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3. For budgets to be effective: ) A. Objectives should be attainable. B. There should be management approval. C. They should be developed from the "botto O D. Both A and B. O E. A. B. and S.

3. For budgets to be effective: ) A. Objectives should be attainable. B. There should be management approval. C. They should be developed from the "botto O D. Both A and B. O E. A. B. and S.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Understanding Effective Budgets **Question 3: For budgets to be effective:** - **A. Objectives should be attainable.** - **B. There should be management approval.** - **C. They should be developed from the "bottom-up".** - **D. Both A and B.** - **E. A, B, and C.** **Explanation:** To create an effective budget, several key criteria must be met. Not only should the objectives outlined in the budget be realistic and achievable (A), but it is also crucial for the budget to receive management approval to ensure alignment with organizational goals (B). Additionally, an effective budget often incorporates a "bottom-up" approach, where input from various levels within the organization is considered to ensure accuracy and feasibility (C). **Key Points:** 1. **Attainable Objectives (A):** Setting realistic goals that can be achieved within the allocated resources and time frame. 2. **Management Approval (B):** Ensuring that the proposed budget aligns with strategic aims and has the endorsement of key decision-makers. 3. **Bottom-Up Development (C):** Engaging employees at all levels to enhance the accuracy and commitment to the budget. 4. **Combined Approaches (D & E):** Recognizing that combining these practices (D) or applying all of them together (E) can further enhance budget effectiveness. This theoretical understanding is essential for anyone involved in budget planning and financial management.
Transcribed Image Text:### Understanding Effective Budgets **Question 3: For budgets to be effective:** - **A. Objectives should be attainable.** - **B. There should be management approval.** - **C. They should be developed from the "bottom-up".** - **D. Both A and B.** - **E. A, B, and C.** **Explanation:** To create an effective budget, several key criteria must be met. Not only should the objectives outlined in the budget be realistic and achievable (A), but it is also crucial for the budget to receive management approval to ensure alignment with organizational goals (B). Additionally, an effective budget often incorporates a "bottom-up" approach, where input from various levels within the organization is considered to ensure accuracy and feasibility (C). **Key Points:** 1. **Attainable Objectives (A):** Setting realistic goals that can be achieved within the allocated resources and time frame. 2. **Management Approval (B):** Ensuring that the proposed budget aligns with strategic aims and has the endorsement of key decision-makers. 3. **Bottom-Up Development (C):** Engaging employees at all levels to enhance the accuracy and commitment to the budget. 4. **Combined Approaches (D & E):** Recognizing that combining these practices (D) or applying all of them together (E) can further enhance budget effectiveness. This theoretical understanding is essential for anyone involved in budget planning and financial management.
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