1. Sunday, February 21, 20161 Accounting 525 Presentation Budgeting: Operational Planning

2. Sunday, February 21, 20162 Budgeting Basics u B + A = S + E u S + E - B = A Budgeting Form u Inventories as buffers, receivables and payables as buffers.

3. Sunday, February 21, 20163 Key Concept: Input - Output IOR = input / output ratio inputoutput IQ : 1

4. Sunday, February 21, 20164 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

5. Sunday, February 21, 20165 Purpose of Budgeting Systems u Facilitating communication and coordination thru planning u Allocating resources u Evaluating performance and providing incentives

6. Sunday, February 21, 20166  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

7. Sunday, February 21, 20167 Operations Budget

8. Sunday, February 21, 20168 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

9. Sunday, February 21, 20169 Sales Forecasting Cash Flows Income Statement Cash Receipts Balance Sheet ExpensesExpenses ProductionProduction Production Payments Operations Budget

10. Sunday, February 21, 201610 The End