ACCT1101 Lecture Three

• makes you think about details and implications ahead of time
• think forward and predict future
• highlights potential problems
• quantifies plans (theories into numbers)
• creates benchmarks (comparison for what actually happens)

"The activities the business performs between creation and selling of goods and services"

• Use cash to buy inventories
• Sell the goods
• Collect cash from sales

• the design and marketing of the service
• selling of the service
• collection of cash

"A plan which the business will try to follow"

"A set of interelated reports (budgets) showing the relationship among a companies golas, activities in operating cycle, resources to be used, and expected financial outcomes"

• Sales Budget
• Purchases Budget
• General and Administrative Expenses Budget
• Selling Expenses Budget
• Cash Budget
• Projected Income Statement
• Projected Balance Sheet

"How many units/services plan to be sold and how much cash the business will collect from sales"

• Goods the business will buy
• Purchase price
• Total cost
• Cash payments

Consists of: expenses involved with the selling of goods and services

"The budget divides the expenses into their cost behaviour (fixed or variable per unit of sales)"

Consists of: expenses to do with the running of the business

Also divides them into their cost behaviour (fixed or variable per unit of activity)

"Cash collected in revenue and cash paid in expenses" (receipts and payments)

Expenses and Revenues

"Summarises sales revenue, and expenses for the budget period to obtain the net profit of the business"

"Summarises the company's expected financial position at the end of the budget period"

Assets, Liabilities, Owners Equity

"By analysing the differences between a companys budgeted results and its actual results"