...A big part of today’s government and it being successful has to do with the having a proper budget. A budget is a plan for the accomplishment of programs related to objectives. The budget is a key document which translate our policies into a fiscal document. Like most things in government the budget process in its early stages started off with a lot of errors and things that needed to be fixed. Throughout the years there have been key policies and laws that have made contributions to the development of the federal budget process. These are the main laws and policies that have made contributions for the betterment of the federal budget process; the Budget and Accounting Act of 1921, the Congressional Budget and Impoundment Control Act of 1974, the Balanced Budget and Emergency Control Act of 1985, the...
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...Capital Budget Policy and Process Vernita Davis-Knight Susan Friguglietti Edna Primas Ronald Rehn University of Phoenix-Online February 27, 2008 Capital Budget Policy and Process Capital budgeting is the process by which capital investment decisions are made. Capital can be described as an organization’s operating assets (Diamond, Hanson &, Murphy, 1994). The capital budgeting process includes "planning, setting goals and priorities, arranging financing, and identifying criteria for making long-term investments" (Diamond et al., 1994, p. 463). Previously, capital budgets were known as plant and equipment budgets (Berman, Kukla &, Weeks, 1994). As the previous term implies, most capital expenditures are long-term investments for plant or equipment investments. Most, if not all, organizations have limited financial resources and must decide how to invest the financial resources for the best advantage of the organization. Capital investment decisions have a significant impact on the organization since large amounts of the organization’s resources are at risk for extended periods of time. This makes capital budgeting one of the most important decision making opportunities an organization can undertake (Diamond et al., 1994). There are two basic types of capital budgeting projects, independent projects and mutually exclusive projects. The independent project does not affect the cash flow of other projects. That is, regardless of whether the project is accepted...
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...Budget Management Analysis John Thorpe HCS/571 April 13, 2014 Professor: Amy Reed Budget Management and Variance Analysis Healthcare organizations are faced with severe financial pressures resulting in extreme budget cuts. Consequently, nurse managers and financial managers are tasked with the responsibility of doing more with less while maintaining the high quality of care offered to its consumers. To accomplish the aforementioned tasks, managers use budgetary tools to help them focus on controlling cost while running an efficient operation. Budgeting gives managers the tools necessary to ensure the availability of required resources to meet the organization’s goals and objectives, communicate strategies and monitor results (Cleverly, Song & Cleverly, 2007). Finkler, Kovner & Jones (2007) offer that budgeting should be used to make the organization become more effective and efficient. It is not a tool for maintaining the status quo. Organizations use different approaches to introducing the budgetary process. Some organizations take the current year's budget update it for inflation and projected revenue growth. Others take a clean slate approach; compel managers to justify their expenses and staffing needs on an annual basis. Still other organizations forecast revenue and profit and assign expense rates to departments. However, the most effective budget is one that reflects the true financial position of the organization, provides flexibility and monitored...
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...Introduction There are various strategies that are utilized to control budgets.Through managing budgets organization put themselves in better positions for the financial forecasts. The strategies include the following • Zero based • Activity based • Performance based • Cost variances and benchmarking Zero based budgeting is where expenses are analysed in the organization and the need and cost for each is justified.This strategy of budgeting results in efficient allocation of resources since its based on needs and benefits rather than history. It helps managers to find cost effective ways to improve operations. Activity based costing is the gathering of operating cost data which are associated with specific activities such as maintainance. Under activity based budgeting resource allocation is based on relationship between activities and cost. The most distinct advantage of this type is greater precision in determining costs in cases where departments or products need to be tracked. Performance based budgeting is the practice of developing budgets on a relationship between program funding levels and expected result from that program, allocation of resources are based on their potential results. Performance based budgeting focuses on strategic objectives, performance measurement and effectiveness. One advantage of PBB is that employees perform better since they will be aware that high performing departments will continue to receive funding...
