Concept explainers
Briefly describe why budgetary planning is important to managers.
Concept introduction:
Budgetary Planning:
Budgetary planning is a very important tool used in business. It is composed of two concepts. One is budget and the other is planning. Budget means forecast in financial terms. Budget can be of any type of cost or expenditure. Planning means deciding what to do, how and when to do beforehand. So, budgetary planning means making a budget and then using it for effective working of an organisation.
The reason budgetary planning is important to managers.
Answer to Problem 1Q
Budgetary planning is important for managers because it helps them in performance evaluation of employees. It provides an overall objective. All the departments can align their activities for the accomplishment of organisation goals. It also helps managers in decision making in required time.
Explanation of Solution
Budgetary planning is a very important tool used by management. It helps them in a lot of ways:
- Performance Evaluation of Employees.
- Providing decision making capabilities to managers.
- Can be used in identifying bottlenecks and shortcomings.
- Resources can be allocated effectively and efficiently by proper budgetary planning.
- Budgetary planning provides an overall objective.
- Responsible accounting also comes by budgetary planning. All employees can be held responsible for their work by managers.
- Managers can set benchmarks for their processes and then compare budgets to perform variance analysis.
Want to see more full solutions like this?
Chapter 8 Solutions
MANAGERIAL ACCTG.<LL>W/CONNECT+LRSMRT
- Why is a clear understanding of managements goals and objectives necessary for effective budgets?arrow_forwardIf management is being evaluated on their ability to manage a budget, what can they do to increase cash flow?arrow_forwardWhen would a static budget be effective in evaluating a managers performance?arrow_forward
- Which of the following is true in a bottom-up budgeting approach? Every expense needs to be justified. Supervisors tell departments their budget amount and the departments are free to work within those amounts. Departments budget their needs however they see fit. Departments determine their needs and relate them to the overall goals.arrow_forwardExplain how both small and large organizations can benefit from budgeting.arrow_forwardWhich budget is the starting point in preparing financial budgets? the budgeted income statement the budgeted balance sheet the capital expense budget the cash receipts budgetarrow_forward
- Which approach requires management to justify all its expenditures? A. bottom-up approach B. zero-based budgeting C. master budgeting D. capital allocation budgetingarrow_forwardExplain the role of a sales forecast in budgeting. What is the difference between a sales forecast and a sales budget?arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning