Accounting – Budgeting, Summary Review in Q&A verified/2024.

Accounting – Budgeting, Summary Review in Q&A verified/2024. What is the definition of Budgeting? - Indicate: The process of preparing reports by predicting the financial consequences of likely future transactions What are the key issues of budgeting? - Indicate: - Preparation of reports - Receipts from debtors - Payments to creditors What are the key components to any budgets? - Indicate: - Reconstructing accounts to find missing figures - Identifying budgeted period and relevant information - Ensuing the correct format each response is being used Why are sales estimates required before preparing budgets? - Indicate: - Calculated figures in budgets are often dependent on the level of activity predicted for the period - The estimate for sales will be used to predict other budgeted items such as COS, stock orders, wages and bad debts What Budgets occur in the Cash Flow Statement? - Indicate: Estimated Operating, Investing and Financing activities What Budgets occur in the Income Statement? - Indicate: Estimated revenue less expenses incurred What Budgets occur in the Balance Sheet? - Indicate: Estimated Assets, Liabilities and Owners Equity What is the purpose of budgeting? - Indicate: A small business must be able to plan and control the future activities of the business. The preparation of these reports provides information for the owner in this decision making process How does budgeting effect planning? - Indicate: Assists planning by predicting what is likely to occur in the future which gives the owner preparation for problems that may arise or opportunities that may arise How does budgeting effect decision making? - Indicate: The actual performance of the business can be compared with the budgeted result as the budgeted result sets a standard or benchmark to evaluate the actual performance of the business. Variance reports can then be seen and acted upon if necessary