Budgets Budgets There are a number of budgets that an organization may adopt in planning for its future activities as well as for monitoring performance and evaluation of different areas within the organization. Myself, for instance, work with different types of budgets for planning and monitoring activities within the organization. The first budget I work with is the cash budget. The cash budget is meant for cash planning and control (Hansen et al., 2007). It is a forecast of the organization’s cash inflow and outflow for a given period of time. The main reason why the cash budget is prepared is to help the management keep the cash balances safely in a reasonable relationship to its requirements. It also assists in avoiding idle cash and any cash shortage that may adversely affect the organization. The cash budget consist mainly of four sections: Receipts, where cash balance at the beginning is entered plus all other cash collections from customers and other receipts. disbursement section, where all the cash payments are entered. cash surplus or deficit column, where the difference between receipts and payments are entered and finally, the financing section, enumerating a detailed account of repayments and borrowings expected during the financial period.
The other budget that I work with in the organization where I work is the operating budget. This refers to a statement representing the organization’s financial plan for each duty center during the budget period and shows the operating activities involving expenditures and revenues. The various types of operating budgets I work with include revenue, expense and profit budgets. Revenue budget mainly identifies the revenue needed by the organization and mainly projects organization’s future sales. Expense budget is an operating budget that identifies expected future expenses during the budget period. These include fixed, variable and discretionary costs. Profit budget, on the other hand, is a combination of revenue and expense budget into a single statement to reveal the net and gross profit realized during the period. This budget is important because it aids in making final resource allocation (Ippolito, 2004).
Working with different types of budget separating makes work harder as the organization I work with has been adopting this system. To make work easier, it is imperative that these budgets should be linked together in form of a master budget. A muster budget will be able to incorporate all the organizations financial and operating plans for the entire period (Cooke and Williams, 2004).
Cooke, B., Williams P. (2004). Construction planning, programming and control. New York NY: John Willey amp. Sons.
Hansen, DR., Movwen, M.M., amp. Guan, L. (2007). Cost management: Accounting amp. control. New Jersey, NJ: Cengage Learning.
Ippolito, D.S. (2004). Why budgets matter: Budget policy and American politics. New York, NY: Penn State Press.