Bob and Dale have just purchased a small honey manufacturing ...

[DyllonKazuo]

Bob and Dale have just purchased a small honey manufacturing company that was having financial difficulties. After a brief operating period, they decided that the company's main problem was an improper budgeting function.
 
  The company made a good product and market potential was great.
 
  Required:
  Describe the usual budgeting cycle that well-managed companies adopt?

Question 2

(Journal entries - basic events and transactions)
 
   Prepare entries to record the following events and transactions for Tropical Township for the year 2013.
 
  a. The Township adopted a budget calling for appropriations of 360,000 . The estimated revenues (all property taxes) were 340,000.
  b. The Township sent property tax bills amounting to 340,000 to property owners.
  c. Property owners paid 335,000 of property taxes to the Township.
  d. A purchase order of 25,000 was sent to a vendor of supplies.
  e. The supplies ordered in transaction d. were received in good order and the accompanying invoice of 24,000 was approved.

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Answer to Question 1

Answer: The usual budgeting cycle that well-managed companies adopt consists of the following three steps:
1. Before the start of the period, managers and management accountants work together to develop plans for the company as a whole and the performance of its subunits, taking into account the company's past performance, market feedback, and anticipated future changes.
2. At the beginning of the period, managers are provided with a framework that outlines specific financial or nonfinancial expectations against which actual results will be compared.
3. During the course of the year, management accountants and managers investigate any deviations from plans and take corrective action, if necessary.

Answer to Question 2

a. Estimated revenues - property taxes 340,000
Budgetary fund balance 20,000
Appropriations 360,000

b. Property taxes receivable 340,000
Revenues - property taxes 340,000

c. Cash 335,000
Property taxes receivable 335,000

d. Encumbrances 25,000
Budgetary fund balance reserved for encumbrances 25,000

e. Budgetary fund balance reserved for encumbrances 25,000
Encumbrances 25,000

Expenditures - supplies 24,000
Vouchers payable 24,000