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...Budget Variance Every hospital faces many challenges, but one of the most difficult challenges is knowing how to manage expenses. When a hospital is planning their budget not only do they have to plan a budget that is beneficial for their staff but also high level care for their patients. With so much in society changing such as technology, increase health care cost, and government restrictions it makes planning the budget very challenging. In order to analyze how expenses are being spent compared to the budget that is allotted for them, budget variances have to be made (accountingtools.com, 2013). These variances have to be extremely well detailed in order to make an accurate budget for the following year. Things that should be taken into consideration when doing a budget variance are variance reports, interpreting the results of variance reports and analyzing these reports based on actual performance, and developing a way to better the budget based on these results. The purpose of this paper is to fully analyze all factors that should be considered for a budget variance for a hospital. The very first step for a budget variance is to develop a variance report (accountingtool.com, 2013). There are various factors that should be analyzed to produce a proper variance report such as how many beds are available, how many patients are seen daily, how much staff is available or working in a specific day, how many supplies will be used, and how much utilities such as electricity...
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...costs to help managers to form a well informed decisions for an organization (Lanen, Anderson, & Maher, 2011, p. 6). Cost accounting methods and their use, budgets including discipline, construction, and elements, and variance analysis are important aspects of cost accounting as a whole, which is an important tool for a successful organization. The main goal of cost accounting is to help managers to maximize value within their organization (Lanen, Anderson, & Maher, 2011, p. 3). One of the fundamental services of cost accounting is to provide information to the manager to guide them to make effective valuable decisions (Lanen, Anderson, & Maher, 2011, p. 3). An essential objective of cost accounting is to create an effective value chain (Lanen, Anderson, & Maher, 2011, p. 4). A value chain is a set of activities in which raw materials are converted into goods and services for consumers to purchase (Lanen, Anderson, & Maher, 2011, p. 4). An organization is responsible to coordinate with their vendors and suppliers along with their distributors and customers to accomplish their objective (Lanen, Anderson, & Maher, 2011, p. 4). Thus, the cost accounting system gives the organization the tools to begin such coordination. To begin this process, research and development encompass activities from the production process and customer service (Lanen, Anderson, & Maher, 2011, p. 4). Managers gauge these activities to determine their contribution to the final product, service...
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... The budget is their plan for success. According to Noreen, Brewer, and Garrison (2011) it is a quantitative plan for acquiring and using resources over a specified time period. The budget process can seem like a tedious exercise for some, as it involves and affects all areas of the company, but in the end it enables a company to plan how it will achieve revenue goals and control costs. In the simplest of terms the budget explains how much the company should be spending to produce a predetermined about amount of product which will yield a desired profit. Through the budgeting process and the controlling of costs many company’s like American Airlines, are able to keep their costs at a minimum and profits as high as possible. A company’s master budget is actually made up of a collection of smaller budgets that detail the company’s sales, production and financial goals. These smaller budgets consist of a sales budget, a production budget or an inventory of merchandise purchases budget, a direct materials budget, a direct labor budget, a manufacturing overhead budget, an ending finished goods inventory budget, a selling and administrative expense budget, and a cash budget. The information obtained from these budgets come together to make up the budgeted income statement and the budgeted balance sheet. The sales budget shows the expected sales for the period. Noreen et all (2011) tells us that an accurate sales budget is the key to the entire budgeting process. The...
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...Kenya Ratcliff American Intercontinental University FINA425 – Budgeting January 24, 2016 Abstract This is a research paper about financial budgets. This research paper talks about a management director would establish policies and system for a business and/or organization. This research paper will help to explain the different style of budgets, budget cycles and the guidelines rules for set up a financial budget for a business and/or organization. Unit 3 Individual Project Introduction This is a report from the management director to establish policies and systems for the new business, I Can Business Incorporated (ICBI). This report will be delivered to the board of directors of ICBI. This report will describe what a financial reporting system is and explain how management for ICBI should use an activity based budget instead of an operating budget. This report also gives examples of budget guidelines for ICBI. Describe the meaning and the components of a financial reporting system Financial reporting is the process of compiling statements that shows a glimpse of an organization’s financial “health” or status to management, investors and the government. There are four basic reports that are included in a financial report. There is a balance sheet, an income statement or sometimes called the profit & loss statement, a cash flow statement and a statement of shareholder’s equity. The balance sheet gives a detailed picture of the financial condition of a business at...
