Budgetary Processes Flashcards

Budgetary Processes Flashcards
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Financial Budgets

A company's cash budget, budgeted balance sheet and budgeted income statement are contained in this budget group.

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Operating Budgets

This group of budgets includes a company's selling expense, sales and general and administrative budgets.

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Capital Expenditure Budget

Businesses use this budget to record information about equipment or building purchases or the sales of plant assets.

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Master Budget

This budget typically contains information from a company's operating, financial and capital expenditure budgets.

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Manufacturing Overhead Budget

This budget covers business costs that aren't related to the direct labor or direct materials budgets. It is recorded on the COGS line in a master budget.

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Cost Centers

Departments in a business that can make budgetary requests but that don't generate a profit. Custodial or finance departments are an example of these business areas.

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Budgeting Processes: Top-Down

Businesses use this budgeting process when upper management proved departments with a budget that they must follow.

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Budgeting Processes: Bottom-Up

This budgeting approach allows each department to submit an individual budget. Upper management then approves these budgets.

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Direct Labor Budget

Businesses use this budget to track the expenses they incur related to labor used to manufacture products. It uses the production budget.

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Direct Labor Budget: Formula

(Number of units produced x time to produce each unit) x worker pay-rate per hour.

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Income Statement

The financial document that shows how much a company earns. Along with the balance sheet, this document connects a company's operating and financial budgets.

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Balance Sheet

This financial statement lists out all of a company's liabilities and assets. It draws on data provided by a company's capital expenditure budget.

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Depreciation

This is included in a business's master budget as a reflection of paid capital expenses that are offering a business contributions. This number is often positive and lowers a budget's net amount.

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Capital Expenses

Expenses that a business pays to increase its competitiveness.

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28 cards in set

Flashcard Content Overview

This set of flashcards can help you go over the uses of these budgets:

  • Operating
  • Capital expenditure
  • Direct labor
  • Sales
  • Production
  • Direct materials
  • Sales and administrative expense
  • Master
  • Financial

You'll also be able to review payback periods, the net present value of money and the time value of money.

Front
Back
Capital Expenses

Expenses that a business pays to increase its competitiveness.

Depreciation

This is included in a business's master budget as a reflection of paid capital expenses that are offering a business contributions. This number is often positive and lowers a budget's net amount.

Balance Sheet

This financial statement lists out all of a company's liabilities and assets. It draws on data provided by a company's capital expenditure budget.

Income Statement

The financial document that shows how much a company earns. Along with the balance sheet, this document connects a company's operating and financial budgets.

Direct Labor Budget: Formula

(Number of units produced x time to produce each unit) x worker pay-rate per hour.

Direct Labor Budget

Businesses use this budget to track the expenses they incur related to labor used to manufacture products. It uses the production budget.

Budgeting Processes: Bottom-Up

This budgeting approach allows each department to submit an individual budget. Upper management then approves these budgets.

Budgeting Processes: Top-Down

Businesses use this budgeting process when upper management proved departments with a budget that they must follow.

Cost Centers

Departments in a business that can make budgetary requests but that don't generate a profit. Custodial or finance departments are an example of these business areas.

Manufacturing Overhead Budget

This budget covers business costs that aren't related to the direct labor or direct materials budgets. It is recorded on the COGS line in a master budget.

Master Budget

This budget typically contains information from a company's operating, financial and capital expenditure budgets.

Capital Expenditure Budget

Businesses use this budget to record information about equipment or building purchases or the sales of plant assets.

Operating Budgets

This group of budgets includes a company's selling expense, sales and general and administrative budgets.

Financial Budgets

A company's cash budget, budgeted balance sheet and budgeted income statement are contained in this budget group.

Budgeted Balance Sheet

A financial document that contains information about a company's current and predicted liabilities, assets and shareholder equities.

Shareholder Equity

This represents a company's worth. It is considered to be the difference in a company's current liabilities and current assets.

Assets

This refers to the things a company owns. It can include cash, inventory and money in accounts receivable.

Liabilities

Debts that are owed by a company. These can include notes payable and accounts payable.

Budgeted Income Statement

This financial document predicts the bottom line, or net income, of a company in the future.

Budgeted Income Statement: Formula

Net sales - cost of goods sold x gross margin. Gross margin - administrative and selling expenses = net operating income. Net operative income - interest payments = net income.

Direct Materials Budget: Formula

((Total needed materials for production + required on hand amount after production) - currently available raw materials) x raw material unit cost. Repeat for each individual material.

Direct Materials Budget

Businesses can use this budget to assess how many raw materials they have to buy to complete the orders they have for a given period of time.

Selling and Administrative Expense Budget

This records the expenses a company has that don't relate directly to the manufacture of products, such as rent payments. It is found after the gross profit margin in a budgeted income statement.

Production Budget

This budget provides companies with information about how many products they need to manufacture. It doesn't use currency. Information from this budget is used to make a direct materials budget.

Sales Budget

This budget tells companies how much money they should make in a set amount of time and where it should come from based on historical data. This budget is usually one of the first prepared.

Time Value of Money

A concept that tells us that our money has more worth today than in the future. This concept exists due to inflation, uncertainty and opportunity cost.

Payback Period

The length of time necessary for an investment made by a company to cover its initial costs.

Net Present Value

This value looks at how much a project or investment will cost and compares this with how much profit the project or investment will generate. Subtract cost from profit to find this.

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