Description
Using the GCU Library, locate a journal article about budgeting. In the subject line of your post, include the name of the article that you read. Then, in your initial post, provide a link to the article and a summary followed by your reaction to the article. The summary should be approximately 250 words and the reaction should be approximately 150 words. The summary should describe the major points of the article, and the reaction should demonstrate your interpretation of the article and how you can apply that knowledge. Do not choose an article that one of your classmates has already posted. To participate in follow-up discussion, choose one of the articles that a classmate has posted and provide your own reaction to it. Note: It may be challenging to find a relevant article if you do not use the library.
Please include proper citations in your discussion post. Points will be deducted if proper citations are not used.
Beena Shaji
Feb 22, 2024, 6:35 PM
Published
Hello, Sir and Class
Describe the budgeting process and its impact on stakeholders.
The planning and control of an organization’s financial resources comprise a critical process called budgeting. Budget plays a crucial role in ensuring efficient and effective allocation of resources in achieving the organization’s goals. The typical budgeting process comprises various steps, such as revenue and expenses forecast, budget plan creation, and setting financial goals (Keng’ara & Makina, 2020). The budgeting process significantly impacts stakeholders. For instance, the organization’s budget decisions affect customers, employees, creditors, and investors. The budget cuts impact employees through the resulting decrease and reduced benefits. Budgetary decisions influence creditors and investors, further impacting the organization’s financial stability (Keng’ara & Makina, 2020). Generally, the buying decisions affect customers, controlling the prices of services and products.
Create the components of the master budget.
The master budget consists of various components: sales, production, direct materials, direct labor, manufacturing overhead, selling and administrative expense budgets, and a budgeted balance sheet. Primarily, every organization’s budget, like capital, cash, and operating, is contained in a comprehensive financial plan that is a master budget (Avi, 2023). As one of the significant components, the sales budget predicts the upcoming period’s anticipated sales revenue. However, market patterns and historical data determine this prediction.
The production budget plays the central role in determining the amount of goods or service amount required for production to meet the projected sales. Likewise, another component is a direct material budget, which revolves around the cost and quantity estimation of the needed materials for production depending on the set production budget (Avi, 2023). Besides, calculating the labor cost required for the production relies on the direct labor budget. The production budget forms the base of this component. Likewise, the approximation of the production’s indirect costs, such as maintenance and utilities, constitute the manufacturing overhead budget (Avi, 2023). Also, the administrative and selling activities involve various costs that are predicted in the selling and administrative expense budget.
Further, anticipated expenses and revenues for the budget period are reflected in the organization’s budgeted income statement. These revenue and expense summaries constitute the budgeted net income (Avi, 2023). The budgeted balance sheet reflects the organization’s financial position at the end of the budget period.
The organizational decisions based on budgetary information
Budgetary information should guide the organization’s evaluation of its decisions. This evaluation aligns the fiscal choices with the financial goals and challenges of the organization (Kimmel et al., 2020). Identifying variances and taking corrective action is easy by comparing actual performance. Additionally, due to the available budgetary information, organizations are finding it easy to make sound financial decisions regarding cost control strategies, investment opportunities, and resource allocation.
References
Avi, M. S. (2023). The Operating Budgets of Hotel Companies. American Journal Of Tourism, Hospitality And Event Management, 4(3), 1-20.
Keng’ara, R., & Makina, I. (2020). Effect of budgetary processes on organizational performance: A case of marine state agencies, Kenya. Universal Journal of Accounting and Finance, 8(4), 115-130.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2020). Financial accounting: tools for business decision-making. John Wiley & Sons.
Beena Shaji
REPLY
DDDavid Duren replied toBeena ShajiFeb 23, 2024, 8:54 PMUnread
Beena, I appreciate your article. It provides a broad overview of the budget process. From my experience over 40 years, I notice the use of a top-down budget process over a bottom-up approach. What are some of the advantages and disadvantages of a bottom-up approach and explain your preferences for the method over a top-down approach?
