Key Terms

budget

quantitative plan estimating when and how much cash or other resources will be received and how the cash or other resources will be used

budgeted balance sheet

estimated assets, liabilities, and equities that the company would have at the end of the year if their performance were to meet its expectations

budgeted income statement

statement similar to a traditional income statement except it contains budgeted data

capital asset budget

budget showing the organization’s plans to invest in long-term assets

cash budget

combined budget of all cash inflows and outflows of the organization

cash collections schedule

schedule showing when cash will be received from customers

cash payments schedule

schedule showing when cash will be used to pay for direct material purchases

direct labor budget

budget based on the production budget used to ensure the proper amount of staff is available for production and that there is money available to pay for the labor

direct materials budget

budget combining the production budget with the direct material per unit to ensure the proper quantity of direct materials is available when needed for production

financial budget

category of budgeting that details estimates for cash inflows and outflows through planned operations and changes capital investments of assets, liabilities, and equities

flexible budget

budget based on different levels of activity

manufacturing overhead budget

budget including the remainder of the production costs not covered by the direct materials and direct labor budgets

master budget

overall budget that includes the operating and financial budgets

operating budget

category of budgeting that helps managers plan and manage production, order materials, schedule direct labor, and monitor overhead expenses

production budget

budget showing the number of units that need to be produced for each period based on sales estimates and required inventory levels

rolling budget

budget that is continuously updated by adding an additional budget period at the end of the current budget period

sales budget

budget showing the expected sales in units and the sales price for the budget period

selling and administrative expense budget

budget showing the variable and fixed expenses estimated to be incurred in all areas other than production

static budget

budget prepared for a single level of activity for a given period

zero-based budgeting

budget that begins with zero dollars and then includes in the budget only revenue and expenses that can be supported or justified