logo
g Text Version
Beauty & Self
Books & Music
Career
Computers
Education
Family
Food & Wine
Health & Fitness
Hobbies & Crafts
Home & Garden
Money
News & Politics
Relationships
Religion & Spirituality
Sports
Travel & Culture
TV & Movies

dailyclick
Bored? Games!
Nutrition
Postcards
Take a Quiz
Rate My Photo

new
European Travel
Action Movies
Bible Basics
Houseplants
Romance Movies
Creativity
Family Travel


dailyclick
All times in EST

Full Schedule
g
g Accounting Site

BellaOnline's Accounting Editor

g

Budgeting and its Role in Decision Making

Guest Author - Consuelo Herrera, CAMS, CFE

Budgeting is crucial for decision-making. It gives a business a sense of direction. A budget is an anticipated computation of revenues and the ways in which those revenues will be spent in achieving the business’ goals.

Budgeting involves planning for the future. The ideal is to plan in advance for the next five years through the development and implementation of a strategic plan. Control is an important part of the budgeting process because it assesses what actually happens against what an organization has planned.

If ABC, Ltd plans to enter the market with a new product, the budget process anticipates the number of units that should be available for sale to fulfill the market needs for that specific product after taking into consideration other factors such as competition share and marketing strategies to promote and position that new product. It should also consider the direct labor, direct material, indirect costs, and overhead related to the production of such product. The sales budget becomes the plan action needed for ABC, Ltd to achieve the expected 5% of the market share.

Organizations that keep a sound budgeting system prepare a master budget, which is the comprehensive financial plan for the organization as a whole. According to the company’s needs it should to be broken down into quarterly or monthly budgets. The reason is that management can monitor the budget performance by evaluating actual against budgeted amounts and taken corrective measures when discrepancies are noted.

Components of the Master Budget

Two major components are: operating and financial budgets. While the operating budget provides the income generating of an organization, the financial budget anticipates the inflows and outflows of cash and the overall financial position.

A budgeted income statement includes schedules as follows:

  1. Sales budget

  2. Production budget

  3. Direct material purchases budget

  4. Direct labor budget

  5. Overhead budget

  6. Selling and administrative expenses budget

  7. Ending finished goods inventory budget

  8. Cost of goods sold budget.

Forensic accountants can find clues of fraud and wrondoing in an organization by analyzing unusal variances within budgets.
This site needs an editor - click to learn more!

Add Budgeting+and+its+Role+in+Decision+Making to Twitter Add Budgeting+and+its+Role+in+Decision+Making to Facebook Add Budgeting+and+its+Role+in+Decision+Making to MySpace Add Budgeting+and+its+Role+in+Decision+Making to Del.icio.us Digg Budgeting+and+its+Role+in+Decision+Making Add Budgeting+and+its+Role+in+Decision+Making to Yahoo My Web Add Budgeting+and+its+Role+in+Decision+Making to Google Bookmarks Add Budgeting+and+its+Role+in+Decision+Making to Stumbleupon Add Budgeting+and+its+Role+in+Decision+Making to Reddit




Allowance for Bad Debt Expense Recording
Analyzing Accounting Transactions
Forensic Accounting Quiz
RSS
Related Articles
Editor's Picks Articles
Top Ten Articles
Previous Features
Site Map


For FREE email updates, subscribe to the Accounting Newsletter


Past Issues


print
Printer Friendly
bookmark
Bookmark
tell friend
Tell a Friend
forum
Forum
email
Email Editor


Content copyright © 2014 by Consuelo Herrera, CAMS, CFE. All rights reserved.
This content was written by Consuelo Herrera, CAMS, CFE. If you wish to use this content in any manner, you need written permission. Contact BellaOnline Administration for details.

g


g features
Archives | Site Map

forum
Forum
email
Contact

Past Issues
memberscenter


vote
Poetry
Daily
Weekly
Monthly
Less than Monthly



BellaOnline on Facebook
g


| About BellaOnline | Privacy Policy | Advertising | Become an Editor |
Website copyright © 2014 Minerva WebWorks LLC. All rights reserved.


BellaOnline Editor