There are different types of budgeting that businesses typically use and those include Operating budgets, Capital Budgets and there are many subtypes that exist because a budget can also be created for special events, the recruitment and retention of new staff, and to manage the advertising expenses and return on investments for a business (Demand Media, 1999-2012). According to Demand Media (1999-2012), "An operating budget outlines the total operating expenses and income for the organization, typically for the period of a fiscal year. Capital budgets evaluate the investments and assets of the business, and a cash budget shows the predicted cash flow in and out of the business over a period of time” (para.2 ). According to the Cost-Benefit Analysis (2012), “Capital budgeting has at its core the tool of cost-benefit analysis; it merely extends the basic form into a multi-period analysis, with consideration of the time value of money. In this context, a new product, venture, or investment is evaluated on a start-to-finish basis, with care taken to capture all the impacts on the company, both cost and benefits. When these inputs and outputs are quantified by year, they can then be discounted to present value to determine the net present value of the opportunity at the time of the decision” ("Cost-Benefit Analysis," 2012).
The cash budget is another aspect of budget expectation. The cash budget determines how much cash an organization have on hand, and how much is needed to meet each expense. The cash budget will reveal to companies the availability of any type of surplus the company has for short-term investments.
Capital planning and budgeting is a very vital piece in the Public Budgeting System process. It is an essential implement in the financial management practice and is effective in both public and private organizations. It is the method which consists of the determination and the evaluation of the investments and the possible expenses by an organization. As explicate by Lee, Johnson, & Joyce (2008), capital budgets help in determining how much of each form of investment is needed, and it supports an organization in assessing the available revenue which includes loans is required to finance those investments (p. 475). Capital budgeting is a central part of the universal
Managerial accounting is essential for decision making. Making the best choice depends on the manager's goals, the anticipated results from each alternative, and the information available when the decision is made (Schneider, 2012). The different techniques associated with managerial accounting are very helpful in the decisions that need to be made. In order to truly understand decision making with managerial accounting one must first discern exactly what managerial accounting means and some of the techniques associated with it. The definition of managerial accounting will be discussed along with the techniques of cost management techniques, budgeting, and quality control.
In outlining a budget there are two phases that must be determined to create a budget, an operating phase and a financial phase. “Developing a new operating budget starts with examining budgets from previous years and identifying what components are going to change, by how much and if any new components need to be added or existing ones reduced or cut” (Budget Challenges, 2012). In the first phase of the budget it needs to be determined how much money is going to be needed to operate the day to day activities of the business.
A capital budget is very important for a business. It is a heated subject because a decision about capital budgeting can help the business to determine if the proposed investments or project are worth taking or not. There are two things that a business has to take into consideration when it is making a capital budget decision. First there are financial decisions that have to be made. Second, there is an investment decision that is also
A comprehensive budget has more details because it covers more aspects of financial activity. A comprehensive budget is capable of projecting recurring incomes as well as the expenses of nonrecurring expenditures. Components of a comprehensive budget include operating budget and capital budget. With an operating budget for non-recurring, you must be sure that the period is long enough to show what is recurring and what is not. In many instances
Citizens of the United States are legally required to pay taxes and follow the laws of their government. Thus far, with only having four weeks of interning at the House of Representatives, I have learned a lot about governmental accounting and politics. For example, one of the biggest complaints of American people is their increasing tax rates. Every year, the government has the responsibility of negotiating and preparing a budget for the upcoming years based primarily on taxpayer dollars. There is a long process that goes into creating a budget and allocating appropriations. But what happens when a major event occurs that cannot be appropriated ahead of time? This research paper will explore the budget process and how taxpayer dollars contribute, how appropriations are made, and what happens to the budget when the nation experiences an unexpected natural disaster or terrorist attack.
Capital budgeting is a long-term schedule that decides what investment projects to choose. When an option is selected, a company decides where and how to obtain the funds to support its investment and a way of determining the capital structure. A company should make sure it has access to working capital to maintain it operations daily. If this is not available, the company will not be able to maintain it daily operation until
The budgeted income statement, cash flows, and balance sheet follow in order. The income budget relies on the revenue and expense forecast from the operating budget, while the budget cash flows are planned for financial and investment activities. A final component of the budget process, the projected balance statement, can be used to tie in all the budgeting dependencies. Once a budget has been prepared, evaluation can be expected before approval. Budgetary components may require several iterations before finalizing the organizational budget.
Budgeting in a business is important for so many reasons. Business leaders often deal with large amounts of money, and some employees or outsiders might see the organization's revenue as nearly limitless. Regardless of the business cash on hand, though, careful budgeting plays a critical role in any organization's success. Chester & Wayne is a large regional food distribution company and the CEO of the company has asked for some assistance in preparing a budget for their cash flow. With the information provided by CEO, Mr. Wayne, the budget will be carefully planned.
A cash budget will project the amount of cash you will have at any given time during a certain period. This will project surpluses and deficits in the cash budget which will be the used to identify opportunities for investment or financing.
The keen competition requires companies to consider the cost variable. But traditional budgeting method separates the cost into variable and fixed, put the emphasis on the variable cost and consider the fixed cost implacable.