Chapter 9 : The Master Budget and Responsible Accounting

Strategic Planning

Setting long-term goals that may extend 5-10 years into the future

Participative Budgeting

Budgeting that involves the participation of many levels of management

Rolling Budget

A budget that is continuously updated so that the next 12 months of operations are always budgeted; also known as a continuous budget

Zero-based Budgeting

A budgeting approach in which managers begin with a budget of zero and must justify every dollar put into the budget.

Budget Committee

A committee comprised of upper management, as well as cross-functional managers, who review, revise, and approve the final budget

Slack

Intentionally overstating budgeted expenses or understating budgeted revenues in order to cope with uncertainty, make performance appear better, or make room for potential budget cuts

Safety Stock

Extra inventory kept on hand in case demand is higher than expected or problems in the factory slow production

Operating Budgets

The budgets needed to run the daily operations of the company. The operation budgets culminate in a budgeted income statement

Financial Budgets

The budgets that project the collection and payment of cash, as well as forecast the company's budgeted balance sheet

Master Budget

The comprehensive planning document for the entire organization. The master budget includes the operating budgets and the financial budgets.

Production Budget

Used to forecast how many units should be made to meet sales projections

Variance

The difference between actual and budgeted figures (revenues and expenses)