Introduction to Budgets and Preparing the Master Budget Budgets and the Organization Many people associate the word budget primarily with limitations on spending. For example, management often gives each unit in an organization a spending budget and then expects them to slay within the limits prescribed by the budget. However, budgeting can play a much more important role than simply limiting spending. Budgeting moves planning to the forefront of the manager's mind. Well-managed organizations make budgeting an integral part of the formulation and execution of their strategy.
Many decisions are involved, and many questions must be answered. And the managers will decide the most effective ways to achieve the budget target for the operation under personal control Control Spending within the budget and having responsibility to achieve revenues specified within the budget are very important. Budgets and actual revenues and expenditures are monitored constantly for variations and to determine whether the organization is on target. If performance does not meet the budget, action can be taken immediately to adjust activities. Evaluation Evaluation can be provided by comparing the budget with actual performance.
However, the plan may change as different departments’ budgets are reviewed together and the overall budgeted profit compared to the top level management’s expectations. Hence, it may be the case that those people involved in the initial budgets, i.e. lower level management, have to deal with their budgets being changed. – To motivate managers to perform well If managers play a part in setting the budget, they are more likely to think that the figures included in them are realistic. Therefore, they are more likely to try their best to achieve them.
In other words the administration needs to react to the set of information given. The administration has to utilize the strengths of the entity and take full advantage of the opportunities that taken place. Minimizing the weaknesses is also a main factor. The real value of SWOT analysis is to collect all the information and data together, and Analyzing them to assess the most important cases and the most vital issues. For planning to seize business opportunities and the potential threats, managements have to use SWOT analysis.
Thus budget is a means and budgetary control is the end result. Budgetary control is a continuous process which helps in planning and coordination. It also provides a method of control. Definition According to Brown and Howard “Budgetary control is a system of coordinating costs which includes the preparation of budgets, coordinating the work of departments and establishing responsibilities, comparing the actual performance with the budgeted and acting upon results to achieve maximum profitability”. I.C.M.A.
2.1.1 Overview (i) Concept of Budget and Budgeting Budget: Planning becomes a significant function of a manager. A budget is a plan to achieve desired results given the circumstances. Budget is prepared to effectively use the funds. It is a detailed plan of operations for a specific period. It is prepared based on past information and lays down the strategy to be implemented to attain the desired results.
The balance scorecard was also recommended by Karin to the managers in other to measure productivity, complexity, flexibility, cycle time and origination. The authenticities of increased pressures and as well the barrier between functional division like marketing, accounting, finances and manufacturing can be eliminated when MACS designer incorporate relevant performance measure into the system. For a change management, the new manager needs a very strong skill (Entrepreneurial and Communication skill) to redesign the system to fit a new policy. Budget in some organization can be used as financial representation of their policy. In as much as people affect budget, Karin in her research express how budget can also affect people which she said are “human element in budgeting”.
Control resources By making people accountable and responsible for a budget, a business can help to control its resources. Working to a budget helps staff to understand where the business is going and helps to motivate them to use resources efficiently and effectively. Budgets can monitor actual income and expenses against projected figures to identify differences and reveal problems. This helps the organisation to take remedial action and control its resources. Plan for the future Budgets can also show how a business plans to allocate its resources for the future.
Budgetary control attributes to the way managers make use of budgets to oversee and authorize costs and activity in a certain period of time. It is basically the process of setting economical and work goals with budgets, comparison with the existing results and carrying out a performance that adapts to it. Future financial needs require an approximate calculation and orderly arrangement under budgetary control techniques. It is also used to manage the financial performance of the organization. According to iedunote (2017), below are the strengths and weaknesses of Budgeting: Another tool used in management accounting is the ratio analysis that is used to control in the clearance of primary functions of forecasting, devising, coordination,
The objective of this research proposal project is to identify factors that affect the manipulation of accounting data. The debate starts with a background and purpose of the research project, it followed by the summary of project in relation to literature review and research methodology as well as the summary and conclusion. The below introduction represents a background for this study and support the reader in interpreting achievement of this research proposal objectives. 1.1 Background and purpose Recently, accounts manipulations have become a critical importance issue in accounting and banking field. Accounting manipulation is the ability to modify figures in the reported financial statement and it can be done by using earnings management