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...Table of contents Introduction 12 Body 13 3.1 Explain the purpose and nature of budgeting process which should normally be taken in the preparation of budgets for Glentruan Furniture Ltd. 13 Budget 13 Purpose and nature of budget 15 Purpose 15 Nature 15 3.2 Select appropriate budgeting methods for new product line and its need. 16 Incremental budget 16 Zero based budget 16 Different between zero based budgeting and incremental budget 16 Fixed budget 17 Flexible budget 17 Different between fixed and flexible budget 17 Functional budget 18 Sales budget 18 Production budget 18 Direct material usage budget 18 Direct material purchase budget 18 Direct labor budget 18 Factory overhead budget 18 Selling and administration budget 18 Cash budget 19 Master budget 19 3.3 Prepare budgets according to the chosen budgeting methods based on the given information in the scenario. 20 Sales budget 20 Production budget 22 Direct material usage budget 23 Direct material purchase budget 26 Direct labor budget 28 Factory overhead budget 30 Selling and administration budget 34 Departmental budget 35 3.4 Also prepare a cash budget. 38 Cash budget 38 Master budget 42 Budgeted profit and loss 42 Budgeted balance sheet 43 Final review 46 Budget committee 47 Working capital 47 Liquidity ratio 47 ROCE 47 4.1 Calculate variances, identify possible causes and recommend corrective action. 48 4.2 Prepare and operating statement...
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...Discuss the sequence in which the major components of the master budget are prepared. Why is it necessary to prepare the components in such a sequence? The Sequence for a master budget is as follows: A production budget, purchases budget, personnel budget, direct labor budget, overhead budget, selling and administrative budget, capital budget, and budgeted financial statements. Using this sequence to create a master budget a manager has assistance to align activities and resources allocations with organizational goals; it’s a vehicle to promote employee participation, cooperation, and department coordination. It's also a tool to enhance conduct of the managerial functions of planning, controlling, problems solving; basis on which to sharpen management's responsiveness to changes in both internal and external factors; and model that provides a rigorous view of future performance of a business in time to consider alternative measures. 7. Why is a firm’s production budget influenced by the finished goods inventory policy? The production budget follows from the sales budget and is based on information about the type, quantity, and timing of units to be sold. (A retail or service company would not prepare a production budget.) Sales information is combines with beginning and ending Finished Goods (FG) Inventory information so that managers can schedule necessary production. 8. Assume that in preparing the cash budget, the accountant discovers that a cash shortage will likely occur...
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...manipulate the accounting data. 2/ Non-accounting style: the performance is evaluated based mostly on qualitative factors such as consumer satisfaction, quality and timeliness. As this style is similar to the profit conscious style (both emphasise the profit in long run), thus the managers’ behaviours is similar as well. The main difference is that managers would take the accounting information less seriously and pay more attention on the qualitative factors. 3/ Budget constrained style: managers are required to follow the pre-set budgets, which means that they are evaluated on short term performance. Because of the pressure to reduce cost as much as possible within a short period of time, managers are often more stressful and so lead to causing employees not working well together. The focus on short-term profit also encourages managers to do anything to better their performance in that period without caring about the return in the long run. In the DFS case, it is clearly that managers are subjected to budget...
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...budgeting practices. One approach advocates improving the budgeting process and primarily focuses on the planning problems with budgeting. The other advocates abandoning the budget and primarily focuses on the performance evaluation problems with budgeting. This paper provides an overview and research perspective on these two recent developments. We discuss why practitioners have become dissatisfied with budgets, describe the two distinct approaches, place them in a research context, suggest insights that may aid the practitioners, and use the practitioner perspectives to identify fruitful areas for research. INTRODUCTION udgeting is the cornerstone of the management control process in nearly all organizations, but despite its widespread use, it is far from perfect.1 Practitioners express concerns about using budgets for planning and performance evaluation. The practitioners argue that budgets impede the allocation of organizational resources to their best uses and encourage myopic decision making and other dysfunctional budget games. They attribute these problems, in part, to traditional budgeting’s financial, top-down, commandand-control orientation as embedded in annual budget planning and performance evaluation processes (e.g., Schmidt 1992; Bunce et al. 1995; Hope and Fraser 1997, 2000, 2003; Wallander 1999; Ekholm and Wallin 2000; Marcino 2000; Jensen 2001). We demonstrate practitioners’ concerns with budgets by...
