FNSORG501 Budgeting For Shareholders Equity And Accounts Payable

The company has been performing well as per the given performance budget. This can be stated because the operating income of the company for the given quarter has come out well. The fixed cost of the firm has been restricted, and this has resulted in a high performance by the given firm.

Evaluation of the production manager’s performance for the quarter

The manager, as per the given report has been successful in performing well. He has made efforts to control the fixed cost and for this reason the operating profit has come out well.

Budgeted Income statement

 Cash budget

 Budgeted Balance Sheet as of June, 2015

Budgets can be described as an essential component of the organization which helps in effective management of the various functions in an organization (Brigham et al. 2016).However there exists certain advantages and disadvantages of the budgeting process.

The advantages of budgets are:

• The budget forms an essential aspect of the management as they help the organization to think about the future. The given budgeting procedure with specific guidelines for the managers helps them to divert their attention from the different mundane activities and concentrate on the strategic obligations of the organization.
• It helps in communication and coordination.  It brings together the various departments in an organization and goes a long way in building team rapport.
• The budgets also tend to act as guidance for action.
• Budgets go a long way in evaluating the performance of the organization. It forms an integral part of control and review in a firm and the actual performance may be monitored against it.
• Budgets go a long way in helping to identify considerable savings and maintain overhead costs. The company helps the organization to maintain a control system (Titman, Keown and Martin 2017).

The disadvantages of a budget are as follows:

• Budgets are bureaucratic in nature.
• They involve time and funds. Budgeting procedure can be described as a tedious one and therefore, it requires investment from the organization.
• The organization has to indulge in various efforts to form a budget. This effort could instead be invested in some other productive matter (Barr 2018).
• Experts argue that if the organization has already identified the Key Volume and Activity then why should the organization investing in the exercise of budgeting.
• The budgets are coercive and it is important for a firm to engage in good management and motivate the workforce.

The different kinds of budgets have been discussed as follows;

1. Plant Utilization Budget:

The plant utilization budget is prepared with respect to the working hours, convenient units of plant facilities and other related components of the production budget. It helps in loading on each process, costs, cost centers, dove tails other related aspects.

1. Production Cost Budget:

A prediction costs budget is a budget which is also known as a manufacturing budget and consists of primarily materials budget, labor budget and factory overhead budget.

1. Direct Material Budget: of the

This budget consists of the cost of the direct materials purchased for the organization. This budget assists the purchase department in preparing a schedule of their total purchases and helps them to fix the maximum and minimum level of inventories.

1. Capital Budgeting:

Capital Budgeting can be described as the planning and development done for the purpose of maximizing the long term profitability of the business.  It lays down a plan for the capital outlays. They are very important as it helps an organization to make effective capital budgeting decisions. It also has an effect on the long impacts on the company`s cost structure.

1. Zero Base Budgeting:

The zero based budgeting is a budgeting process which helps the firm to prepare a new budget for the firm from the scratch. The managers need to justify the reason behind putting each cost in the appropriate section (Lasher 2013). The given budget has various advantages in the sense that it motivates the members to form cost effective ways of task performance.

1. Performance Budget:

The performance budget has been originated in USA and is based on functions, programs and activities. It is based on a work plan which expresses the achievement of various levels of the organization.

1. Sales Budget:

The sales budget is a functional budget which helps to forecast the sales in an organization. It represents the total sales along with the physical quantities as well. The primary purpose of a sales budget is to estimate the sales and developed a plan accordingly.

1. Production Budget:

A production budget consists of the total volume of production whereby the operations has been divided by days, weeks and months (Zietlow et al. 2018). This helps the department to estimate the correct way of identifying the production of the goods.

1. Cash Budget:

The cash budget can be described as a critical budget whereby the organization determines what the cash requirements of the given period are.

1. Flexible Budget:

The flexible budget is asked on the concept of a fixed budget whereby certain changes are made to the fixed budget in a manner such that the organization can inculcate its costs in the budget.

A master budget can be described as an amalgamation of all the lower level budgets that a company produces with respect to its various functional areas. The master budget also comprises of the financial statements and cash forecasting. The given budget is either prepared on a monthly basis or a quarterly basis (Saunders 2014). The primary purpose of a master budget is to help an organization in achieving its specific goals. Various master budgets also consist of headcount changes which are needed to be made in order to achieve the budget goals.

The budget can be described as a central planning tool which the management makes use of in order to determine the key activities of an organization and to judge the performance in various centers (Finkler et al. 2016). Or the formation of a master budget, the organization should use a participative budgeting technique.

The given budgets form a part of the master budget:

• Direct labor budget 
• Direct materials budget 
• Ending finished goods budget 
• Manufacturing overhead budget 
• Production budget 
• Sales budget 
• Selling and administrative expense budget

Financial risk can be described as the risk which is faced by the shareholders of a particular organization. The various shareholders fear that they will lose out on money which they have invested in the given organization. This happens in cases where the organization`s cash flows are inadequate to meet the financial obligations of the firm (Brooks 2015). When any company makes use of debt financing, the given creditors are paid first and the shareholders become insolvent in case the firm is unable to pay to the organization. Financial risk can also be described as the possibility where an organization defaults on its bonds and due to this the bondholder loses out on their money.

The given measures may be undertaken to avoid uncertainties

1. Preparing a damage report.

This report may help the firm to understand the how a particular happening of an event may cause problems to an organization and what would be the degree of impact on the firm.

1. Avoiding the emotions

A business is a rational organization and for this reason, it is very important for the firm to realize that they cannot make business decisions based on emotions.

1. Focusing on long term objectives

The long term objectives of an organization take it towards its futures and this makes it very important for the firm to focus on the long term well being of the organization in order to meet its goals.

1. Clarity in communication of challenge

The communication of the challenge forms an essential aspect of the organization

1. Collaboration is the key

It is very important for a firm to collaborate in the times of the need.

Barr, M.J., 2018. Budgets and financial management in higher education. John Wiley & Sons.

Brigham, E.F., Ehrhardt, M.C., Nason, R.R. and Gessaroli, J., 2016. Financial Managment: Theory And Practice, Canadian Edition. Nelson Education.

Brooks, R., 2015. Financial management: core concepts. Pearson.

Finkler, S.A., Smith, D.L., Calabrese, T.D. and Purtell, R.M., 2016. Financial management for public, health, and not-for-profit organizations. CQ Press.

Lasher, W.R., 2013. Practical financial management. Nelson Education.

Saunders, A., 2014. Financial markets and institutions. McGraw-Hill Higher Education.

Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and applications. Pearson.

Zietlow, J., Hankin, J.A., Seidner, A. and O’Brien, T., 2018. Financial management for nonprofit organizations: Policies and practices. John Wiley & Sons.