The paper 'Financial Management Approaches " is a great example of a finance and accounting assignment. A budget refers to a detailed quantitatively expressed plan of action regarding the forthcoming accounting or financial period. In other words, it is a plan of what the company is aiming to achieve and the targets it has set to monitor the achievement of the desired goals. A budget is a quantitative statement for a certain period of time ( which in most cases takes a year) may include planned expenses, revenues, cash flows, assets and liabilities. What is meant by budgetary control? Budgetary control refers to the process of keeping track of how the company is achieving its prior set targets and making necessary corrective measure to ensure that the desired objectives of the budget are met.
Therefore, budgetary control aims at making sure that the right things are done. It is important to have effective control in the budgetary process of a company since business operates in an environment that is very unpredictable which may cause a disturbance in the system resulting deviation from the anticipated results.
These disturbances may include entry of a powerful competitor in the market, the anticipated rise in the cost of production among others. What factors would need to be taken into consideration before developing a sales budget? Several factors need to be considered before developing a sales budget. These factors include past sales patterns, competition, distribution, legislation, the economic environment, changing consumer tastes, environmental factors, results of market research, anticipated advertising, and pricing policies and discounts offered. Name Six (6) internal and external factors should be taken into consideration when planning and preparing a budget? When planning and preparing a budget the internal and external factors that should be taken into consideration include The planned operating level of the company The availability of resources in the company The limiting factors of production Political and legal events General and specific economic trends and Anticipated competitors and customers’ activities What is the cash budget?
Why cash budget is very important in a company? What method is used for monitoring the cash budget, please explain. What are the main causes of cash flow problems, please explain. A cash budget is a financial plan of the expected cash receipts and cash payments for the forthcoming financial period. A cash budget is crucial in a company since it aids the identification of cash surpluses and cash shortages in advance as it is a timing of all cash movements in the company.
In addition, a cash budget allows the company to have an effective planning of when and how it will acquire its financial resources. Cash receipts and cash disbursements in a company are handled by different individuals in the company in order to ensure its good management and enhance monitoring the cash budget.
Cash is not released in full to the various department nut it is received only when there is a need. The respective department is supposed to account how it has used the previously released cash before more cash can be granted. In addition, the manager must state in clear terms how he intends to use the cash requested. If the user is not in the budget, then the manager is asked to wait for the next budgetary period. However, if the need was urgent, the cash can be granted upon authorization by the management.
ReferenceHorngren, C. T., Datar, S. M. and Rajan, M. V., 2012. Cost Accounting: A Managerial Emphasis, (14th ed.). Upper Saddle River, New Jersey: Pearson Prentice Hall.