ACC chapter 9

Master Budget

comprehensive financial plan for the organization as a whole

Operational budgets

describe the income-generating activities of a firm; sales to income statement consist of 9 budgets

Financial budgets

detail the inflows and outflows of cash and the overall financial position; consists of 3 budgets (cash, balance sheet, and capital budget)

Planning

looking ahead to see what actions should be taken to realize particular goals

Budgets

financial plans for the future, they identify objectives and actions needed to achieve them

Control

looking backward determining what actually happened and comparing it with the previously planned outcomes

Budget Committee

reviews the budget, provides policy guidelines and budgetary goals, approves the final budget, membership should represent all aspects of organization

Strategic Plan

describes future goals, activities, and operations- normally 5 to 10 years out

Continuous Budget

a moving 12-month budget

Goal Congruence

the alignment of managerial and organizational goals

Incentives

the means an organization uses to influence a manager to exert effort to achieve an organization's goals. Can be both monetary and non-monetary

Dysfunctional Behavior

individual behavior that is in basic conflict with the goals of the organization

Building Slack

underestimate revenue or overestimate costs; padding the budget

Pseudo Participation

top management assumes total control of the budgeting process. Ask sub-ordinates to sign off without having any real input

Controllable Costs

the costs whose level a manager can influence

Myopia

when a manager takes actions that improve budgetary performance in the short run but bring long-run harm to the firm

Participative Budgeting

subordinate managers have considerable voice in how the budgets are established. Helps establish a sense of responsibility and fosters creativity