In this
sense, a budget can fairly be defined as the master financial
plan of government or an organization. This is because a budget
permits the average citizen to see fiscal policy of government
or organization in an integrated form by giving him a unified
view of the policies and activities to be pursed in providing
public utility services or in production of consumers goods. In
this regard, distinction should be made between a budget and a
forecasting. A budget is not in itself a forecast, but is a
planned course of action based on a forecast for future
situations.
Budget Preparation We are aware that a well-planned budget
preparation lays the foundation for formulating sound and
accurate budgets. Stated below are some essential elements,
which should be taken into consideration when doing the
exercises of budget preparation.
1. Interpret and grasp fully the declared policies and
objectives of the organization.
2. Convert these objectives into outline plans on the bases of
which directors can formulate their departmental budgets.
The task of collecting valid budget data can be simplified by
means of issuing a preprinted budget preparation sheet which is
to be circulated to all manager in charge of budget centers.
Use the previous budget results for guidance.
Initial budgets prepared by various departments should be
subjected to serious review for validation.
Prepare an initial budget draft and put up for consideration by
the concerned.
Incorporate amendments suggested (if any) and submit the budget
proposal in its revised form for endorsement and onward
transmission to the competent authority for final approval.
Some types of budgets: The most common type of budget is the
recurrent budget or operational budget, listing expected
receipts and expenses of the coming year based on the expenses
of the past year. Operating expenses may be listed in extensive
details under headings such as labor, materials, travel
expenses, office supplies, etc.
Another type of budget is the capital budget covering
development expenditure such as purchases of new machinery,
plant, buildings; provision for depreciation cost for fixed
assets, ect.
Development budget Is that type of budget, which includes funds
for implementation of infrastructure projects such as
construction of highways, bridges, ports, telecommunications
networks, ect.
Cash budget or cash flow analysis is made to help management
maintain sufficient supply of cash to meet organization
obligations without tying up funds that can be more profitably
invested elsewhere.
The comprehensive or Master budget is that kind of overall
budget integrating several departmental, sectional or local
budgets into one master budget.
Budget summary is the form of budget including summary of all
budgets within the organization and thus it serves as an
effective tool for overall budgetary control.
General remarks § If, during budget period, revenues are exactly
equal to expenditures ,this budget is known as a balanced
budget.
§ If revenues for the budget period are greater than
expenditure, the difference is known as budget surplus.
§ If revenues for the budget period are less than expenditures,
the difference is known as budget deficit.
§ After final approval, a budget may be invalidated by economic
changes such as inflation, recession or other unforeseen factors
and this may require revision of the budget as a whole or
raising requests for providing supplementary or additional
funds.
Internal audit as a means of budgetary and administrative
control
Finally, it is worth noting that internal audit is highly
effective tool of control over both financial and administrative
operations whether in the public or private sectors. Stated
below are some types of internal audit functions.
§ Accounts and records audit.
§ Cost audit.
§ Personnel audit.
§ Management audit.
§ Methods and procedures audit.
§ Forms audit.
§ Stores audit.
§ Stock taking audit.
Cash audit
concerned with matters relating to the supply and demand of
monetary resources or funding in a business or in government.