The term “budget” is actually a shorthand term to describe a variety of budget documents. All of these documents are combined into a master budget. The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period.
The master budget contains two classes of budgets. Operating budgets are the individual budgets that result in the preparation of the budgeted income statement. These budgets establish goals for the company’s sales and production personnel. In contrast, financial budgets are the capital expenditure budget, the cash budget, and the budgeted balance sheet. These budgets focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.
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Capital stock consists of preferred and common stock. Preferred stock appears before common stock because of its preferential rights.
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Cost method is an accounting method in which the investment in common stock is recorded at cost, and revenues are recognized only when cash dividends are received.
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Accountancy involves the preparation of the final accounts to show the result of the business at the end of the financial period. The man