Description
Budgeting. What is a budget and what are its benefits? Explain what the master budget is and discuss the various budgets that comprise the master budget. Explain flexible budgets and budget variances. Explain capital budgeting and the various methods used to evaluate projects and expenditures, including payback method, net present value method, and internal rate of return method. Provide a discussion of all potential scenarios and the relevance to the accounting profession.
Requirements:
MUST be at least 8 Pages
Must begin with an introductory paragraph that has a thesis statement
Must end with a conclusion that reaffirms the thesis
At least 4 references (all work must be cited)
Must be APA style layout (Including a title and a separate reference page)
Explanation & Answer
Attached.
Running head: BUDGETING
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Budgeting
Names:
Institution:
BUDGETING
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Budgeting
Every business relies on the available resources to successfully carry out its operations
and meet its operational goals. Whether an organization operates as a non-profit or a forprofit, budgeting is an essential process that allows a business to estimate the resources
required to fund its operations and the expected gains from that particular process. Simply
put, a budget is a financial planning tool that estimates and breaks down the costs that a
business anticipates to undergo and the revenues that it seeks to collect from during a
particular financial period (Lidia, 2014). It does not mean that a business cannot do without a
budget. Rather, businesses that create a budget for their operations often have a better picture
of their estimated operations and end up developing ways that can optimize their operations
so as to generate the maximum turnover from the available resources.
Purpose and benefits of a budget
A budget serves various purposes in a business. The primary purpose of a budget is to
serve as a planning tool for every organization. Ideally, every business experiences a scarcity
of the required resources. For instance, there is no business that at any one time has more
money than it can spend. However, it is always essential to gain the most out of the available
resources. According to Lidia (2014), a budget is adopted by many businesses as a tool to
help them forecast their expenditure and income during a particular financial period, which
then helps an organization in planning the best way to utilize the available resources to
optimize the turnover that arises from these operations. Every organization needs to analyze
the available resources and their flow. This then helps in estimating whether or not they are
sufficient to sustain operations. In return, this helps in breaking down the best approach to
allocate these resources based on a breakdown of operations.
BUDGETING
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A budget also serves as a decision-making tool. Notably, it enables the business to
predict the probable expenses and the anticipated income. In return, this helps in identifying
whether or not the selected mode of allocation of resources is suitable for a business and
whether or not it should make a change for the same. Based on the strategic goals that an
organization has, leaders can then identify whether or not a particular distribution of resources
and their probable turnover suits the business. These leaders can then choose to proceed or
abandon a particular process, to reduce or increase the allocated resources, and to distribute
the resources to the business processes that are a priority in achieving strategic goals.
A budget is an essential tool for businesses to monitor their performance. A budget is
prepared ahead of a particular financial period. In the course of the financial period, a
business can monitor whether or not the organization is operating in line with the projected
curve and whether it may be...
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