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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Communication

The city of Milton has an annual budget cycle that begins on July 1 and ends on June 30. At the beginning of each budget year, an annual budget is established for each department. The annual budget is divided by 12 months to provide a constant monthly static budget. On June 30, all unspent budgeted monies for the budget year from the various city departments must be “returned” to the General Fund. Thus, if department heads fail to use their budget by year-end, they will lose it. A budget analyst prepared a chart of the difference between the monthly actual and budgeted amounts for the recent fiscal year. The chart was as follows:

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  Write a memo to Stacy Collins, the city manager, interpreting the chart and suggesting improvements to the budgeting system.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

To Prepare: A MEMO to the city manager Mr. S.

Explanation

MEMO

Dated: 30/08/2019

From:

ABC

To:

Mr. S

City Manager

Subject: Suggesting improvements to the budgeting system.

Mr. S

City Manager

After revising the budget report, it is clear that there is some substantial goal battle within the departments. The reports shows that the managers are not efficient and produce very poor budgeting and spending decision. For the first 10 months (July to April) of the budgeted year, the actual expenditure was reasonably less than the budgeted. Then suddenly the managers have spent the balance excess budget in May and June. The budget variance is zero as the amount spent was equal to the total amount budgeted. Therefore, the managers did not spent more than the authorized amount. Conversely, the managers spent the balance amount in the last two months to avoid returning the money to the General fund...

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