, including calculations related to the allocation of such amounts

flexible budget

budget that covers a range of potential outcomes by relating expense levels to the potential revenues

incremental budgeting

budgeting approach where the prior year experience sets a base line for a new budget; changes are made based on new information but the base need not be rejustified in detail

master budget

Also known as the comprehensive budget; an integrated set of articulated budgets relating to numerous operational subcomponents (labor, material, overhead, SG&A, etc.)

pro forma financial statements

As if" budgeted financial statements

production budget

budget that details planned levels of production; takes into account sales and inventory build/decline

sales budget

budget that details anticipated sales levels

SG&A budget

budget that details anticipated selling, general, and administrative costs

static budget

budget that does not anticipate alternative outcomes; estimated sales and expenses are fixed and establish the relevant benchmarks