Quick glossary: Corporate budgeting
October 12, 2017
Successful management starts with a strategic business plan supported by a workable financial budget. This list of 25 essential terms will help you understand the basic vocabulary associated with the corporate financial budgeting process.
From the glossary:
Whether you are running a small department or an entire Fortune 100 enterprise, successful management starts with a strategic business plan supported by a viable financial budget. Without the establishment of a financial budget, there is no way to measure whether the results from operations are successful. Operating without a budget is the epitome of managing by the seat of your pants—you may get away with it for awhile, but it will eventually fail you.
Developing a financial budget requires knowledge about the business, the company, and the industry, as well as familiarity with budgetary terminology. This list will give you a foundation for understanding corporate budgeting concepts.
The booking of revenues when they are invoiced or expenditures when they are billed. Accrual revenues are considered earned when a claim for reimbursement (receivable) is submitted. Accrual expenses are considered encumbered when a purchase order or contract (payable) is submitted.
Denotes the dollar amount authorized to be spent by the department or enterprise on a budgeted expenditure.
Anything of value owned by an enterprise, including cash, accounts receivables, equipment, furniture, buildings, vehicles, and inventory.
The booking of revenues when they are received or expenditures when they are paid. Revenues are considered earned when they are deposited into a bank account. Expenses are considered encumbered when a check or transfer of money is completed.
Cash flow is a measurement of the net amount of cash and cash-equivalents moving into and out of a business. When an enterprise receives more cash than there are expenditures, it is called positive cash flow.
Chart of accounts
A set of accounts and corresponding codes that characterize the typical transactions of an organization. The chart of accounts (CoA) facilitates the consistent coding of transactions for entry into the accounting and financial systems of an enterprise.
Cost of goods sold and cost of sales
The cost of goods sold (COGS) is an accounting term that refers to the total amount of expenditures made to produce a manufactured good or product. Similarly, cost of sales (COS) is an accounting term that refers to the total amount of expenditures made to complete a sale in an enterprise selling services only. Both measurements are separated from overhead expenditures.