A budget is a financial tool that can help one to make better financial decisions, budgets are action statements that give an account of what is going on to map the next choices. They can also be defined as a plan of expenditure. The budget process involves defining goals and gathering information, forming expectations and reconciling goals and data, creating the budget, monitoring actual outcomes and analyzing variances, adjusting budget, expectations or goals and redefining goals. (Siegel and Yatch, 2009). Since creating a budget requires one to look at the past behaviour, the financial statements and the current situation, a budget projects how things should work out. Creating a successful budget involves reconciling goals and behaviours. By planning conservatively, one can avoid unexpected surprises.
b). A comprehensive budget
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Recurring incomes and expenditures affect everyday life and they happen often not seasonally and the financial statements used are the income statement and the cash flow statement. It is wise to have a budget that follows a period of time that shows all items. For those items that have an uncertain amount, a minimum amount can be used and a maximum amount can be used when it comes to expenses, to plan conservatively. If, income cannot be counted on, it should be omitted from the budget. Getting new information can change expectations, as well as does an anticipated change in personal or micro factors. Personal or micro factors include age and health. Economic conditions can affect a budget through macroeconomic factors. Macro factors are not easy to predict and the best way to deal with them will be to keep track of how the economy is working through the news or other methods. So the operating budget's purpose is to help one plan and make decisions when it comes to recurring
Operating budgets are budgets that deal mainly with the day-to-day operations of a facility. This may include wages, utilities, rent, and items purchased that have the intent of lasting less than a year (Johnston, n.d). This type budget provides the needed information regarding the cash on hand needed to operate the facility during a fiscal year. Capital expenditure budgets deal with more long term items such as equipment or property. As stated by Johnston (n.d.), it is necessary to have a capital budget for continued growth of the business. You complete this task by purchasing assets that produce an income. Capital expenditure budget have the potential to cover a five- to ten-year period (Baker & Baker, 2014, p.174). Items included in the capital expenditure budget may also include loan interest and bondholder's interest. The operating budget and the capital expenditure budget interact with one another. To demonstrate an example: a healthcare facility purchases a chemistry analyzer for its clinical laboratory. The chemistry analyzer is placed in the capital expenditure budget, but the maintenance for the analyzer is placed in the operational budget. The capital expenditure expense is the chemistry analyzer, but the materials used to maintain the chemistry analyzer are operational expense.
For government budgeting to be effective, the process that guides it must be an evolving one. As the government gets bigger, it will most likely destabilize the existing method. Therefore, it must change to keep pace with the demands and growth of the country. The process must be capable of handling the complexity of our nation and its multifaceted needs so it will always need revisions and restructuring to face these new challenges. Its ultimate goal must be to reinforce the government and strengthen the country.
Budgets are a resource that a nonprofit can utilize to develop strategic plans and tactical operational management plans to achieve their mission. Budgets can be used as a communications mechanism with internal and external stakeholders. “In most settings, budget and budgeting are overly feared exercises [however] with the proper knowledge they can be used as the management aids they are intended to be” (McLaughlin, 2016, p.176). The National Council of Nonprofits points to a budget as “a guide that can help a nonprofit plan for the future as well as assess its current financial health” (Council of Nonprofits, n.d.).
The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred. The Budget Process Budgetary planning may differ between organizations. Single-period budgets and rolling budgets have methodologies that provide advantages and disadvantages that may make one budget time frame better than another. A single period may require less time in planning during a fiscal year, but is less accurate than a rolling budget that is continuously planned on a repetitive basis. In either case, budgets are planned in advance in order for a company to operate profitably, and less so to have "actual results equal budgeted results."
