Budget Preparation in an Organization

Document Type:Coursework

Subject Area:Accounting

Document 1

A budget contains the plans of a company with a set of goals and how the company intends to achieve the set goals using the limited available resources. A key budgetary factor can also be defined as the factors that limit the budget of an enterprise. For example, sales and resources. It is therefore very important to determine the key budgetary factor to know what to budget for first. This paper describes the planning and control cycle in the preparation of budget by the organisation and also the steps involved in the budgetary control processes and explains what is meant to a key budgetary factor during the preparation of the budgets of the organisation. After the budget formulation, then the budget implementation follows which involves the combination of the ideas from the top management to come up with one solution.

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In the implementation of the budget, a series of cyclical processes follows which involves; the top management sends an outline of the organisational environment to the operation manager. The overview contains the general organisation’s goals and the available resources in a given period (Olurankinse et al. Then the operation manager formulates the operations plans, their set goals and the resources required for the operations. Then the top management gathers, combine and evaluates all the information collected from the operations unit. For the small organisation, budgets are in most cases unnecessary because they are monitored by the owner of the business who can do it personally. Steps in planning Planning is a process that takes several steps, the process begins with the identification of an opportunity, and this opportunity gives the organisation a mission to be achieved.

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The mission is the reason why an organisation exists, what they are aiming at achieving. The second step is usually to set objectives, which must be specific, measurable, achievable, realistic and timely. Once the organisation identifies the objectives, they come up the various set of conditions that the organisation needs to be in to achieve the objectives they have. Conclusion A good budget for any organisation will always depend on the top management because they take full control of the budgeting process. The paper also concludes that it becomes easy for the managers to control the whole organisation through the setting of standards in which all the performance of the operation units should conform to those standards. And therefore it can be recommended that the managers from the organisations whose operations match the set standards, should not intervene with the operations of the operating unit if their results always conform to the set standards.

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