Sunday, February 21, Accounting 525 Presentation Budgeting: Operational Planning

Sunday, February 21, Budgeting Basics u B + A = S + E u S + E - B = A Budgeting Form u Inventories as buffers, receivables and payables as buffers.

Sunday, February 21, Key Concept: Input - Output IOR = input / output ratio inputoutput IQ : 1

Sunday, February 21, Key Concept: Time Line Time Line Model Time Start of Period End of Period End and Start of Period End and Start of Period Period 1 Period 2 Period 3

Sunday, February 21, Purpose of Budgeting Systems u Facilitating communication and coordination thru planning u Allocating resources u Evaluating performance and providing incentives

Sunday, February 21,  Operational budgets and budgeted (pro forma) financial statements  Capital budget (capacity)  Financing budget (cash flows)  Operational budgets and budgeted (pro forma) financial statements  Capital budget (capacity)  Financing budget (cash flows) Types of Budgets

Sunday, February 21, Operations Budget

Sunday, February 21, Operations Budget u Historical financial statements are based on transaction aggregation so the methodology is recording transactions and classifying transactions – the micro approach u Budgeted financial statements [and supporting schedules] are based on aggregate estimates and logic relationships [leading to mathematical calculations] – the macro approach

Sunday, February 21, Sales Forecasting Cash Flows Income Statement Cash Receipts Balance Sheet ExpensesExpenses ProductionProduction Production Payments Operations Budget

Sunday, February 21, The End