In any enterprise, budget is perhaps the most crucial managing and planning tool. Not only does it describe economic growth, but it also shapes profits. Budget is basically a measurable and organized quantity that can describe project planning. Budget can also be considered as a control tool since it is decisive in making the project activities with which the real results needs to be compared. For the purpose of control, trends and positive and negative variations are evaluated.
Organization goals are achieved by assigning budget control tasks to the organization along with the cost that is expected to be incurred, i.e., expenditure. Anyone studying Finance would obviously have to come across topics like budget and expenditure. Online budget control and expenditure homework answers can be really helpful for such students.
Defining budget
Budget can be defined as a quantitative expression of a plan that is stated in monetary terms. It has a specific limit and is defined with clarity for a certain time period. It includes aspect on which a company or a business firm considers improving upon. A budget may consider the entire firm as one or may include different departments.
A team for decision making makes up the budget by analyzing the revenue and expense of the firm. This team also studies the previous revenue and expenses of the firm. After a considerable amount of research, they come up with an appropriate budget that foresees the requirements of the firm under strict expenditure and cost.
If you have a proper understanding of the basic definition of budget, you won’t have much problem with your budget control and expenditure homework answers. Budget includes revenues, planned volume sales, expenses and costs, assets, liabilities, cash flows and resource quantities.
It basically expresses the primary strategic plans of the operation of business, which comprises of organizations, events, units and activities. To put it in simpler terms, budget is nothing but an amount of money that is allocated carefully for particular motive, and the intended expenditure is taken into consideration.
Types of Budget
Budgets can be categorized on two main bases: expenditure type and level of activity.
Budgets can either be operating budget or capital expenditure, depending on the expenditure type. The budget serves as a financial plan that allocates resources for various tasks or expenditure for different activities. Capital expenditure budget involves allocation of finances for buildings assets of the facility or plant. The bigger picture is taken into account over here, like investment in development and research by buying sophisticated machinery or building modern labs, all of which are long-term budget plans.
Profit generated via sales and operation costs are taken into consideration with operating budgets. It includes manufacturing budget, sales budget, distribution cost, administrative expenses, etc. The Rent, salaries, stationary, phone and electricity bills, taxes and audit fees also fall under operating budget.
Budget can be classified into fixed and flexible budget, depending on the level of activity. The finances are predefined with fixed budget. Government budget is an example of fixed budget. Such kind of budget is best suited for enterprises where quality or quantity of production doesn’t fluctuate a lot and remains more or less the same. Flexible budget, on the other hand, shows the real costs incurred while planning, production and also after production. This kind of budget includes activities whose costs vary with time and production may fluctuate as well.
Expenditure control
The definition of expenditure control is another thing that will help you with your budget control and expenditure homework answers. It is a crucial element for execution of budget. If the expenditure control system is effective, a desired level of fiscal discipline is maintained. It also allows agencies to implement the planned activities in an appropriate manner.
Expenditure control includes elements like ascertaining budget availability, financial and administrative sanctions, processing and recording controls including segregation and delegation, certification and lastly approval and disbursal of payments.
Types of Expenditure control
For proper recording and classification, expenditures are classified broadly into two main categories: Capital and Current. The expenditures for daily financing activities are called current expenditures. It includes expenditures on allowances and pays, maintenance of properties, buildings, utilities, office supplies, etc.
Capital expenditures, on the other hand, are expenditures incurred for medium-term or short-term which involve long-term returns such as expenditure for acquiring immoveable properties, structures, training, vehicle, equipment, plant, etc.
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Budget Control Characteristics
- The sales for future are projected by the budget. All other expenses are dictated by sales forecasting.
- When the budget is approved, the whole organization shows commitment for achieving goals that are clearly defined.
- The long-term budget is further broken down into short-term budget like monthly, quarterly, etc.
- The projected production helps evaluate actual performance
- Variations and deviations are properly scrutinized, and necessary steps are taken for putting the activity back on track.
Everything mentioned above is enough to give you a basic idea for framing your budget control and expenditure homework answers. Online homework help services are always there for you if you require further help.