Foundations of Accounting 2 Essay Example | Topics and Well Written Essays - 1500 words

Foundations of Accounting 2 - Essay Example The cash flow is not an estimate of your sales and expenses; rather it is an estimate of when the money associated with sales or in any other income generating account will be received and when the money paying the expenses will be paid out. Budgeted Profit and Loss differs from a budgeted cash inflow or outflow where much of the data for the budgeted income statement come from other budgets already prepared. For example, sales figures come from the sales budget. Cost of goods sold is based on unit cost of production (and the direct materials budget). The direct labour budget provides labour cost information. And the manufacturing overhead budget provides overhead cost information. While that of a cash budget, it merely provides a forecast of cash disbursements and cash realization. D) PRINCIPLES OF GOOD BUDGETING ARE NOT ALWAYS FOLLOWED IN PRACTICE because of different types of constraints. One of which is the financial stability of the business and of the industry. Rising prices and rising costs of different materials for a manufacturing business, for example, has one of the greatest effects on the business, it has to make the company cut its expenses and therefore has a direct effect on the forecasted financial statement. Even though there are several ways in making sure that projections do happen, it is still subjected to uncertainty the occurrence of which can greatly affect the financial standing of the company. There are also instances that a good budget is not always effective when there is a personal interest involved in the project, that is, management or any person attached to a certain project has its own personal goal that is detrimental to the company. Therefore, proper ‘attitude’ should be observed and there must be a common goal towards a certain action. E) ESTIMATING SALES FOR THE NEXT ACCOUNTING PERIOD is done thru a forecast or a budget. Sales forecasting is