Budgeting

1
9
Chapter Nine

• Budgeting

2
(No Transcript)
3
Introduction

• Who has been involved?
• Personal
• Business
• Governmental

4
Budgeting Importance

• Very critical step in management financial
  planning
• Business
• Government
• Not-for-profits
• Individuals

5
Budget Definition

• Budget
• Detailed plan expressed in quantitative terms
• Specifies how resources will be acquired used
• During a specified period of time

6
Purpose of Budgeting Systems

• Planning
• Facilitating Communication Coordination
• Allocating Resources
• Controlling Profit Operations
• Evaluating Performance

7
Budgeting System

• Procedures in place to develop manage a budget
• Administration
• Reports
• Forms, etc.
• Approvals flow of responsibility
• Acctg System

8
Budget Administration

• Budget Director
• Budget Procedural Manual
• Budget Committee
• Executive
• Board

9
Types of Budgets
Operating Budgets (annual) Long-Range
Budgets Capital Budgets Continuous or Rolling
Budget
2005
2006
2007
2008
10
(No Transcript)
11
Zero-Base Budgeting
To receive funding during budgeting process,
each activity must be justified from the ground
floor in terms of its continued usefulness.
12
Behavioral Impact of Budgets

• Budgetary Slack/Padding the Budget
• People may perceive that their performance will
  look better if they can beat the budget.
• Therefore, budgetary sales are understated and
  budgetary expenses are overstated
• Participative Budgeting

13
Commercial vs Governmental Budgeting

• Commercial
• Sales
• Revenues
• Less Costs
• Expenses
• Net Income

• Governmental
• Expenditures
• Less Revenues
• Zero

14
(No Transcript)
15
(No Transcript)
16
Actual