Answer:
A.) The budgeting process
The budgeting process refers to the process that organisations follow to plan financially for the activities for the coming year:
1. The Finance Manager produces guidelines and format for various departments in order for them to input their department's budget estimates
2. A Budget Meeting is called for all heads of department or budget holders to discuss the estimates.
3. The Budget estimates are revised and agreed.
4. Budget Presentation: The finalized budget estimates are presented to the CEO by the budget holders or head of departments for approval.
B.) The benefits of budgeting
1. Planning : Budgeting is a very reliable planning tool that aids in setting the minds of managers in the right perspective for achievement of targets (budget objectives) in the coming year. It outlines what is needed to achieve goals
2. Control: Budgets are the output of planning but the input to control. It helps to co-ordinates the activities of the organization by reminding managers of their targets and making them to perform their duties. It also guides how money is to be spent and for what.
3. Integration: Budgeting integrates the activities of all departments and presents a single picture for the organisation. It simply lets managers know that they are interdependent and they must work together to achieve the organisations goal.
3. Communication: Budgets communicates the direction of the company to all staff of the company and they all will understand where they fit in and what is to be achieved.
4. Motivation: Budget motivates managers to achieve their departmental goals and targets particularly when compensation is tied to performance.
5. Evaluation of Performance: Budgeting at the end of the year is the basis on which each managers performance is evaluated.
C.) Components of a master budget for a manufacturing company,
1. Sales Budget
2. Production Budget
3. Direct Material Budget
4. Labor Budget
5. Overhead Budget
6. Selling and Admin Budget
7. Capital Expenditure Budget
8. Cash Budget
9. Ending Goods Inventory Budget
10. Budgeted Income Statement
11. Budgeted Balance Sheet
4.) Effective implementation method of a budget.
Step 1. Planning
Step 2. Prioritizing
Step 3. Division into monthly and quarterly columns
Step 4. Connection between periods
Step 5. Monitoring
Step-by-step explanation:
Effective implementation method of a budget.
Step 1. Planning : Make sure you have taken a clue from previous years spendings
Step 2. Prioritizing: Which activities and targets are most important, spend on those ones first
Step 3. Division into monthly and quarterly columns: Divide your budgets into months so as to achieve your goals in bits and your monthly targets will be very clear.
Step 4. Connection between periods: Total your budgets and let the closing cash balance of an initial period be the opening cash balance of the following period and this will reveal period of cash shortages and surpluses.
Step 5. Monitoring: Budget spending must be monitored and approval for supplementary budget must be gotten if limit must be exceeded.