Two of the primary functions of management are planning and control. When these two functions are combined with the accounting techniques studied, they provide one of management’s most useful tools: the budgeting process. This process, in turn, involves both budgeting and budgetary control. Budgeting is simply stating in dollars-and-cents terms what the firm wants to accomplish in a given period.Most individuals have some informal plan at the beginning of the month as to how they are going to spend their money. They know, in general, what their expected income is and for what expenses they must use that money.
Businesses must use more formal plans, but they follow the same procedure an individual does— determine how much revenue will come into the firm, divide that revenue among the expenses, and determine the expected profit or loss from operations. In essence, the firm is preparing a “planned” income statement when it sets up a budget. Theaccounting section of the plan should include:Application of managerial accounting within the organization including elements such as:
2. Expected revenue
3. Expected expenses
4. Projected net income5. Budgetary control
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