In this paper we explore budgets in depth, the tools that help you make a comprehensive or a specialized budget and why these may be necessary.
A budget can be thought of as a map towards a goal, such as retirement or saving for a particular items such as a house or a car. Subsequently, making a budget gives us a tool to complete this goal and keep us on track towards the end. Just as the financial planning process involves creating goals, budgets are a means to make the goals a reality and not just a dream. (Siegel & Yacht, 2009) One tool we learned about of course is being conservative, others include the cash budget when our income is less predictable, or a comprehensive budget which should include an operating budget and a capital budget. Moreover, there are times a specialized budget might need to be created for a specific goal such as a dream vacation or a tax
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Other specialized budgets are generally created for a specific purpose such as a hobby or perhaps taxes as Siegel & Yacht, (2009) , explained. Moreover, these budgets are prepared with separate expenses and perhaps even specific income set aside just for these budgets. ("Cash Budget and Other Specialized Budgets," n.d.) The specialized budget is a part of the comprehensive budget and used to make your dreams come true or just keep the tax man at bay as you will.
Finally, using the tools that we learned about in this chapter such as being conservative and taking the time to create a comprehensive budget that includes a capital budget and specialized budgets as needed, might be the ticket to buying that yacht to sail around the world just as Alice dreamed of. Moreover, life can be unpredictable but having a good comprehensive budget can help us keep our finances a little more stable, which can make difficult times and unexpected monetary expenses less
Shim, J., & Siegel, J., & Shim, A., (4th edition)(2012). Budgeting basics and beyond. Retrieved from http://wow.coursesmart.com/9781118096277/firstsection
This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).
A budget is an instrument used to help managers ensure that the resources used effectively and proficiently toward the goals of an organization. A budget projection can be made on a yearly base depending on previous year or existing one. They can further be broken down quarterly or monthly depending on it use. Generating a budget is complex undertaking, and for a budget to be effective the organization ought to follow it strictly. However, no matter how closely a business follows their guidelines there will always be some form of variances. The organization should expect a few variances and be able to work these discrepancies in any budget
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) 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 central challenge that budget developers encounter is predicting what the future holds for the internal business and external factors. Reading the future is something that can never be done with perfect precision. The fast pace of technological change, the complexities of global competition and world events make developing effective budgets both more difficult and more important.
Creating a budget is a skill that creates savings and keeps you out of debt. A budget starts out as a snapshot of your current monetary affairs. Your current income streams and their sources, your bills and saving needs and any other pertinent information all go into it. From there you can see how to best direct your flows for the most effective use of your money.
There are two financial tools described in chapter five of our textbook that can help you make better financial decisions, the first being the comprehensive budget and the other being specialized budgets. A comprehensive budget is further separated into two more components, an operating budget, and a capital budget. Specialized budgets are also related to the comprehensive budget. (R. Seigel and C. Yacht p. 92-103)
A budget, as defined by Hilton (2009 pg 348), is a detailed plan, expressed in quantitative terms that specifies how resources will be acquired and used during a specific period of time. A budget is a financial document utilized to project future income and expenses. A budget is based on how much you make in income and what your monthly expenses are. Budgets evaluate performances while the plan is what is going to happen or refine what you want to accomplish by thinking ahead. The purpose of having a budget is it improves efficiency, assigns responsibility, provides direction, and helps businesses plans and control finances. Managers use the budget as a
A budget will give the individual a preview of their income and their expenses. Thus, providing a way for them to organize their funds and understand the way their monthly or yearly income is divided. A budget is a tool to prioritize the way their money is divided or reduce excess spending. For example, mortgages, utilities, and food are given top priority, while frivolous expenditures like movies, games, or new clothing are given less priority.
A budget is a formal written plan at an organizational level for the outgoing expenses and incoming revenues for a specific period. The purpose of the budget is to ensure that the funds are available to accomplish the objectives of the
Most entities and organization create budgets as a guide for controlling its spending, prediction of profit, and it expenditure as they progress toward a set goal. Budget involves pulling resources together to achieve a specific goal. According to Gapenski (2006), budgeting is an offshoot in a planning process. A basic managerial accounting tool use in holding planning and control functions together is referred to as set of budgets (p. 255). One major setback manager or budget developer encounter is trying to design a future, a process that cannot be created with the precision just right. This article highlights some financial management
A personal budget showing recurring and nonrecurring income and expenses, including living expenses, loan payments, savings and investment activity, and durable purchases, is a comprehensive personal budget. This type of budget shows all aspects of financial activities. It is an essential tool for managing your finances and strategizing for your financial future. With goals in mind, the comprehensive personal budget helps in determining how to effectively reach those goals with minimal financial impact. In a sense, a comprehensive personal budget is an ongoing health assessment for your finances (Siegel & Yacht, 2009).
Budgeting is crucial in the well-being of a company especially the financial health status of a company. In fact, no professionally managed firm would fail to budget, since the budget establishes what is authorized, how to plan for purchasing contracts and hiring, and indicates how much financing is needed to support planned activity. It is routine for a company to budget for its expenses. Expense budgets act as a guideline of how much revenue a company would require keeping the activities running. It is used to set the company’s targets for a certain period.
“It’s clearly a budget. It’s got a lot of numbers in it” (George W. Busch 2005). This definition of a budget can be supplemented using the Oxford dictionary, which states that a budget is an estimate of income and expenditures for a set period of time. Nowadays almost every business uses budgets and managers use them as a tool in order to set targets. In other words managers can, with the use of budgets, explain in a financial way what are the
Budget and budgetary control practices are undeniably indispensable as organizations routinely go about their business activities and operations. These organizations are constantly on the alert on how actual levels of performance agree with planned or budgeted performance. A budget expresses a plan in monetary terms. It is prepared and approved prior to a particular budgeted period and explicitly may show the income, expenditure and the capital to be employed by organizations in achieving their goals and objectives.