Exam 4 - Ch 14

Question 1

budgeting - what, used to, helps…

Answer 1

• A plan for a specific period of time (for current year, 3-5 yrs, &long-term)
• helps management determine how to use resources
• used to estimate future costs and revenues

Question 2

What are the three levels of planning

Answer 2

• strategic planning = involves long term plans
• capital budgeting = focuses on intermediate-range planning 3-5 yrs
• operations budgeting = focuses on short term plans and used to create master budget

Question 3

advantages of budgeting (4 adv)

Answer 3

• promotes planning
• promotes coordination between departments
• compare budget to actual for performance evaluations
• enhances corrective actions

Question 4

What is the master budget

Answer 4

a group of detailed budgets and schedules representing the company’s operating and financial plans:

• includes operating budgets, capital budgets, and pro forma financial statements

Question 5

Operating budget (4)

Answer 5

• a sales budget
• an inventory purchases budget
• a selling and admin expense budget
• a cash budget

Question 6

what is the capital budget for?

Answer 6

for longer term assets

Question 7

pro forma financial statements include (3)

Answer 7

income statement, balance sheet, cash flows

Question 8

sales budget

Answer 8

is the FIRST budget prepared. shows expected sales for the coming periods and expected collections on those sales.

Question 9

total sales formula

Answer 9

total sales = credit sales + Credit (A/R) Sales

Question 10

accounts receivable -

Answer 10

money the company expects to collect from customers for sales made on credit. it represents sales made where the customer hasn’t paid yet

Question 11

inventory purchase budget -

what does it show?

Answer 11

where merchandisers purchase inventory to resell to customers to earn a profit

shows: it helps prepare how much inventory to buy to keep up with sales

Question 12

schedule of cash payments for inventory purchases -

Answer 12

a company will know their payment schedule owed to vendors… they may allow purchases to be payed over time

Question 13

accounts payable -

Answer 13

is liability the business owes to its supplier for goods and services it has already received but has not payed for yet

Question 14

selling and administrative expense budget includes (7)

Answer 14

salaries expense
salary commission expense
depreciation expense
utilities expense
insurance expense
rent expense
miscellaneous expense