Budget is a simple plan that outlines of all income verses all expenses on monthly basis. Responsibility is successful implementation and personal budget needs to be championed at responsible way. A realistic and focused time line needs to be set the beginning to ensure that desired outcomes are achieved. Timetable is obviously shaped by the target date for introduction of personal budget. At basic level our personal budget will provide an accurate picture of our income verses dept,monthly expense and savings. It is also essential as we create our budget that we remember that we are trying to hit our balance between various part of our financial image. When we create personal budget we will add our past spending and personal depts.. There are so many kind of methods and tools are available to create, using and adjusting a personal budget. A budget allocates or distributes expected income expected expenses and intentioned savings. A good personal budget needs honest financial assessment but most of the people creating a personal budget is the first time they take a hard look at the they spend money. The main goal of personal budget is that minimize expenses and maximise saving its simple theory. We can cut down our unnecessary needs and increase our saving each month. After a month we can calculate how much money we can save exactly If make a creative budget. Perhaps the most important ingredient of a successful personal budget is a commitment. Budget needs an active participation of entire family. (D.Roos,February 2014)
Participative budgeting has the advantage of transferring information from the subordinate to their superior This knowledge is likely to be more reliable and accurate as the subordinate has direct contact with the activity and therefore is in the best position to make budget estimates. Participative Budgeting also gives subordinates the opportunity to discuss organisational issues with superiors, in which an exchange of information and ideas can help to solve problems and agree future actions (Nouri & Parker 1998). This transferral of information is important particularly when dealing with a matter of high task difficulty as, the more difficult a task, the greater the need for consultation with subordinates. Participative budgeting has a higher performance rate when dealing with more difficult and more volatile tasks than non consultative budgeting (Lau & Tan 1998)
Good budgeting is supported by, and in turn supports, the various pillars of modern public governance: integrity, openness, participation, accountability and a strategic approach to planning and achieving national objectives. Budgeting is thus an essential keystone in the
Quantitative plans are called budgets. Budgets are prepared to impose cost controls on the activities of an organization (Chenhall, 1986).Budgets are then used to evaluate the performance of the management and budget itself is considered as a standard to evaluate the performance Solomon, 1956). The purpose of the budget is also to implement the strategy of the organization and communicate it to the employees of the organization Rickards (2006). The change in the external environment has led to the change in the budgeting approaches from the initial cash based budgets to the zerio based budgets (Bovaird, 2007).
Budgeting helps organize and formalize management's planning activities. This unit extends the study of budgeting to look more closely at the use of budgets to evaluate performance. Evaluations are important for controlling and monitoring business activities. This awareness helps managers make decisions that protect the financial health of their companies.
A budget, “according to Siegal and Yacht (2009), is a projection of a financial requirement and the consequences of the plan” (p,89). In other words, a budget if
It is comprised to two main components. These components are the operating budget and the capital budget. The purpose of the operating budget is to reflect the daily "recurring income and expenses, i.e., living expenses and incomes from wages, interest, and dividends, usually related to short-term goals. " In keeping with the conservative theme it is wise to not list any irregularly recurring income.
For example, buying an apartment is a once-in-a-life event, or winning a lottery doesn't happen so regularly to describe it as an operating budget income. Both the capital budget and the operating budget are influenced by micro factors (such as family structure, health, career choice, and age) and macro factors (such as economic cycles, unemployment, and inflation/deflation). However, there are factors particular for each of the budget. This way, the operating budget is also influenced by the person's financial history, while the capital budget is also influenced by the time value of money. When creating these budgets, making conclusions and reports all these factors should be taken into consideration in order to make truthful, reliable
Budget is combining your income and expenses to decide how much money you are going to spend on an item. Budget is an important step to determine your financial health and financial stability. It’s an important financial tool because it can help plan for expenses, cut cost were unneeded, save for future goals, plan for emergencies that occur inexpediently, and list what you are spending and saving.
Every government entity has a primary goal, which is to be as efficient and effective as possible while expending the smallest amount of resources. In addition, the resources expended cannot be more than the resources received as revenues. The budgeting process is a tool that assists government entities in being both efficient and effective. Before a budget can be adequately prepared, you must first understand the budgeting concept and secondly be knowledgeable of budget types.
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support