Flashcards on Management Accounting Principles and Methods
Management Accounting Principles and Methods Explained
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Budgeting
22 cards
Card 1
Question: What is a master budget?
Answer: A set of linked budgets that together show the company’s full financial plan.
Card 2
Question: Why is the sales budget key to preparing the master budget?
Answer: It forecasts expected sales for the budget period and serves as the foundation for other budgets through detailed mathematical forecasts.
Card 3
Question: What does the production budget show and why is it needed?
Answer: It shows the number of units to produce to meet sales, and it plans production needs including direct materials, direct labor, manufacturing overhead,
Card 4
Question: What is the purpose of an ending finished goods inventory budget?
Answer: It shows the cost of unsold units; cost of goods sold is included in the income statement and the value of ending inventory is shown on the budgeted b
Card 5
Question: What does the sales & administrative (SG&A) budget cover?
Answer: It covers selling, general, and administrative expenses in smaller, separate budgets.
Card 6
Question: What are the main sections of a cash budget?
Answer: Receipts (inflows), disbursements (cash outflows), excess/deficiency of cash, and financing (e.g., loans) showing how cash will be acquired and used.
Card 7
Question: What is a budgeted income statement?
Answer: An estimate of net income for the budget period based on projected revenues and expenses.
Card 8
Question: What does the budgeted balance sheet estimate?
Answer: Estimated assets, liabilities, and equity at the end of the budget period.
Card 9
Question: What key questions does budgeting answer?
Answer: What sales, costs, cash flows, and profits are expected; and what we will earn, spend, owe, and own by period end.
Card 10
Question: What is the purpose of performance reports in the variance analysis cycle?
Answer: To show differences between actual and budgeted results and to raise questions about causes of variances.