TOPIC 1: Ethics and budgeting.
Budgeting is an essential technique in organization’s planning and control system. Budgeting provides the financial outcome of an organization’s activities as well as gives a summary of program of operation for a special time period in the future and it is also known as a central part of a planning and control system in an organization. While planning is viewed as an important responsibility taken by management in order to oblige an organization’s individuals to plan, for example, in hotels Viet Nam, the managers about the food, the reservation or the service have to work together to plan for an increase in the number of customers, by contrast, control is known as an essential function of management and
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The systems of budgeting have many behavioural outcome, a budget affects an organization’s individuals, such as: individuals using the budget to expedite decision making, individual whose performance is appraised using the budget or individuals preparing the budget . Moreover, the meaning of unethical behaviour in business can arise in a variety of circumstances, such as: slighting a vendor's pay, refusing to give customers a refund based on a contract's one-sided fine print and over charging for a monopolistic service are a few such examples and the budgeting process can create unethical behaviour as well.
The individual reactions to the process of budgeting can affect to the effectiveness of an organization and is considered when the process of budgeting is implemented and designed. Ethics is viewed as budgeting’s behavioural dimension, the worth of budgets in promotions, manager’s pay increases and performance evaluation drives to the unethical action’s possibility, for example, a manager who methodical overestimates costs and underestimates sales for the target of appointing the budget more comfortable or easier to succeed is encouraging unethical behaviour because, the truth is that many managers have taken considerable decision-making authority, contracts encouraging profit-sharing may be provided to motivate the manager to have decisions that company can have the most interest, however the contracts present uncertainty into the compensation functions of the
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).
Budgets should not be a managers task only. The whole organization should be involved in the budgeting process.
Budgeting systems turn managers’ perspectives forward and by looking to the future and planning, managers are able to anticipate and correct potential problems before they arise (Horngren, Foster & Datar, 2000). Through budgeting, management can plan ahead and maintain enough cash to pay creditors, to have adequate raw materials to meet production requirements, and to have sufficient finished goods to meet expected sales (Kieso, 2002).
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.
Based on the master budget, there have something wrong and unclear. All the numbers are the same, evenly quarter two have more sale than other quarter, at least less 30% than quarter two. We can easy to recognize with a few changes and we can achieve a goal $1.000.000
ABSTRACT: This case1 provides an opportunity to study budgets, budget variances, and performance evaluation at several levels. As a purely mechanical problem, the case asks for calculations of various price, efficiency, spending, and volume variances from a set of budgets and actual results. The case is also an interpretive exercise. After the variances have been computed, the next step is to develop plausible conjectures about their likely causes. Finally, it is a case about performance evaluation and responsibility accounting. The company has an incentive plan, based on the budget
Budgeting is the systematic method of allocating financial, physical, and human resources to achieve an organization’s strategic goals. Budgets are utilized by for-profit and non-profit organizations to monitor the progress towards the goals, assist in the control of spending, and help predict cash flow for the organization.
Budgets serve five main purposes; planning, facilitating communication and coordination, allocating resources, controlling profits and operations and evaluating performance and providing incentives. The budgeting process requires both technical and interpersonal leadership skills to achieve each of these purposes effectively. The director’s memo demonstrates several short comings in the budgeting process. The director instituted the “responsibility accounting system” as a means of evaluating performance. However, the DPW director has not consulted Sam in the budget process. Sam understands that his total expenditures are impacted by relatively unpredictable events that contribute to an uncontrollable element of his cost. The
A budget can be disadvantageous also. There is judgment and subjectivity in the budgeting process. It does not consider quality and customer service. Budgets can be seen as pressure devices imposed by management, thus resulting in: bad labour relations. Budget could results departmental conflict arises due to disputes over resource allocation, and departments blaming each other if targets are not attained. It is difficult to reconcile personal and corporate goals
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
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.
Budgetary control is part of overall organisation control and is concerned primarily with the control of performance. The use of budgetary control in performance management has of late taken on greater importance especially as a more integrative control mechanism for the organisation. Discuss.
P4. Explain the advantages and disadvantages of different types of planning tools used for budgetary control.
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.
Many businesses expect employees to achieve budget targets as part of their overall performance. While the specifics requirements of each employee differ with the position and nature of the company, it is common for employees to be expected to sell a certain number of items, control costs versus a budgeted amount or reduce waste compared with a benchmark. A potential downfall of using budget information for performance evaluation is that employees may be so concerned with making budget targets that they may do so at the cost of other parts of the business.