Budget: Management and Budgeting
Introduction
What Is A Budget?
"A budget is a plan." More specifically, a budget is a plan of action matched by resources required to implement the plan. Budgets generally divide between two broad categories: the operating budget, sometimes known as the "expense" budget and the capital budget. Budget in simple word means a sum of money allocated for a particular purpose. Budget is there in everyone's life, it may be a small or a big one. Budget is a tool which helps in controlling and planning the functions of an organization. It is formalized statements of the goals of an organization stated in financial terms and accomplishes several important functions for managers. It states future projections of revenues, expenses and expected profits. Planning, evaluating performance, co-ordinating activities, implementing plans, communicating, motivating and authorising actions are the main functions of a budget. The budget period depends upon the action plan; it might be for a short or long duration. A budget compels the managers to think ahead by formalizing their responsibilities for planning, is best framework for judging subsequent performance and aids managers in coordinating their efforts, so that the plans of an organization meets the objectives of the organization as a whole.
Three Major Purposes Of A Budget
Planning.
Coordinating.
Controlling.
These three functions dictate that budgeting process is flexible but accountable throughout the fiscal period. Budgets are the common denominator of an organization and a constant in the life of any organization.
Budgeting In a Business Sense
It is the planned allocation of available funds to each department within a company. Budgeting allows executives to control overspending in less productive areas. The assets of the company are utilised in such a way to generate significant income or good public relations. Budgeting is usually handled in meetings with accountants, financial experts and representatives from each
What Is A Budget?
"A budget is a plan." More specifically, a budget is a plan of action matched by resources required to implement the plan. Budgets generally divide between two broad categories: the operating budget, sometimes known as the "expense" budget and the capital budget. Budget in simple word means a sum of money allocated for a particular purpose. Budget is there in everyone's life, it may be a small or a big one. Budget is a tool which helps in controlling and planning the functions of an organization. It is formalized statements of the goals of an organization stated in financial terms and accomplishes several important functions for managers. It states future projections of revenues, expenses and expected profits. Planning, evaluating performance, co-ordinating activities, implementing plans, communicating, motivating and authorising actions are the main functions of a budget. The budget period depends upon the action plan; it might be for a short or long duration. A budget compels the managers to think ahead by formalizing their responsibilities for planning, is best framework for judging subsequent performance and aids managers in coordinating their efforts, so that the plans of an organization meets the objectives of the organization as a whole.
Three Major Purposes Of A Budget
Planning.
Coordinating.
Controlling.
These three functions dictate that budgeting process is flexible but accountable throughout the fiscal period. Budgets are the common denominator of an organization and a constant in the life of any organization.
Budgeting In a Business Sense
It is the planned allocation of available funds to each department within a company. Budgeting allows executives to control overspending in less productive areas. The assets of the company are utilised in such a way to generate significant income or good public relations. Budgeting is usually handled in meetings with accountants, financial experts and representatives from each
Bibliography: Horngren. Sundem. Stratton. Introduction to Management Accounting: 13th Ed. New Jersey: Pearson Prentice Hall, 2005. Atkinson. Management Accounting: 3rd Ed. New Jersey: Prentice Hall, 2001. Management Accounting ICSA Study Text. London: BPP Publishing, 1989. Williamson, Duncan. Cost and Management Accounting. Europe: Prentice Hall, 1996. Drury, Colin. Cost and Management Accounting : An introduction: 5th Ed. London: Thomson Learning, 2003. Morse, Wayne. Davis, James. Management Accounting: 2nd Ed. Canada: Addison Wesley Publishing Company, 1988. SBA (2001) ‘Activity Based Budgeting ' at http://www.sba.gov/cfo/abb.html (accessed: 18 November 2005)