Question

Hi,

I am requesting your help. This course-related in Managerial Accounting about Real-World discussion.

1. Define the term budget (according to the text). How are budgets used in planning?
2. Define control (according to the text). How are the budget used to control?
3. Explain how organizations can benefit from budgeting.
4. Share an example of a business or personal budget you have seen or utilized. How was this budget used in planning and control?

Thank you,
Michelle

Answer 1

Answer are as under
1. Define the term budget (according to the text). How are budgets used in planning?
A budget means predefine plan by an individual or company for spending it resources which is base on past experience and future expectation of the project. It help to understand and allocated the scare resources of the company to achieve the desire objective. It can be financial and non financial budget also. It is used for all types of projects. There are various types of budget like cash budget, performance budget, sales budget, production budgets, planning budgets, capital budgets etc. It used to know the actual output of the company. Budget is compare with actual result and variance analysis is done. It shows the enterprise long term and short term planning.
When a organisation decides it long term and short term objectives, to achieve the same it manager and operational team set out the plan for achieving the same. Plan is achievable only if a budget is prepare by the company. Company need to prepare a budget which shows that how the overall objectives and goal of organization could be achieved.
2. Define control (according to the text). How are the budget used to control?
When a organisation prepares a budget, set of controls are set to achieved the planned results. Controls are set at each and every level of planning for which budgets are prepared. At the end of year or month budgeted plan is compared with the actual results. Risk assessment is done on the basis of control and budget set. With the help of controls sets, management can be aware about the future predictable risk and helps to allocate the scare resources.
Controlling ensure in budgeting that actual results does not derive from the standards set.
3. Explain how organizations can benefit from budgeting.
In the following manner organization gets benefit from budgeting :
a. It help to predict the future cost. On the basis of it organization can know the out flow of cash
b. Management is able to compare the actual and standard data on the basis of budgeted figure
c. Organization will get clear picture of where its resoureces are utilized
d. It helps to forcast the results
e. Helps to control and avoid the cost
f. It helps to assess the risk and on the basis of it controls can be set
g. Helps to achieve organization financial and non monetary goals
h. It helps to meet the contigent liability
4. Share an example of a business or personal budget you have seen or utilized. How was this budget used in planning and control?
I am sharing the example of my personal monthly budget use by me for investment and expenses spending purpose :
with the help of the below budget , I could understand what is my monthly expenses, monthly investment and how much cash on hand should I keep for contingent liability
		(Amount in $)
Date	Particular	Money bought in through Job	Money spend
01.04.2019	Salary received	42,000.00	-
01.04.2019	Rent paid	-	2,000.00
05.04.2019	Car loan instalment	-	5,000.00
10.04.2019	Electricity bill	-	1,500.00
12.04.2019	Water bill	-	800.00
15.04.2019	Mobile expenses	-	1,200.00
15.04.2019	House hold shopping	-	10,000.00
18.04.2019	Entertainment expenses	-	5,000.00
21.04.2019	Investment	-	5,000.00
		42,000.00	30,500.00
	Balance left	11,500.00