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...criteria 2.2 8 Assessment criteria 2.3 10 Section 3 11 Assessment criteria 3.1 11 Assessment criteria 3.2 13 Assessment criteria 3.4 15 Zero-based budgeting 16 Top-down budgeting 16 Bottom-up budgeting 16 Activity-Based Budgeting 16 Section 4 18 Assessment criteria 4.1 18 Assessment criteria 4.2 21 Conclusion 22 Bibliography 23 Introduction Financial management is the efficient as well as effective management of the funds in a motive of accomplishing the goals and the objectives an organization. It comprises of how to rise capital and how to allocate for instance through budgeting. This does not only cater for the long term budget but also the allocation of funds in the short term. In our discussion we are going to focus on various issues such the various methods used in costing, the budgeting formation and formation process, and the different types of budgeting. The attainment of coordination will also be factored since it is key to the success of a business. Task 1 Assessment criteria 1.1 a. Identify and explain the various ways by which cost can be classified discussion the value of costs classification including any weaknesses in your argument In the world of business there are a range of costing methods are actually used by the enterprises in evaluation and the analyzing the cost of production when contrasted with the value of other substitutes. In executing the cost, two principle methods are used. Cost analyses deals with procedure of costing and...
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...Budgeting is the process of formulating an organisation plans. The most important planning, evaluation and communication benefits depend on an effective budgeting process that engages employees throughout all levels of the organisation. Four major benefits of effective budgeting are: 1. Budgeting provides an opportunity for managers to re-evaluate existing activities and evaluate possible new activities. 2. Budgeting compels managers to think ahead by formalizing their responsibilities for planning. 3. Budgeting aids managers in communicating objectives and coordinating actions across the organisation. 4. Budgeting provides benchmark to evaluate subsequent performance. The advantages of budgeting described previously are limited, in some cases severely, by problems associated with budgets. In this section, three problems that complicate the implantation of budgets: 1. Low levels of participation in the budget process and lack of acceptance of responsibility for the final budget. 2. Incentives to lie and cheat in the budget process. 3. Difficulties in obtaining accurate sales forecasts. What external factors need to be considered? External influences that are not in your control may have an impact on the success of your efforts. Having alternate plans or rethinking your strategies should be a part of your planning. Some external influences that can affect your financial planning include (examples in parenthesis): Government or national policies...
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...Healthcare Budget HCS 577 Sharon Gomes- Sanders Healthcare Budget Review of the Patton-Fuller community Hospital's 2009 operating budget and 2010 budget assumptions showed the accuracy of the 2010 operating budget projection. The operating budget is the yearly statement of profit and loss for the organization. Healthcare organizations prepare projected operating budgets for the approval of senior management. At the end of the fiscal year, a detailed accounting provides the report for how the company performed. There are effective and ineffective ways to manage the fiscal status of healthcare entities. This paper will take everything into consideration and identify effective and ineffective financial management practices in the health care setting. Healthcare businesses thrive on a foundation of strong fiscal management. There are effective management practices in the creation and monitor of an operational budget. An effective management practice is to link budget development to corporate strategy. When the budget is linked to the overall corporate strategy, managers and employees can get a clearer picture of the company's strategic goals. Capital management aligns an organization's long-range strategic, financial, and related operating plans (Nugent, 2001). Obtaining employee buy in leads to the coordination of support for organizational goals, leading to strong fiscal performance. Effective communication between departments ensures a same page mentality in budget development...
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