ACC 363 Exam 2 Study Guide 
Chapter 6: Master Budget and Responsibility Accounting
A budget is the quantitive expression of a proposed plan of action by management for a specified period
Also to aid to coordinate what needs to be done to implement that plan
A financial budget quantifies managers’ expectations regarding a company’s income, cash flows, and financial position
Strategy specifies how an organization matches it capabilities with the opportunities in the marketplace to accomplish its objectives
Stratigic plans are expressed through long-run budgets and operating plans are expressed via short-run budgets
The master budget expressed management’s operating and financial plans for a specified period, usually a fiscal year, and it includes a set of budgeted financial statements. Involves both operating and financing decisions:
Operating decisions deal with how to best use the limited resources of an organization
Financing decisions deal with how to obtain the funds to acquire those resources
Budgeted statements are sometimes called pro forma statements
Budgets:
Promote coordination and communication among subunits within the company
Coordinationg is meshing and balancing all aspects of production or service and all departments in a company in the best way to meet its goals
Communication is making sure all employees understand those goals
Provide a framework for judging performance and facilitating learning
Budgets enable a company’s managers to measure against predicted performance
Budgets overcome two limitations of using past performance as a basis for judging actual results
1) Past results often incorporate past miscues and substandard performance
2) Future conditions can be expected to differ from the past
Motivate managers and other employees
Performance of employees improves when they receive a challenging budget
Challenges in Administering Budgets
The budgeting process is time-consuming (months-long exercise consuming a tremendous amount of resources)
Developing an
A budget is the quantitive expression of a proposed plan of action by management for a specified period
Also to aid to coordinate what needs to be done to implement that plan
A financial budget quantifies managers’ expectations regarding a company’s income, cash flows, and financial position
Strategy specifies how an organization matches it capabilities with the opportunities in the marketplace to accomplish its objectives
Stratigic plans are expressed through long-run budgets and operating plans are expressed via short-run budgets
The master budget expressed management’s operating and financial plans for a specified period, usually a fiscal year, and it includes a set of budgeted financial statements. Involves both operating and financing decisions:
Operating decisions deal with how to best use the limited resources of an organization
Financing decisions deal with how to obtain the funds to acquire those resources
Budgeted statements are sometimes called pro forma statements
Budgets:
Promote coordination and communication among subunits within the company
Coordinationg is meshing and balancing all aspects of production or service and all departments in a company in the best way to meet its goals
Communication is making sure all employees understand those goals
Provide a framework for judging performance and facilitating learning
Budgets enable a company’s managers to measure against predicted performance
Budgets overcome two limitations of using past performance as a basis for judging actual results
1) Past results often incorporate past miscues and substandard performance
2) Future conditions can be expected to differ from the past
Motivate managers and other employees
Performance of employees improves when they receive a challenging budget
Challenges in Administering Budgets
The budgeting process is time-consuming (months-long exercise consuming a tremendous amount of resources)
Developing an