Chapter 6- Master Budgets

This chapter provides an introduction to the master budget and responsibility accounting. Budgets are crucial management tools for several reasons. They translate strategic goals into concrete quantitative plans for acquiring and allocating resources. Budgets establish clear benchmarks, which are essential for evaluating actual results and determining if the company is on track to meet it's goals.

Describe the master budget and explain it’s benefits: The budgeting process also compels managers and employees to critically examine the firms strategic uncertanties, competitive landscape, and operational issues.

Strategy, planning, and budgets.

Budgeting is most useful when it is integrated with a companies strategy

The firm’s strategy affects it’s budgeting, and vice versa

Why Budget?

1. Communicate and Coordinate

2. Provide a benchmark or reference point

3. Motivate Employees

4. Learn

What is a budget?

A budget is the quantitative expression of a proposed plan ogf action by management for a specified period. Quantified plan for using limited resources.

What does the Operating Budget and it’s supporting schedules look like?