American Intercontinental University
FINA425 – Budgeting
January 24, 2016
This is a research paper about financial budgets. This research paper talks about a management director would establish policies and system for a business and/or organization. This research paper will help to explain the different style of budgets, budget cycles and the guidelines rules for set up a financial budget for a business and/or organization.
Unit 3 Individual Project
This is a report from the management director to establish policies and systems for the new business, I Can Business Incorporated (ICBI). This report will be delivered to the board of directors of ...view middle of the document...
Examples of liabilities are loans and store credit. Owner’s equity is the part of the business that belongs to the owner. Basically it’s the difference between the total assets and the total liabilities. The owner can claim any remaining assets once creditors and debts are paid off.
The income statement or the profit & loss statement is a financial report that gives management information regarding the profit or loss for the last accounting period. This report is very important to management and business owners because the income statement shows how the business is really doing, if it’s “health” (profit) or “sick” (loss). Managers and business owners want a “healthy” (profitable) business because the profit is the reason why the business is operating in the first place. The income statement consists only of revenues and expenses. Revenues are an inflow of assets or in other words cash flowing into the business. Expenses are an outflow or other using up of assets or in other words cash flowing out of the business to pay off operating costs.
The cash flow statements are a statement that details the incoming and outgoing flow of cash during the same time period as the income statement. Examples include cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. The statements of shareholders’ equity is a statement that discloses sources of change in the shareholders’ equity accounts. Equity for shareholders can increase by the following two ways: amounts invested by the shareholders of the corporation and amounts earned by the corporation on behalf of the shareholders. Examples include common stock, preferred stock, additional paid-in capital (paid-in capital in excess of par value) and retained earnings.
Explain the budget cycle and process.
There are four basic phases to the budget cycle, preparing the budget, approving the budget, executing the budget, and evaluating the budget. The first phase, preparing the budget, starts with a brainstorming session to careful plan out where the money will be needed the most first and then going down the line with new ideas or initiatives that can be started right away. Top executives and management officers offers some insight to what each department can expect to receive in monetary funds. Upon making their spending decisions, each department will send their requests to the top executives and management and wait for inclusion in or exclusion from, the final document.
The second phase, approving the budget, is when the budget is subject to further debate. The approval of the budget isn’t based on a yes or no basis. The approval of the budget is another opportunity to rethink and fine tune how the business is really spending its funds.
The third phase, executing the budget, top executives can freeze the money to departments to prevent foolish or wastefully spending of money. At this point, departments can request reprogramming...